Business and Economics
Mexico is the world’s fourth largest economy and the 11th most populous country. Periodically, oil resources have played an important role in economic development, but now Mexico is primarily an industrialized country with a strikingly strong focus on exports. In 2017, agriculture accounted for 4 percent of GDP, mining industry and construction for 32 percent and service for 64 percent. According to the World Bank’s classification, Mexico is an upper middle-income country. For the years 2011–12, annual economic growth was 3.9 percent. Mexico has been a member of NAFTA, the North American Free Trade Association since 1994, and the United States is its most dominant trading partner, especially in terms of exports.
Thousands of years ago, agriculture in southern Mexico was the most developed in the western hemisphere. Already during pre-Columbian times, the assets began to be used on metals, mainly silver. The Spanish colonizers exploited the metal assets as early as the 16th century, and silver and gold flowed home to Spain. In the countryside, large estates were established with farm workers who lived in ever greater poverty and starvation. Independence in 1823 changed little of this. The revolution in the 1910s was aimed, among other things, at creating its own business life and by obtaining land reform in rural areas through a land reform. The state took over ownership of the natural resources and then handed over the right to use the land to the villages (see Agriculture of Mexico on Digopaul.com).
A consumer goods industry began to emerge and the state protected it from foreign competition through long-running protectionism. At the same time, imports of the capital goods needed for industrialization were facilitated. The economic development of 1940-70 was such that the outside world talked about “the Mexican wonder”. In the mid-1970s, large oil deposits were encountered and this was followed by a short period of even faster economic growth. The state embarked on costly projects, including to improve transport conditions.
1980s economic crisis.
When the international oil market began to decline in the 1970s, Mexico was forced to take out large foreign loans. An overly optimistic economic policy and, in addition, financial neglect meant that the country could not cope with borrowing costs and the economy was in a serious crisis. In 1985, the government succeeded in getting the foreign creditors to agree to a debt restructuring plan, but the entire 1980s was a crisis period. Poverty remained, unemployment increased and slums grew in the cities. The misery was reinforced after the catastrophic earthquake in Mexico City in 1985.
The only way to achieve stabilization and secure economic growth in the country was a gradual liberalization in the business sector in order to increase trade and a better climate for foreign investment. The state’s dominant role in the business sector was subdued and increasingly privatized. Foreign investment also increased, especially in the form of maquiladoras, US-owned factories with favorable conditions in cities on the border with the US (see Industry). However, much of the other industry was not very competitive abroad. It was inefficient and had to be modernized, but there was a lack of domestic capital. It became important to continue to engage foreign investors through further liberalization, a position that still remains. The internationalization that followed the increased free trade, mainly within NAFTA, has led to a division in the economy and society. A highly advanced, capital-intensive industry is emerging, but the vast majority of industry employees are in traditional, labor-intensive and low-paid operations.
Increased poverty in the countryside.
In rural areas, poverty in recent years has increased further among small farmers, especially in the South Indian population. In the early 1990s, land reform was initiated to modernize agriculture and increase yields and thus prosperity among small farmers. Co-ownership within ejidos is increasingly being replaced by safer use rights and also by private land ownership. But just over half of Mexico’s population lived in 2012 below the official poverty line, a larger proportion than five years earlier (see Social Conditions).
Farmers with market-oriented cultivation, on the other hand, earn a lot from growing demand for fruits and vegetables, especially in the southwestern United States. Thus, the economic growth of recent years has meant that differences have increased between different parts of the country. Länder with good transport conditions and telecommunications have attracted more and more foreign direct investment, where jobs have increased and wages have risen. For other parts of the country, liberalization and NAFTA have meant that many businesses are out of competition. Jobs have disappeared, which has resulted in continued large relocation to other bands. USA.
Rapid recovery from the financial crisis.
The strong connection of the economy to the US meant that the financial crisis there from 2008 onwards became very noticeable in Mexico as well. But the country recovered within a year, and it has subsequently been judged to have stable growth and a good business climate, despite extensive violence between drug leagues, mainly in the north. Unemployment is relatively low, but a large part of employment is in the informal sector, which reduces the state’s ability to collect taxes.
