Important Topics Facing Mexico Today: Part 1 – Economy
By Troy Ryley, Managing Director, Mexico, Transplace
This two-part series will discuss some of the relevant topics that are front-and-center in Mexico today, including current political and economic factors, and how key industries and trade are doing, particularly when considering Mexico-U.S. relations. Want to keep up to date with all things Mexico? Here’s what you need to know:
The Economy is Stable…
Overall, Mexico is enjoying relative stability and a good business climate for most of the companies doing business there today. Some of the other standout points about Mexico’s current economic climate include:
- The GDP is at $1.261 trillion – and expected growth rate projection is at 3%¹
- Inflation is on the decline and is currently at around 3%¹
- There are significant reserves built up throughout the country, allowing Mexico to enjoy this consistent stability
- It’s currently the 14th largest world economy,² and continues to advance at a steady pace
…And Trade is on the Rise
U.S.-Mexico trade has recently topped a record $500 billion, making it the 11th largest economy in the world by purchasing power parity (PPP).² While it’s not surprising that Mexico’s main export partner is the U.S. (with approximately 70% of exports³), it’s important to note that U.S.-Mexico trade is currently at a deficit. Mexico is currently exporting far more to the U.S. than it is importing, which is creating some significant trade and logistics issues. (Stay tuned because this topic will be discussed in greater detail in Part 2 of this post!)
It’s also worth noting that currently 48% of all Mexico-U.S. trade flows through Laredo, TX, which is the shortest distance to two of the major population centers in Mexico: Monterrey and Mexico City. Overall, Mexican exports are up 7% and imports are up 5% – and Mexico is a top U.S. exporter of items such as televisions, computer monitors and vehicle parts. Vehicle parts, in particular, is quickly becoming one of the key exports of the overall Mexican economy, and was its highest growth area in 2014.
It’s the Wild West Again in South Texas
In a large area of South Texas, there is a huge “bonanza” of oil available for drilling. Due to this boom, small towns throughout this area have quickly grown in order to create the infrastructure needed to support the immense drilling opportunity.
The Eagle Ford Shale area (shown on the map) also runs across the Rio Grande and extends through the northeast section of Mexico – and the Mexican government has realized that they need to be able to take advantage of the drilling opportunities offered by this region. They don’t currently have the necessary technology in place, but some global companies do, and Mexico is trying to figure out how to go about tapping the available wealth of this oil.
In 1938, the Mexican government kicked out most foreign oil and gas companies,⁴ and the industry was nationalized and protected. A newly proposed Energy Sector Reform would allow foreign investment to get at energy reserves, especially the deep water reserves in the Gulf of Mexico. This reform is also pushing for transparency and healthy competition amongst oil and gas companies.
To learn more about how these important economic factors are impacting transportation and logistics, click here to listen to my webcast, and stay tuned for Part 2 of this post.
What are some other international economic topics that are of interest to your company?