Mexico - Overview
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The year 2013 was the most difficult for the Mexican economy since 2009. Due to the weak recovery of the US economy, the Mexican trading deficit deepened sharply and remittances from Mexicans living in the US dropped by 5%, despite being the country's second largest source of foreign currency. The reduction in public spending has also been an impediment to growth. The country also suffered damaged caused by two large hurricanes. Teh country has a number of advantages: foreign investment has been booming, its public finances are healthy, state debt is contained, infaltion is stable and the banking system is solid. The discovery of new gas fields has opened new possibilities for the country and a hope to turn away from nuclear energy. The 2014 budget The banking system is sound, and through a policy of budgetary and fiscal restraint, public debt has been contained at less than 40% of GDP and economic stability has been maintained. The discovery of gas fields in the country opens up and makes possible the withdrawal from nuclear energy. The 2014 budget is expansionist and plans on having the highest budget deficit (1.5% of the GDP) since the 2009 recession. It gives priority to infrastructures, education adn public safety and aims to encourage growth, job creation and improve the social situation. A tax increase is planned to finance unemployment insurance and pensions; the state monopoly on oil should be abandoned. A new strategy to fight against organised crime has also been adopted, since violence is hampering development.
Less than 5% unemployment is foreseen for 2014, but the informal sector is very large. Inequalities have increased, in terms of income but also in terms of exposure to natural disasters. More than 46.% of residents are poor. Insecurity related to crimes committed by drug cartels is a major problem.
The aerospace sector has grown sharply in the last five years, due to the presences of almost 190 companies, such as Bombardier, Goodrich, the Safran group and Honeywell, which together employ 30 000 people. Mexico is also one of the 10th major car producers. The hi-tech, information and software development sectors are also experiencing a real momentum, driven by the quality of the workforce, clusters and low operating costs, which allow for the establishment of call centers.
The tertiary sector contributes to around 60% of the GDP and the construction sector has been coming up since 2010 due to significant real estate investments.
Foreign trade overview
The United States buys 80% of Mexico's exports. Its main export partners are the NAFTA and the European Union. The main export goods are electrical and electronic equipment, vehicles, mineral fuels, oil and machinery. Its three main import partners are the NAFTA, China and Japan. It mainly imports electrical and electronics equipment, machinery, vehicles and plastic products.
After reaching its frist trade surplus since fifteen years in 2012, Mexico registered a 1 billion USD trade deficit in 2013, due to weak economic growth and the slow recovery of the US economy.
However, in recent years, Mexico's competitiveness has been hampered by the growth of organized crime and the lack of reforms in the energy sector, professional services and taxation. Corruption and administrative inefficiency are also major problems.
The areas where foreign investments are concentrated the most are the border towns with the United States (where assembly factories are located), as well as the capital. The Yucatan peninsula continues to receive foreign investments thanks to its tourism appeal. These investments come especially from the United States and Spain (mainly from the banking sector). The sectors receiving significant foreign investments are finance, automobile industry and electronics and energy sectors. The U.S. and Japan are the two largest investors.