Both in the world market and at home, Mexico has faced increased competition from China and other countries in East and Southeast Asia. China has become the second largest trading partner and an increasing share of imports comes from there. However, in 2012-13, a new trend began to be noticed. The differences in production costs between the two countries are decreasing, as Chinese wages have increased significantly, while Mexican wages in several industries have remained almost unchanged for a long time. In addition, Mexico competes by strictly following international copyright and trademark rules. In addition, the transport distances are shorter for the large US market than they are from China.
According to the current development plan, the Peña Nieto government that took office in 2012 works primarily with improving transport and telecommunication systems, reducing poverty and improving education. In addition, energy supply should be facilitated. Oil recovery has stagnated but hopes are linked to natural gas extraction. The country also has great potential in terms of renewable energy raw materials, which have so far played a minor role. The latest governments have prioritized measures to achieve sustainable agriculture and forestry, because the serious consequences of the ongoing climate change in the country, ie. the drying out of the landscape. In an international perspective, Mexico has strict environmental legislation but much of it has not been possible.
In 2013, agriculture together with forestry and fisheries accounted for 11 percent of employment in Mexico. During the 00s, agricultural production increased steadily but slowly, by 1.7 percent per year, and during the 2010s the increase has been even smaller. Since 1993, Mexico has been a net importer of food.
In 2010, 6 percent of the country’s exports of agricultural products, mainly coffee, fruit and vegetables. Approximately 7 percent of imports were agricultural goods, mainly cereals and meat. The increased free trade has been positive for those who grow fruit and vegetables but negative for cereal and meat producers.
Land use and ownership structure.
Most of Mexico is too dry or too mountainous for agriculture, and only just under 14 percent of the land is used for permanent agriculture. More than half are pasture or forest land and the remainder is desert or semi-desert. The best conditions for farming are in southern Mexico, where one of the world’s earliest agricultural societies grew and several large Native American civilizations later flourished. There, maybe 9,000 years ago corn was grown, and eventually also beans, squash, chili peppers and cotton. The Spanish colonizers introduced large-scale agriculture in the form of extensive but low-productivity properties, haciendas, where the peasants (peons) lived under almost slave-like conditions. In the context of the Mexican Revolution, the state took over all land and handed over the agricultural land to the village communities (ejidos), whose members were granted the right of use, individually or collectively. This redistribution was enacted in 1917 and carried out most consistently in southern and central Mexico. The result was a small-scale farming and better conditions for the rural population. Production increased, but agricultural methods hardly changed.
As free trade grew from the early 1990s, the eidos system emerged as low-productivity. The land could not be sold or bequeathed, nor could it be given as collateral for loans. It hardly provided opportunities for investment for modernization. A law in 1992 opened for a radical ownership and structural reform in which the individual member can sell his land to an outsider. The processes are very complicated and time consuming. The changes are therefore slow and still much of the land is uneconomically fragmented. In 2010, 72 percent of farms comprised less than 5 ha and 94 percent less than 20 ha. About half of all land in Mexico is still owned by ejidos, while 40 percent is privately owned and the remainder is owned by the state. The poorest farmers have become even more disadvantaged. Their ownership is often unclear,
Crops and cultivation conditions.
Small farmers in Ejidomark still grow the old basic foods corn, beans, tomatoes and squash. On the central plateau and in the south, it is mostly self-sustaining agriculture with sometimes a small surplus sold in the local market. Most private small farmers also have little opportunity to improve their situation. Costs for inputs such as seeds and fertilizers are rising faster than revenue does. Poor road network and weak trade organization make growers’ contacts with the market more difficult. There are almost no banks in such areas and the farmers therefore do not have access to loans and financial services. Government loans for agricultural development are no longer granted and subsidies of various kinds mainly end up with major landowners. The poorest farmer households are in the south where farmers make up a large proportion of the population,
During the 1950s and 1960s, the state implemented large-scale irrigation projects in northern Mexico, particularly in the state of Chihuahua and along the California Gulf coast, which more than doubled the agricultural area. It mainly grows wheat and cotton and vegetables for export. Mexico is self-sustaining with durum wheat used for pasta, while most of the wheat for bread is imported from the United States.
In the coastal areas of the Gulf of Mexico, the rainfall is sufficient and fairly reliable. There it operates a market-oriented agriculture that produces, among other things, sugar cane, vegetables and tropical fruit such as avocado, bananas, pineapple and mango, partly on multinational companies’ plantations and partly on small farmers, some of which grow on contract. At the bottom of the south conditions are suitable for cultivation of cocoa and coffee, then old important export goods. As a coffee producer, Mexico was the seventh in the world in 2010. More than 90 percent of the coffee comes from small farmers, most Indians with farms on only a few acres. They are weak towards the buyers and receive only a small part of the selling price.
