Mexican Economy

According to the World Bank, Mexico has the highest per capita income in Latin America and is firmly established as a middle-income country. Since the economic debacle of 1994-1995 the country has made an impressive recovery, building a diversified economy and improving infrastructure. However, huge gaps remain between rich and poor.

Mexico has a free-market economy with a mixture of modern and outmoded industry and agriculture, increasingly dominated by the private sector. The number of state-owned enterprises in Mexico has fallen from more than 1,000 in 1982 to fewer than 200 in 1999. The administration of President Ernesto Zedillo (1994–2000) continued a policy of privatizing and expanding competition in sea ports, railroads, telecommunications, electricity, natural gas distribution, and airports which was initiated by his predecessors Miguel de la Madrid and Carlos Salinas.

A strong export sector helped to cushion the economy's decline in 1995 and led the recovery in 1996–1999. Private consumption became the leading driver of growth, accompanied by increased employment and higher wages. Mexico still needs to overcome many structural problems as it strives to modernize its economy and raise living standards. Income distribution is very unequal, with the top 20% of income earners accounting for 55% of income.

Following 6.9% growth in 2000, real GDP fell 0.3% in 2001, with the US slowdown the principal cause. Positive developments in 2001 included a drop in inflation to 6.5%, a sharp fall in interest rates, and a strong peso that appreciated 5% against the US dollar. Trade with the US and Canada has tripled since NAFTA was implemented in 1994.

Mexico has opened its markets to free trade as no other country in the world, having lifted its trade barriers with more than 40 countries in 12 Free Trade Agreements, including Japan and the European Union. However more than 85% of the trade is still done with the United States. Government authorities expect that by putting more than 90% of trade under free trade agreements with different countries Mexico will lessen its dependence on the US. The government is pursuing to sign an additional agreement with Mercosur.

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