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- GDP (PPP):
- $2.1 trillion
- 2.1% growth
- 3.3% 5-year compound annual growth
- $17,881 per capita
- Inflation (CPI):
- FDI Inflow:
The Mexican economy has shown a moderate degree of resilience in the face of a challenging global economic environment. Reform efforts have continued in many areas related to enhancing regulatory efficiency and liberalizing investment regimes.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 65.2 (down 1.2 points)
- Economic Freedom Status: Moderately Free
- Global Ranking: 62nd
- Regional Ranking: 3rd in North America
- Notable Successes: Trade Freedom and Investment Freedom
- Concerns: Property Rights, Corruption, and Labor Freedom
- Overall Score Change Since 2012: –0.1
Mexico has lagged notably in promoting the effective rule of law and strengthening its legal framework. The judicial system remains vulnerable to political interference, and property rights are not strongly protected. Corruption further undermines long-term commercial competitiveness. Recent years’ expansionary public spending threatens fiscal sustainability. The reform agenda addressing these shortcomings has been extensive, but progress has been limited.
President Enrique Peña Nieto, in office since 2012, has made constitutional reforms in education, energy, and telecommunications the centerpiece of his administration. Mexico is also replacing the current inquisitorial paper-based judicial process with an oral adversarial system that seeks to increase the quality, expediency, and transparency of Mexican justice. However, implementation of both economic and judicial reforms has been slow. As a result, Mexico has yet to see the expected increase in foreign direct investment that might come from a stronger rule of law and more competition. Investment in the automobile sector is strong, but growth remains below potential. The informal sector is large. Organized crime and corruption are endemic.
Corruption, deeply embedded culturally, is pervasive and fed by billions of narco-dollars. It entrenches the power of monopolists, party bosses, and other mafias. The murder of 43 college students by a drug gang in September 2014 after a political protest was a poignant reminder of Mexico’s ongoing epidemic of violence, corruption, and impunity. Contracts are generally upheld, but courts are inefficient and vulnerable to political interference.
The top individual income tax rate is 35 percent, and the corporate tax rate is 30 percent. Other taxes include a value-added tax. The overall tax burden equals about 19.7 percent of GDP. Government spending now accounts for 28.1 percent of total domestic output, and budget deficits have been widening. Public debt is equivalent to about 50 percent of GDP.
With no minimum capital required, launching a business takes less than 10 procedures, but completing licensing requirements remains costly. The recent labor reform bill was watered down to protect unions. In the wake of lower oil revenues, the government’s 2015 budget included significant cuts in subsidies to Pemex, the state-owned oil company, and CFE, the state-owned electricity firm, but housing subsidies were increased.
Mexico’s average tariff rate is 5.4 percent. Mexico has reduced tariff and non-tariff barriers both unilaterally and through trade agreements. Oil and gas reserves are owned by the government, but the energy sector is being liberalized. The financial sector has become more competitive and open in spite of the challenging global environment. Banking remains relatively stable, and foreign participation has grown rapidly.