White corn is the most important basic food and is grown in all parts of the country. It is a climate-sensitive crop and most small farmers have not yet started growing the more dry-resistant varieties. The area sown has decreased significantly, but Mexico is still the world’s fourth largest producer of maize. Apart from the southernmost part and the Gulf Coast, Mexico is rainy and it is located in a part of the world where the climate has become drier with more and more fateful dry periods. Artificial irrigation is of great importance and gives a double yield most years, but only a quarter of the field is irrigation.
The sharp increase in population from the 1970s onwards and the slow increase in production have meant that agriculture no longer provides enough basic food and that grain imports have gradually increased over the last decades. The NAFTA agreement meant that trade in agricultural commodities increased sharply, especially during the 1990s. The United States receives about 80 percent of Mexico’s exports from agriculture, and demand there has increased, especially for winter vegetables, but also for fruit juices and cut flowers.
European colonizers introduced cattle breeding in the 16th century, and on the haciendas there were usually both horses and cattle and goats. Larger farms with animals (ranches) still exist in the arid areas of the north, but the uncertain supply of water and the high price of imported feed maize have made the breeding of meat animals less important. Imports of cheap meat from the United States have instead multiplied. In the central highlands, it is common with sheep and goats, and there the breeding of dairy cows has increased. Livestock accounts for about 30 percent of all agricultural production and now the most important animals are poultry.
Nearly a third of Mexico’s area is wooded. In addition, there are also semi-desert areas with dry shrubbery and steep-grazed pastures with sparse populations of trees. About half of the forest area consists of temperate trees, while the rest is tropical forests. These are found in southernmost Mexico, mainly in the Yucatán Peninsula and in the state of Chiapas. Temperate forests grow mainly on the western part of the Sierra Madre Occidental. Of forest production, 90 percent comes from temperate forests and only 10 percent from tropical forests in the south. But these are a versatile resource: from there, people from tradition collect materials for construction, dyeing and not least for health care. About 1,500 plants are used as medicinal plants.
The forest area fell sharply during the latter part of the 20th century; during the 1980s at an average of 1.4 percent per year. Mexico was then one of the countries that had the fastest rate of deforestation. Most of the cut down was used for fuel and at the same time the need for imports of forest products increased. The forest clearing provided more agricultural land, but at the same time increased erosion and a drier environment. As a result, the water shortage became increasingly evident in the country. Thus, there were several reasons why the government in the 1990s began to pursue a modern forest policy. It invested heavily in commercial forest plantations and in 2006 there were 1,400 km2plantations with monoculture of fast-growing eucalyptus, cedar, teak or pine. Since then, even more have been planted, and after twenty years now the earliest plantations have harvested mature forest. Such production will increase each year, reducing the need to import forest raw materials and forest products.
Of the forest area, however, 99.5 percent is natural forest with mostly low productivity, mainly as a result of poor management and illegal logging. Halting the environmental impact requires extensive measures. After the environmental consciousness has awakened within the country’s government, after 2000, an increasingly ambitious policy was developed to achieve sustainable forestry and thereby be able to protect the forest, land and water resources and also reduce carbon dioxide content. New forest is planted on degraded land, and ejidos, which is still responsible for more than half of Mexico’s forests, receives support to start with sustainable forestry. New laws exist to protect fauna and flora and to promote ecological balance, and nature conservation areas have been set aside. More generally, rural development support is also provided in forested areas.
At the state and local level, resources and often insights and understanding for concrete planning and implementation of forest policy are lacking. The large forest companies are also usually not interested in sustainable forestry. In addition, there are areas with organized groups of illegal harvesters and in their areas also guerrilla bands that challenge the authorities. Many planting programs fail and generally, at most half of the planted trees survive. In southern Mexico, most of the forest is contained in ejidos, a form of ownership and use that is likely to delay changes. Forest clearing and fires in burning agriculture still occur, mainly in Chiapas, but deforestation is no longer a national problem in Mexico.
