Mexico has had plenty of historical events making it the country it is today. Mexico’s trek to freedom began in 1810 with the ‘Cry of Hidalgo.’ On August 24, 1821, after Mexico defeated Spain’s Royal Forces, the Treaty of Cordoba was signed, and independence was inevitable. In 1823, General Santa Anna and the Republican leaders formed a new government that gave the Mexican people freedom from several country’s lingering rules and policies. As a result, today Mexico is a strong and independent country with a thriving economic growth.
Officially Speaking
Mexico’s economic growth has conservatively made it the 15th largest economy in the world. It also holds the 11th position in purchasing power, according to the International Monetary Fund Organization. However, the recession of 2008 crippled most of the world’s economy, and Mexico was not immune to this financial downfall. Since those trying times, Mexico’s Macroeconomics (a country’s total economic position nationally and on the global market) has shown remarkable recovery.
Now with the Covid-19 epidemic plaguing almost every country globally, the economic indicators for 2020 are mixed at best. Mexico’s GDP (Gross Domestic Product – market value of all goods & services produced by a country in a fiscal year) has slightly decreased compared to previous years. Still, Mexico has one of the largest economies in Latin America, which makes it a vital influence in the global market. Its world exports contribute 39.3% in comparison to 142 countries, which average 45.7. Mexico’s largest GDP consists of several industries, including the service sector, which produces approximately 62 percent of its total GDP. Other categories are as follows:
- Wholesale and Retail – 16%
- Real Estate – 10%
- Transportation, Warehousing, and Communication – 7%
- Financial and Insurance – 6%
The second important part of Mexico’s GDP comes from the manufacturing sector, which accounts for 18%. Most of that comes from automotive and food production. Other noted contributions are utilities, water, gas, electricity, mining, and agriculture.
Prospective View
Mexico has managed to keep its inflation at bay and interest rates at record lows. They have also increased wage earnings per capita. This, in turn, will create an all-points purchasing environment. Although Mexico is still quite a ways away from an actual high-class status, there is progress on an annual basis. When a livable income can be earned throughout the working population, the attributes will stimulate economic growth to help small-medium businesses (SMB) thrive. This creates jobs, tax revenue, and more money being pumped into the economy as a whole.
Tax Revenue
Taxes in Mexico are meager in comparison to other developed countries. Therefore, this can be a two-fold proposition for both investors and the Mexican government. Here are a couple of points to consider.
- A lower tax structure will attract foreign investors who are looking to keep more of their profits.
- The government creates a larger tax basis, which, in turn, generates more revenue.
The additional tax revenue generated can support social programs that will help the less fortunate. Also, medical care, supplemental food programs, and affordable housing can greatly benefit from Mexico’s economic growth. Within the last few decades, Mexico has also been allocating money to upgrade its infrastructure. Some of the forthcoming funds will be directed to improving federal highways, roads, public transportation, public works, and protecting natural resources.
Tourism Industry
Almost every country depends on some sort of tourism dollars. Mexico’s Tourism Industry accounts for approximately 17% of its GDP. No matter what the world’s economic status is, people are always willing to travel. Many of Mexico’s municipalities survive on tourists spending their disposable income on goods and services. When local merchants do well, so does the local government. In general, tourists want to experience places that have a well-maintained infrastructure and feel safe. Let’s not forget that tourists need places to stay. As a result, this prompts investors to build resorts, condos, and other accommodations.
Real Estate Market
With an estimated 2.4 trillion-dollar Gross Domestic Product in 2020, Mexico’s real estate market plays an essential part in all its GDP’s sectors. Mexico real estate was valued at 31 Billion USD in 2018. It is estimated to reach 60 Billion USD by 2025. These types of figures hold plenty of potential when looking at Mexico’s economic growth. Here are several reasons why the real estate market solidifies a foundation for a growing economy.
- Real estate companies hire employees to sell and administrate transactions.
- Companies need to purchase real estate to house their business.
- Contractors hire thousands of skilled labor for new construction.
- Real estate companies help investors buy property for investment and personal needs.
- These new homeowners spend their money purchasing goods and services.
However, these are only a few of the contributing factors that fit into a common equation creating a thriving economy. Also, the outcome will produce a chain reaction that creates a continuous cycle. This, in turn, will support economic growth in each one of the GDP’s indicating sectors.
Economic Growth Now and in The Future
For an investor looking to expand internationally, Mexico offers an excellent opportunity to be a valued asset to anyone’s portfolio. The most obvious and proven investment is in real estate. There are very few places where you can still purchase a home on or near the beach for as little as 200,000 USD. Having a property that family and friends can enjoy and, at the same time, generate an income that will create a nice return. There is no doubt that Mexico’s economy will continue to grow and offer financial rewards now and in the future.
There are so many economic factors that affect a country’s financial position. Mexico’s economic growth has been on a roller coaster ride for the past several years. It has seen its highs and lows. In fact, maintaining financial stability in all the GDP sectors can be a daunting task. With this in mind, Mexico has done a great job capitalizing on maintaining a positive position by utilizing its resources. Mexico’s economic achievements will hopefully encourage other developing countries to strive for the same outcome.