Mexico has a free market mixed economy, a mixture of modern and outmoded industry and agriculture, both of which are increasingly dominated by the private sector, and is firmly established as an upper middle-income country. It is the 12th largest economy in the world as measured in Gross Domestic Product in purchasing power parity. According to the latest information available from the World Bank, Mexico had the highest Gross National Income per capita in Latin America, both in nominal terms and in purchasing power parity(PPP), at US$7,830 and US$11,990 respectively in 2006. After the 1994 economic debacle, Mexico has made an impressive recovery, building a modern and diversified economy. Recent administrations have also improved infrastructure and opened competition in seaports, railroads, telecommunications, electricity generation, natural gas distribution and airports. Oil is Mexico's largest source of foreign income. According to Goldman Sachs BRIMC review of emerging economies, by 2050 the largest economies in the world will be as follows: China, United States, India, Japan, Brazil and Mexico.
According to the director for Mexico at the World Bank, the population in extreme poverty has decreased from 24.2% to 17.6% in the general population and from 42% to 27.9% in rural areas from 2000-2004. Nonetheless, income inequality remains a problem, and huge gaps remain not only between rich and poor but also between the north and the south, and between urban and rural areas. Sharp contrasts in income and Human Development are also a grave problem in Mexico. The 2004 United Nations Human Development Index report for Mexico states that Benito Juárez, a district of the Distrito Federal, and San Pedro Garza García, in the State of Nuevo León, would have a similar level of economic, educational and life expectancy development to Germany or New Zealand. In contrast, Metlatonoc, in the state of Guerrero, would have an HDI similar to that of Syria.
Many of the positive effects in poverty reduction and the increase in purchasing power of the middle class are attributed to the macro economic stability pursued by the last two administrations. GDP annual average growth for the period of 1995-2002 was 5.1%. The economic downturn in the United States also caused a similar pattern in Mexico, from which it rapidly recovered to grow 4.1% in 2005 and 3% in 2005. Inflation has reached a record low of 3.3% in 2005, and interest rates are low, which have spurred credit-consumption in the middle class. The Fox administration also provided monetary stability: the budget deficit was further reduced and foreign debt was decreased to less than 20% of GDP. Along with Chile, Mexico has the highest rating of long-term sovereign credit in Latin America. Poverty in Mexico is further reduced by remittances from Mexican citizens working in the United States of America, which reaches US$20 billion dollars per year and is the second largest source of foreign income after oil exports.
Approximately 90% of Mexican trade has been put under free trade agreements with over 40 countries, of which the North American Free Trade Agreement remains the most significant. Almost 90% of Mexican exports go to the United States and Canada and close to 65% of its imports come from these two countries. Other major trade agreements have been signed with the European Union, Japan, Israel and many countries in Central and South America. As such, Mexico has become a major player in international trade and an export power. Measured in the dollar value of exports, Mexico was the 15th largest exporter in the world – tenth if the European Union is treated as a single entity. Mexican exports roughly equal the total exports of all Mercosur members together, Venezuela inclusive.
Ongoing economic concerns include the commercial and financial dependence on the US, low real wages, underemployment for a large segment of the population, inequitable income distribution (the top 20% of income earners account for 55% of income), and few advancement opportunities for the largely Amerindian population in the impoverished southern states. Lack of structural reform is further exacerbated by an ever increasing outflow of the population into the United States, decreasing domestic pressure for reform.
Economy - overview
Mexico has a free market economy in the trillion dollar class. It contains a mixture of modern and outmoded industry and agriculture, increasingly dominated by the private sector. Recent administrations have expanded competition in seaports, railroads, telecommunications, electricity generation, natural gas distribution and airports. Per capita income is one-fourth that of the US; income distribution remains highly unequal. Trade with the US and Canada has tripled since the implementation of NAFTA in 1994. Mexico has 12 free trade agreements with over 40 countries including, Guatemala, Honduras, El Salvador, the European Free Trade Area, and Japan, putting more than 90% of trade under free trade agreements. In 2007, during his first year in office, the Felipe CALDERON administration was able to garner support from the opposition to successfully pass a pension and a fiscal reform. The administration continues to face many economic challenges including the need to upgrade infrastructure, modernise labour laws, and allow private investment in the energy sector. CALDERON has stated that his top economic priorities remain reducing poverty and creating jobs.
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