Less than a third of the forest area is still used for economic forestry. The proportion of sustainable forestry is considerably smaller. Modern forestry is mainly found in the highlands in the north, mainly in the states of Chihuahua and Durango, where larger forests are privately owned. Many wooded areas are mountainous and difficult to access with a lack of good transport routes that can be used all year round. There, the timber is usually used in the many small and low-mechanized sawmills. A large part of the new forest plantations is owned by forest companies that also invest in cardboard and board manufacturing. So far, most packaging material has been made from recycled paper while fine paper has been imported.
In the country’s economy, fishing has little significance, but locally it plays a certain role. Annual catches from sea fishing increased until the beginning of the 1990s, but then stagnated around 1.6 million tonnes annually. That level of production has subsequently become the guideline in the country’s fisheries policy.
The best fishing opportunities are at the top of the northwest, where the California stream contains a lot of plankton. Shrimp are mainly caught in the relatively shallow waters of the California Gulf. Farther out to sea, primarily California sardine is fished (Sardinops Sagax), which is by weight the dominant Mexican fish. Nearly three-quarters of the annual catch from fishing to sea is landed in ports along the Pacific coast: Guayamas in the state of Sonora, Mazatlán in Sinaloa and Manzanillo further south. Sinaloa and Sonora together account for 45 percent of the value of all fishing in Mexico. From there, both wild caught and cultivated shrimp are largely exported to the United States, a country with steadily growing demand for seafood. Mazatlán is the base for high sea fishing off the Pacific coast. There mainly landed large catches of sardines and also tuna. On the east coast, Tampico and Veracruz are the main ports for the Gulf of Mexico fishing. There, oil spills and overfishing have significantly reduced catches. Fish is no longer considered a viable resource.
Overfishing is an acute problem in several areas and the federal state seeks to achieve sustainable fishing using fishing quotas and fishing permits. At the same time, the state in various ways provides support for the development of more modern fishing further out at sea. However, such large-scale fishing is a greater ecological threat than the small-scale using traditional methods. By making it easier for fishermen to switch to fish farming, they seek to counteract overfishing, while at the same time looking to increase production. Fish farming has also increased and now accounts for about a tenth of the country’s total seafood production. The shrubs mainly come from high quality shrimp but also trout.
Mexico has long been an important mineral producing country. In 2011, the mining industry became Mexico’s second most important industry, after oil and natural gas extraction but before tourism, and in 2010, accounting for coal mining, accounted for just over 8 percent of the country’s GDP. Of this, 26 percent came from gold and 20 percent from silver, 16 percent from copper, 10 percent from zinc and 5 percent from iron ore.
Already in pre-Columbian times, the indigenous communities used silver and gold, and mining has a more than 500-year history in Mexico. The Spanish conquerors were accompanied by minerals and soon silver and gold gave Spain the largest income from the new colony. Eventually, however, the deposits decreased and the mining industry declined in importance. General poverty, political instability and capital shortages in the country caused new exploitation to be delayed. In addition, from the beginning of the 1950s until 1992, the country was closed to foreign investment in mining. Only then has there been a sharp expansion, also promoted by NAFTA and not least by growing demand and thus rising world market prices for the minerals that exist in the country.
Mexico became the world’s leading producer of silver in 2010with close to 1/5 of all extraction in the world. In an 800 km long zone with silver deposits along the Sierra Madre Occidental are many large mines. The center is located in the state of Zacateca, where almost half of the silver production comes from. Fresnillo has one of the largest mines. Fresnillo plc is also the name of the country’s leading mining company, one of the world’s largest in terms of silver and gold mining. Silver is also mined on the east coast of California and in the south not far from the metropolitan area. In general, the gold deposits are in the same areas. More than half of that production comes from the states of Sonora and Chihuahua. Rapidly rising gold prices have meant that gold has become the country’s most productive mineral, but in a global perspective, Mexico ranks first in about 10th in gold mining.
Lead and zinc are mainly mined in the northern part of the Sierra Madre Occidental. Mexico was the world’s fifth largest producer of lead in 2010 and the eighth of zinc. Copper ore occurs in a belt west of the silver belt in the Sierra Madre Occidental, especially in the northwest, and the state of Sonora accounts for 2/3 of that production. The center for the iron ore mining is the city of Monterrey in the northeast. In the case of copper and iron ore, Mexico is not among the top ten producers in the world.
