Strong Economy Mexico
Mexico has one of the largest economies and is a global leader in Growth Domestic Product and to start a business. Worldwide, it is ranked as the 2nd best Latin America country in the global competitiveness index. In 2019, the gross domestic product in Mexico was 1.258 MRD USD in total, which reflected into per head in 9’900 USD and place 15 worldwide.
In the 90’s, the GDP was per head on 3’000 USD with a peak in 2014 with 14’000 USD – an increase of almost 500% within 20 years. The year 2024 predicts a GDP of 9,300 USD.the GDP per head between 1980 and 2018 had an increase at certain stages of over 300%
Some Hard Facts
- Mexico belongs to the Top 10 export countries worldwide
- Mexico has globally the 14th largest economy in terms of Growth Domestic Product GDP
- Top 20 countries to start a business
- Top 50 Global Competitive Report 2022
GDP of Mexico
Worldwide GDP in 2021 was at about 12,183 USD per capita. On the other hand, the GDP in Mexico reached USD 10,046 per capita, or 1.273 trillion USD for the whole country. Mexico is therefore one of the
world's largest economies and is currently at rank 15. Mexico has globally the 14th largest economy in terms of Growth Domestic Product GDP and after Brazil the second largest in Latin America. In 2022, Mexico’s economy grew by 3% the gross domestic product, which indicates a recovers after the global drop in growth due to Covid since 2020. In that, the industrial sector grew the most with 3.2%, followed by agricultural with 2.8% and services 2.7% compared to the previous year.
Over the last 40 years, the GDP per head between 1980 and 2018 had an increase at certain stages of over 300%, which is a strong indicator of a strong development of the country itself as well as the globalization. The Corona pandemic hit them, as every other country, very hard, however the forecast promises a recovery in the next years.
Foreign Direct Investment in Mexico
In general, the largest part comes from the car manufacturing, followed by machinery, electrical machinery, optical apparatus, mineral fuels, and plastic articles. As we can see on the graph “FDI in Mexico”, in 2022 (32 USD Billion), it has almost achieved the same level as before Covid time (34 Bilion USD). In the first three quarters, Mexico’s top foreign investors have been the Nafta-Countries United States (12.5 USD Billion) and Canada 3.1 USD Billion), followed by the first European co
untry Spain. With the whole nearshoring trend, it can be expected, that Japan will increase its FDI as well as China will appear within the top 10 foreign investors. The FDI flows in the last 5 years have remained between $30 million and $35 million and more than 36% has been channeled to advanced manufacturing industries, such as automotive, spare parts, electronics, aerospace, pharmaceuticals, e-commerce and medical devices, among others.
Due to the tense relation between United States and Asia, there is an astonishing waiting list of over 400 companies in the most important corridors of the country. Thus, in 2022, Mexico achieved a 5% growth in the manufacturing sector and 17% in exports.
Even though Mexico City is the top recipients of FDI, Nuevo Leon will thanks to many Asian as well as Tesla investment make a significant increasement in FDI. As of 2018, many Asian countries began to increase their investments in Mexico, probably looking for an alternative to avoid the tariffs that former president Donald Trump was imposing at that time. if we analyze the pre and post 2018 data, the foreign direct investment from China increased 162% and from Hong Kong 269%.
Sources; Inegi, Dallas FED & MexicoNow
Trade Agreements facilitate FDI
A key of the strong GDP Mexico are the trade agreements with the different countries. It was the first Latin America country to sign an economic partnership, political coordination, and cooperation agreement with the EU 1997. Mexico is for the EU a very important, strategic partner as the country belongs to one of the world's most dynamic emerging economies. Thirty-seven percent of foreign investment comes from China, 16% from the US, followed by Japan and Mexico at 12%, 9% from South Korea and 5% from Germany. Additionally, the US, Mexico and Canada “USMCA” is generating foreign investment opportunities for Mexico, along with the so-called “Trade War” between the US and China.
