Mexico: Economic and Political Overview

Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Mexico is among the world's 15 largest economies and is the second largest economy in Latin America. The country is highly dependent on the United States, its largest trading partner and destination of nearly 80% of its exports. According to the IMF, GDP grew by an estimated 2.1% in 2022, mainly due to a gradual job market improvement which positively impacted household consumption. The country is expected to continue growing in the coming years, albeit at a slower pace, with the IMF forecasting a growth of 1.2% for 2023 and 1.8% for 2024.

The country recorded a budget deficit of an estimated 3.7% in 2022, a rate that should slightly fluctuate in 2023 and 2024, reaching 4% and 2.6%, respectively. Spending priorities include social programs, the creation of the National Guard to fight rising crime and new funds to support PEMEX, whose rating was downgraded by Fitch due to uncertainty around its future strategy and financial stress. The sector is of pivotal importance to the Mexican economy, as oil production accounts for one third of the government revenues. The country’s debt-to-GDP ratio decreased to 56.8% in 2022 and is expected to remain stable in the upcoming years, at 58.7% in 2023 and 59% in 2024. Inflation has been above target since 2017, and it further increased in 2022, reaching an estimated 8%, the highest rate since 2018. Domestic factors, such as the recovery in the demand for various services, as well as upward pressures on food and energy prices fuelled inflation in 2022. However, inflation is expected to decrease to 6.3% in 2023 and 3.9% in 2024, boosting purchasing power and private consumption. Overall, Mexico's economic recovery plan in response to the COVID-19 crisis has been efficient, and the country's economy has been gradually rebounding. However, further fiscal support is needed in to ease the strains of the pandemic in the short term.

The labour market has been gradually recovering since the pandemic. In 2022, Mexico's unemployment rate slightly decreased to 3.4% and it is expected to reach 3.7% in 2023 and remain stable in 2024. However, the informal sector is still estimated to involve around 60% of employment (OCSE). Key challenges which remain to be tackled include high dependence on the U.S. economy, high and rising criminality rates, income inequality, weakening infrastructure and education, and decades of underinvestment in the oil sector.

Main Sectors of Industry

Mexico's economy is diversified, including hi-tech industries, oil production, mineral exploitation, and manufacturing. According to the latest data from the World Bank, agriculture accounts for 3.9% of Mexico’s GDP and employs 12.5% of the country’s active population. Mexico is the world's seventh agricultural power and ranks among the world's largest producers of coffee, sugar, corn, oranges, avocados and limes. Cattle farming and fishing are also important activities in the food industry. Mexico is also the world's forth largest producer of beer and its largest exporter. The agricultural sector suffers from occasional droughts and other issues related to climate and, in 2021, agricultural production decreased mainly due to significant droughts in Northern Mexico.

Industry employs 25.5% of the workforce and represents 30.8% of GDP, according to the World Bank. In 2022, employment in manufacturing continued to benefit from stronger U.S. activity, which favours the Mexican manufacturing industry. Mexico is among the world's leading producers of many minerals, including silver, fluorite, zinc and mercury. Moreover, oil and gas reserves are one of the country’s most precious possessions. The aerospace sector has grown sharply, thanks to the development of a cluster in Queretaro and the presence of nearly 190 companies, including Bombardier, Goodrich, the Safran group and Honeywell, which together employ 30,000 people. Mexico is also one of the world's ten largest car producers and due to significant real estate investments, the construction sector is dynamic.

The service sector constitutes 59.2% of GDP and employs 62% of the workforce. The hi-tech, information, and software development sectors are experiencing a real momentum, driven by the quality of the workforce, clusters and low operating costs that favours the creation of call centres. Medical services and tourism have been growing steadily for the past few years, mainly due to lower service costs than in other Western countries. Although the services sector was hit the hardest during the pandemic, it showed a significant recovery in the past couple of years.

Source: World Bank, Latest data available.