Only a small part of the country has so far been geologically mapped. Every year new ore deposits are found, and new areas are explored and evaluated. The outside world shows great interest in Mexico’s mineral resources and in 2011 the country was one of the four in the world that attracted the most foreign investment in the mining sector. Three-quarters of these came from Canadian mining companies. Since 2010, China has also shown strong growing interest in Mexican deposits of copper, iron, zinc and lead ore. Another reason for the booming mining industry in Mexico is that the companies have very favorable taxation.
The growing mining industry faces problems as Mexican environmental legislation is strict in terms of, among other things. water. Discharge of chemical agents destroys drinking water, and forest clearing and quarrying reduces vegetation cover. Mining requires a lot of water and when it rains there can be conflicts with other industries such as agriculture and tourism. In order to open new mines, companies must also negotiate with the locals, who are usually organized in ejidosis and often negative to such new businesses. New mineral deposits are found especially in northern Mexico, where the companies’ work is also hampered by contradictions between drug cartels.
Mexico is one of the world’s ten largest oil-producing countries. In 2011, oil accounted for about 55 percent of total energy consumption in the country and also contributed one sixth to export income. However, oil’s share of consumption has declined in recent years, while natural gas plays an increasingly important role with a share of about 30 percent in 2011. Coal accounted for 5 percent and nuclear power for 1 percent, while water energy accounted for 4 percent and other renewable energy sources. about 5 percent.
Already in the early 1900s, foreign companies extracted oil in Mexico and in the 1920s and 30s the country was one of the largest crude oil exporters in the world. In the mid-1930s, the country’s natural resources and thus all extraction and trade in oil and natural gas were nationalized, decisions that were written into the Constitution. The state-owned oil and natural gas company Pemex (Petróleos Mexicanos) was founded in 1938 and is one of the largest companies in Latin America. Mexico is not a member of OPEC but acts in its spirit.
During the 1970s and early 1980s, a number of new oil deposits were found along the Gulf of Mexico, both onshore and offshore. With the deposits as collateral, the state took out large foreign loans and was thus able to finance offshore extraction and also the construction of oil refineries. The increase in production was particularly strong in 1977–82. Mexico was in fifth place in the world as an oil producer in 2004 and exported a lot of crude oil to mainly the US. That year, oil recovery reached its maximum. Then came a sustained decline, and in 2011 less than three-quarters of the volume was produced seven years earlier. At that time, Mexico was down to nine as a crude oil producer, accounting for only 3.6 percent of world production. The country was then no longer among the fifteen largest exporters.
Since the 1970s most extraction has been in the Cantarell field, which has been one of the world’s five largest oil fields. It is located at sea in the southeastern part of Campeche Bay, at the bottom of the Gulf of Mexico. The reserves there are not as large as previous calculations have shown, and Cantarell is now an aging field which in 2012 only produced 1/5 of the production during the peak year 2003. Since 2009, the extraction has been greater in the neighboring, smaller fields Ku – Maloob – Zaap. Small oil fields are also found on the coast to the south and along the coast between Veracruz and Tampico.
Pemex is the state’s “dairy cow” and has not been able to maintain sufficient resources to drive the oil exploration and technology development needed to find and exploit new deposits, especially not in deeper water. Professionals and many politicians have for a long time considered that this can only be solved by opening the country to foreign oil companies, a development made possible in 2013 when the congress’s two chambers decided to end the monopoly in oil and gas extraction. Demand for oil products is gradually increasing in the country and Pemex has also not been able to expand sufficient refinery capacity. The country is therefore a net importer of oil and oil products.
Mexico has significant assets in both conventional natural gas and shale gas. Ordinary natural gas is mainly associated with the oil deposits in the southernmost part of the country, and onshore and offshore fields in the states of Tabasco and Campeche account for just over 60 percent of all natural gas production. Another 25 percent comes from gas fields in the northeast, adjacent to the Texas border. Recovery increased during the first half of the 1990s and has subsequently remained at approximately unchanged levels. Domestic demand for natural gas is gradually increasing, which has led to a steadily growing import of cheap natural gas via pipelines from the USA. Mexico also imports liquefied natural gas from mainly Qatar, Nigeria and Peru.
It has now also become possible for private companies to enter into service agreements with Pemex. They can then exploit Mexican natural gas to sell it to Pemex, which is then responsible for all distribution and sales thereof. One third of all natural gas is used to generate electricity. Mexico, like the United States and Canada, has large shale gas assets, mainly in the arid states of the north. So far, there have been no resources and knowledge to start utilizing them, and recovery is also hampered by areas where the drug cartels are active. In addition, such gas extraction is a process that requires a lot of water.
