Everything about Economy Of Mexico totally explained
The
economy of Mexico is the 12th largest in the world, with a
gross domestic product (by PPP estimate) that surpassed a
trillion dollars in 2004, measured in
purchasing power parity.
Mexico has a
free market and export-oriented economy and is firmly established as an advanced middle-income country. According to the World Bank's latest available figure (
September 14,
2007), it has the highest
income per capita in
Latin America, in market
exchange rates and in
purchasing power parity. Mexico is the only Latin American member of the
Organisation for Economic Co-operation and Development. According to
Goldman Sachs BRIMC review of emerging economies, by 2050 the largest economies in the world will be as follows:
China,
USA,
India,
Japan,
Brazil, and
Mexico.
Since the
1994 crisis, administrations have improved the country's
macroeconomic fundamentals. Mexico wasn't significantly influenced by the recent
2002 South American crisis, and has maintained positive, although low, rates of growth after a brief period of stagnation in 2001.
Moody's (in March 2000) and
Fitch IBCA (in January 2002) issued investment-grade ratings for Mexico's sovereign debt. In spite of its unprecedented macroeconomic stability, which has reduced inflation and interest rates to record lows and has increased per capita income, enormous gaps remain between the urban and the rural population, the northern and southern states, and the rich and the poor. Recently, the
Congress of the Union approved important tax, pension and judicial reforms, and reform to the oil industry is currently being debated.
History
After five decades of political turbulence following the independence of Mexico, the four consecutive administrations of president
Porfirio Díaz (during the last quarter of the nineteenth century) brought unprecedented economic growth. This growth was accompanied by foreign investment and European immigration, the development of an efficient
railroad network and the exploitation of the country's natural resources.
GDP per capita levels
circa 1900 were on par with
Argentina and
Uruguay, almost three times that of
Brazil and
Venezuela. Annual economic growth between 1876 and 1910 averaged 3.3%. Political repression and fraud, as well as huge income inequalities exacerbated by the land distribution system based on
latifundios, in which large
haciendas were owned by a few but worked by
millions of underpaid peasants living in precarious conditions, led to the
Mexican Revolution (1910–1917), an armed conflict that drastically transformed Mexico's political, social, cultural, and economical structure during the twentieth century under a premise of social democracy. The war itself, however, left a harsh toll in the economy and population, which decreased over the 11-year period between 1910 and 1921. The reconstruction of the country was to take place in the following decades.
The period from 1930 to 1970 was dubbed by economic historians as the "Mexican Miracle", a period of economic growth spurred by a model of
import substitution industrialization (ISI) which protected and promoted the development of national industries. Through the ISI model, the country experienced an economic boom through which industries rapidly expanded their production. Important changes in the economic structure included free land distribution to peasants under the concept of
ejido, the nationalization of the oil and railroad companies, the introduction of social rights into the constitution, the birth of large and influential labor unions, and the upgrading of infrastructure. While population doubled from 1940 to 1970, GDP increased sixfold.
The ISI model had reached its peaked in the late 1960s. During the 1970s, the administrations of
Echeverría and
López Portillo, tried to include social development in their policies, an effort that entailed more public spending. With the discovery of vast oil fields in a time in which oil prices were surging and international interest rates were low -and even negative- the government decided to borrow from international capital markets to invest in the state-owned oil company, which in turn seemed to provide a long-run income source to promote social welfare. In fact, this method produced a remarkable growth in public expenditure, as Mexico multiplied its oil production to become the world's fourth largest exporter.
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