Another clear indicator of a strong growth of the manufacturing industry is that the participation of the GDP lies at astonishing 16.7%, which is over 1% compared to the last 10 years. Due to the whole nearshoring trend caused by the trade war between China and United States, the Pandemic Covid 2019 and the Ukrainian War, it can be expected that this trend will continue to grow.
Increasing exports to USA
Manufacturing in the country continues to grow and Mexico remains the 12th largest exporter in the world. Major manufacturing industries in Mexico include automobiles, aviation, apparel and textile, consumer products, and medical devices with raw materials coming from the US, China, Japan, Germany, and South Korea among others.
As you can extract from the graph, Mexico has exported over 377 Billion USD in 2019. The largest part comes from
- Vehicles: US$115 billion (23.3% of total exports)
- Electrical machinery, equipment: $87.1 billion (17.6%)
- Machinery including computers: $85.3 billion (17.2%)
- Mineral fuels including oil: $27.6 billion (5.6%)
- Optical, technical, medical apparatus: $20.6 billion (4.2%)
In 2019, Mexico has exported over 461 Billion USD to other countries and steadily increased it extraordinary. If we look at the top, the neighbor country United States is placed on the second place with 1.645 Billon USD, – 4 times more than Mexico itself. And if we see thetense, political development between United States and China, there is a huge potential for Mexicoto step in an export more products.
Mexico as most important trading partner of United States
Due to global circumstances which include the pandemic and the trade war between USA and China, Mexico is
thanks to the UMSCA Agreement the most important trade partner with 455 billion USD exported of goods in 2022, just behind China with 537 billion USD. Compared to the numbers before Covid (360 billion USD in 2019), it is an outstanding increasement of 25%. We expect a further increasement of export as more and more international companies are looking for nearshoring opportunities in Mexico.
As you can see, due to the huge market and proximity of the United States, Mexico is with over 78% very dependent on that market. The EU is Mexico's third biggest trading partner. Mexico is the EU's second biggest trading partner in Latin America after Brazil.
Similar to the European Union, most important good of export are Vehicles, Electronic equipment, machinery and medical apparatus. Though the total volume of export compared to the EU is more than 10x times higher, which demonstrates a significant dependency on the American Market.
Exports to the United States
Mexico and European Union
As you can extract from the graph below, the exports to the European union have been almost 30% than 10 years ago. This demonstrates a huge trust into the leading manufacturing industry on the continent America – Mexico. With the exception of the pandemic year in which -as in every other country - decreased the exports of good, it increased within one year (2020 to 2021) by 17% from 23 billion USD to 27 billion USD. Thanks to the nearshoring trend, it almost leveled up to 30 billion USD in 2022 to the before covid times. If we try to do a forecast, we expect a further growth in the next years between 32 to 35 billion US Dollar. The main export from Mexico to Europe are Vehicles, followed by Electronic equipment, mineral and fuels, machinery and medical apparatus.
Mexico ranks in the Global Competitive Report as second place in South America
Mexico ranks 55th in the Global Competitiveness Index 2022 and is second in all of South America after Chile (45rd). Mexico have been able to stay stable over the past 5 years with the Ranks 51, 50, 53, 55 and again 55 in 2022. Looking only at the economy performance factor, Mexico made the largest gains with 22 places better than to previous year and ranks now on positions 27th.This thanks to the areas of infrastructure, trained specialists, and also due to the good relationships with the NAFTA regions US & Canada as well as the European Union. Thus, Mexico is one of the most attractive countries in South America to produce commodities.
Ranking of other production locations:
Hong-Kong 3rd
United States 10th
China 17th
Indien 37th
Brasil 59th
Top 20 countries to start a business
Accordingto the news magazine U.S. News from 2020, Mexico is ranked on place 7 in the category "Start a Business" – before many other large countries like USA, Great Britain, Germany, France or Japan. Around 6,000 business decision-makers assessed the attractiveness of a country for starting a company on the basis of five characteristics. The following properties were equally included in the evaluation:
- Financing is affordable
- Bureaucracy
- favorable manufacturing costs
- Connection to the rest of the world
- easy access to capital