Coal is used in Mexico mainly in the steel industry and to generate electricity. Two-fifths of the coal used is imported, mainly from China and Australia. Domestic coal is of poor quality with a high content of ash. Most of the coal mining takes place in the state of Coahuila in the northeast and production has fluctuated widely from year to year.
Over the past decade, the importance of oil has decreased for electricity generation, while natural gas has become increasingly important. In 2009, natural gas produced 53 percent of electricity, oil 17 percent, coal just over 11 percent and nuclear power 4 percent. The remainder came from renewable energy sources, of which just over 10 percent was hydropower and the rest geothermal energy, wind power and energy from biofuels. Mexico’s only nuclear power plant is Laguna Verde in the state of Veracruz. There is great potential for solar power in northern Mexico and for wind power in the southwestern part of the country.
In 2012, the manufacturing industry together with mining and construction accounted for just over 33 percent of employment in Mexico, while 56 percent worked in the service industries. However, the scope and focus of employment cannot be stated quite safely, as many still work in the unofficial sector. Most of them are devoted to trade and personal services.
The manufacturing industry grew by an average of 3.7 percent per year in 2011-12, accounting for about three quarters of export earnings. It was developed seriously from the 1940s and forty years on. The production of consumer goods was then supported by high import duties and other trade restrictions that protected it from foreign competition. It was also stimulated by improved economic conditions, which increased household demand for goods. When the barriers to trade began to reduce in the 1980s, the large and modern companies were able to reach a larger market abroad and also cope with new competition, while many small and medium-sized companies with more traditionally designed operations had problems.
In the late 1960s, maquiladoras began (compound factories) grow in the cities at the border in the north. These were owned by subsidiaries of major US companies. It was a corporate form that would become a very expansive element of Mexican business during the 1980s and 1990s, in particular. They were able to import, without restriction, components that were merged into electrical and electronic machines, which were then exported, mainly to the United States without import duties. Textile and clothing factories of this kind also grew up in the Mexican border cities. The success was a result of both a large and low-paid labor force in Mexico and a large and growing demand for products in the US. The NAFTA agreement in 1994 provided additional stimulus to maquiladoras, and similar factories also grew in other parts of the country.
In 2011, the approximately 3,000 maquiladoras companies together had approximately 1.3 million employees. Products from there have for many decades accounted for a large part of exports from Mexico’s manufacturing industry. The free trade agreements have also meant that foreign investment has increased more and more, especially from the US but also from countries within the EU. In addition, more and more multinational companies from countries other than the United States have placed manufacturing in Mexico to more easily benefit from NAFTA’s large market.
During the 1990s, a slowed growth rate was noticed in industries with labor-intensive manufacturing. Some such companies were attracted to China where wages were lower. Instead, more advanced industry grew, primarily vehicle manufacturing. The largest European, Japanese and American car manufacturers have built or are in the process of building large factories in Mexico, and now virtually all components for the cars can be manufactured there. These companies also build research and technological development departments. In 2011, Mexico had become the eighth largest automaker in the world. Similar developments have also occurred in the aviation industry. A large number of companies in these industries are located near the U.S. border, for example, in the Tijuana – Mexico area just south of California in the United States, but in recent years, these have also been established in the new high-tech manufacturing center that is emerging in the states of Querétaro and Guanajuato north of Mexico City. These industries require highly educated workforce, and large multinational companies often invest in technical upper secondary and college education for young people in the regions where they establish themselves.
At the beginning of the 2010s, the manufacture of transport equipment, telecommunications equipment and office equipment was the most expansive industry in Mexico. A smaller but growing industry is the manufacture of instruments. All in all, this means that high-tech industry is gaining importance in Mexico’s economy and 16 percent of industrial goods exported in 2011 came from there.
The petrochemical industry, metal smelters and metal foundries are of great economic importance. They are highly mechanized industries and therefore have a small share of employment. The first steel mill was built in the early 1900s in Monterrey in the state of Nuevo León in the northeast, and that city is still the center of the country’s steelmaking. Demand for steel has risen sharply as the automotive industry has grown in recent years. Domestic steel production has not increased at the same rate, and steel imports have increased every year. In 2012, it corresponded to half of domestic steel production.