Indicator of Economic Freedom

Score:

65,5/100

World Rank:

65

Regional Rank:

11

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

Business environment ranking

Score:

6.36/10

World Rank:

43/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

Sources of General Economic Information

Ministries

List of government agencies and ministries
Ministry of Foreign Relations
Ministry of Welfare
Ministry of Energy
Ministry of Agrarian, Land, and Urban Development
Ministry of Agriculture and Rural Development

Statistical Office

National Institute of Statistics and Geography

Central Bank

Bank of Mexico

Stock Exchange

Mexican Stock Exchange

Other Useful Resources

Ministry of Economy
Ministry of Finance and Public Credit

Main Online Newspapers

El Financiero
Mexico News Daily
El País Mexico
El Economista
El Diario
El Milenio

Economic Portals

Trade in Mexico

Political Outline

Current Political Leaders

President: Andrés Manuel López Obrador (since 1 December 2018) - MORENA
There is no de facto vice president in Mexico. In case the President is unable to perform his duties, Congress names a Substitute or Interim President. Until the nomination, the Secretary of the Interior is the one who assumes executive powers provisionally.

Next Election Dates

Presidential: July 2024
Senate: July 2024
Chamber of Deputies: July 2024

Current Political Context

President Andrés Manuel López Obrador broke a two-party hegemony that had lasted for decades when he took office in December 2018, capitalising on social discontent. López Obrador’s government declared economic reforms as its priority, including reforms of the legislation in the energy, financial, fiscal, and telecommunications sectors; along with an overall objective of a more equitable income distribution. More recently, however, the Mexican president has been criticised for not implementing a stimulus programme large enough to jump-start economic recovery and growth following the COVID-19 pandemic. Still, the president remained broadly popular in Mexico, mainly due to his pledges to reduce inequality. Moreover, in June 2021, the country held midterm elections, where the ruling Morena party and its allies failed to achieve the required two-thirds majority in the Lower House to pass constitutional changes. Nevertheless, a simple majority allows the government to keep control of issues such as the budgetary process. Still, the election results strengthened Morena's coalition ahead of the 2024 presidential election, as the party won 11 out of the 15 governorships that were at stake. In November 2022, Mexico’s Congress rejected a controversial electoral reform backed by the president, which triggered massive protests by the Obrador's supporters. However, after the initial rejection his proposal, Obrador reverted to a package of laws which required only a simple majority to pass - instead of a two-thirds majority - leading to the approval of his reform in December 2022.

Main Political Parties

Mexico has a multi-party system. Under the transition to democratic pluralism, the centre of political power has shifted away from the executive and towards the legislative branch and local governments. The largest political parties in the country are:

- National Action Party (PAN): centre-right to right wing, liberal conservative, Christian democratic party.
- Institutional Revolutionary Party (PRI): centre to centre-left, oldest political party in the country, constitutionalist, technocratic, social conservative, big tent party.
- National Regeneration Movement (MORENA): centre-left to left wing, anti-neoliberalism, left-wing nationalism, populism.
- Ecologist Green Party of Mexico (PVE): centre-right, environmentalist, conservative.
- Labour Party (PT): left-wing, social democratic, labourist, left-wing nationalist.
- Citizens' Movement (MC): centre-left, social democratic, progressist.
- Party of the Democratic Revolution (PRD): centre-left to left wing, social democratic party.

Type of State

Mexico's official name is the United Mexican States. It is a federal republic based on presidential democracy.

Executive Power

As established by the Constitution, the Executive power is headed by the President of the United Mexican States. The President is both Head of State and of Government, as well as the Supreme Commander of the Armed Forces. He or she is elected by popular vote for a six year term and cannot be reelected. The President appoints the Cabinet.

Legislative Power

The Mexican legislative power is in the hands of the Congress of the Union, which is divided in two chambers: the Chamber of Deputies and the Senate of the Republic. The Chamber of Deputies has 500 members, 300 of which are elected through plurality voting and 200 through proportional representation, with a three-year mandate. The Senate of the Republic is composed by 128 members, 96 of which are elected through plurality voting and 32 through proportional representation, all with a six-year mandate.

Indicator of Freedom of the Press

World Rank:

143/180

Indicator of Political Freedom

Ranking:

Partly Free

Political Freedom:

3/7

Civil Liberties:

4/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

COVID-19 Country Response

Travel restrictions

Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.

Import & export restrictions

A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

section in the IMF’s Policy Tracker platform.

Support plan for businesses

For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.