The food industry is still the largest industrial industry. In 2012, it accounted for about 25 percent of the country’s industrial production and for an even larger share of industrial employment. There is a wide range of raw materials from agriculture and food factories are scattered throughout the country. The domestic market is large and growing in terms of tobacco products, beer and other alcoholic beverages, such as agave-based such as tequila. In addition, there is the large market for fruit and vegetable preserves, also in many exporting countries.
service industryshowed strong growth around 1990 and continued to increase until 2002, when it accounted for close to 70 percent of the country’s GDP. One of several driving forces was the growing tourism. Subsequently, a sharp decline followed and in 2015 the share was only 62 percent. The reason for this is mainly due to the increasing violence from the drug cartels. reduced tourism, entertainment and trade. The subsequent financial crisis further reduced the number of tourists from primarily the United States. It was also a period when employment in the informal sector increased, with its small, cheap and flexible service places. In 2013, the service industry accounted for 59 percent of GDP, following a slow improvement. Mexico’s economic growth as a whole in 2011–12 means that tourism and financial services are regarded as the service industries with the best prospects.
Three traits are striking in the country’s foreign trade: oil exports have varied greatly over different decades, the importance of industrial products has increased greatly in recent years, and for a long time Mexico has been heavily dependent on the US as a trading partner, especially with regard to exports.
From the 1930s to the early 1980s, Mexico pursued a strong protectionist trade policy. However, the country ended up in serious financial difficulties and trade liberalization appeared inevitable. Trade barriers began to be lowered and, above all, negotiations began with other states on free trade agreements. Liberalization has continued gradually and Mexico has become one of the world’s most open countries in terms of trade, which has grown exceptionally well. Exports increased by 475 percent from 1994 to 2011 and imports by 342 percent.
The 1994 Free Trade Agreement between the United States, Mexico and Canada under the North American Free Trade Agreement (NAFTA) became by far the most important agreement. During the following decade, many other free trade agreements, especially bilateral ones, were also signed with countries in South and Central America but also with, for example, the EU and Japan. Mexico (2012) has 12 free trade agreements with a total of 44 countries and negotiations are ongoing on further agreements, mainly with countries around the Pacific. The agreements usually concern both goods and services and entail a gradual reduction of trade barriers and also easing of rules for foreign investment.
According to Countryaah, the main reason for the many free trade agreements alongside NAFTA has been that Mexico seeks to reduce its dependence on trade with the United States. However, the pattern of trade has hardly changed with regard to exporting countries. In 1996, 83 percent of all exports to the United States went, in 2011 the share was 79 percent. In 2011, the EU received only 6 percent of exports, other countries with free trade agreements with Mexico received 8 percent and other countries 7 percent.
As far as importing countries are concerned, there have been changes, but not as a result of the free trade agreements. The US share has decreased, from 75 percent in 1996 to 50 percent in 2011, and the share of other free-trade countries has increased slightly, from 17 percent to 19 percent. The major change has occurred in the case of non-free trade countries, which increased their share of Mexico’s imports from 8 to 31 percent. This is mainly explained by the fact that China in the 00s and mainly since 2008 appeared as one of the country’s most important trading partners. In 2011, 15 percent of Mexico’s imports came from there. In the exchange with the United States, Mexico has a large surplus in commodity trade, but there is currently a small deficit in all foreign trade.
Both the extent of oil recovery and the level of oil prices affect Mexico’s trade balance. In the early 1920s, crude oil provided more than half of the country’s export earnings, but after a few years the deposits subsided and Mexico eventually became a net importer of oil and oil products. Extensive discoveries of oil deposits in the early 1970s again made the country a major oil exporter and in 1982 the oil’s share in exports was close to 80%. Reduced recovery, falling world market prices and rising exports of Mexican industrial goods made the oil in 1995 accounted for only 10 percent of export earnings. In 2011, the share had risen to 14 percent and crude oil was again the most important export commodity. Next in importance came passenger cars (5.4 percent), TVs, mobiles, trucks, base metals, chemical products and fruits,
The most important import goods in 2011 were machines for metalworking and agriculture, as well as petrol and other oil products, steel, mobile phones, passenger cars and grain. A significant proportion of imports are semi-manufactured to the engineering industry, such as TV components.
Mexico’s balance of payments is affected by two other major sources of income, tourism and private US dollar transfers. The funds that Mexican guest workers in the United States send home to family and relatives correspond to several percent of GDP each year.