Mexican Economy after the Global Financial Crisis 2008 Essay

Based on a gross domestic product (GAP) of 1 . 167 trillion in 2011 (about six percent of U. S. GAP), Economic conditions in Mexico are important to the United States because of the close trade and investment interactions, and because of other social and political issues that could be affected by economic conditions, such as immigration. The economy contains rapidly developing modern industrial and service sectors, with increasing private ownership. Recent administrations have expanded competition in ports, railroads, telecommunications, electricity generation, natural gas distribution and airports, with the aim of upgrading infrastructure.

As an export-oriented economy, more than 90% of Mexican trade is under free trade agreements (Fats) with more than 40 countries, including the European Union, Japan, Israel, and much of Central and South America. The most influential FAT is the North American Free Trade Agreement (NONFAT), which came into effect in 1994, and was signed in 1992 by the governments of the United States, Canada and Mexico. In 2006, trade with Mexico two northern partners accounted for almost 90% of its exports and 55% of its imports.

Recently, the Congress of the Union approved important tax, pension and Judicial reforms, and reform to the oil industry is currently being debated. The Mexican economy is both complex and very much in transition. There are at least 3 transitions that are worth noting. The first is the economy’s transition from an agricultural economy to an industrial one. In 1940, agriculture accounted tort 19 percent to GAP and employed 65 percent to the labor force. However, in 1999 agriculture accounted for 5 percent of GAP and employed 23 percent of the labor force.

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In contrast, manufacturing and services accounted for 88 percent of GAP in 1999 and employed approximately 70 percent of the labor force. The most important catalyst for such a dramatic change is Mexico involvement in World War II in the early sass. As a member of the Allies, Mexico began supplying its fellow Allies with war equipment and supplies and, because of the decreased availability of consumer goods from other nations, supplied its own population with consumer goods as well. Since then, both government and private citizens have furthered Mexico industrial develop. . 1 1994 Crisis and Recovery The collapse of the new peso in December 1994 and the ensuing economic crisis caused the economy to contract by an estimated 7 percent during 1995. Investment ND consumption both fell sharply, the latter by some 10 percent. Agriculture, livestock, and fishing contracted by 4 percent; mining by 1 percent; manufacturing by 6 percent; construction by 22 percent; and transport, storage, and communications by 2 percent. The only sector to register positive growth was utilities, which expanded by 3 percent.

By 1996 Mexican government and independent analysts saw signs that the country had begun to emerge from its economic recession. The economy contracted by a modest 1 percent during the first quarter of 1996. The Mexican government reported strong growth of 7 percent for the second quarter, and the Union Bank of Switzerland forecast economic growth of 4 percent for all of 1996. 1. 2 Mexican Economy after Global Financial Crisis (2008) The Mexican economy experienced the most serious decline in economic growth in Latin America after the global financial crisis began in 2008.

Mexico dependence on manufacturing exports and strong ties to the U. S. Economy have made the country very vulnerable to external events and changing economic conditions in the United States. Public sector revenues declined as a result of the crisis, and a number of estimates indicate that Mexico gross domestic product (GAP) contracted by 6. % in 2009. Though GAP is expected to grow in 2010, some economists predict that Mexico economy will not return to its pre-crisis level for some time.

Although Mexico has done much to modify its economic policy over the last 20 years through trade liberalizing, prevarication efforts, and a floating exchange rate regime, these policies have not been enough to protect Mexico from fluctuations in the U. S. Economy. Many analysts argue that structural weaknesses in the Mexican economy have prevented the country from experiencing higher levels of growth and decreasing its dependence on the U. S. Economy. 2. GAP The Gross Domestic Product per capita in Mexico was last recorded at 1 1 million US dollars in 2011, when adjusted by purchasing power parity.

It is equivalent to 70% of the world’s average and it is recorded by the World Bank. Purchasing Power parity G P is gross domestic product converted to international dollars using purchasing power parity rates. Using APP basis is more useful when comparing generalized differences in living standards between nations because APP takes into account the relative cost of living and the inflation rates of the countries, rather than using Just exchange rates which may distort the real differences in income. Mexico GAP per Capital is only $1 5,000 as compared with the U. S. F $49,000 per Capita. People in Mexico are working for $2/her. They have a sub industrial economy where many grow their own food because they cannot afford to buy food, because over 50% of the households do not earn enough money to buy food. They have to grow their own food in this subsistence life style because there are no Jobs. Thus, since they are not looking for Jobs, because there are no Jobs, they are not reported as being unemployed. That does not mean that they do not want a Job, they are coming to the U. S. To find work to support their families. Mexican GAP expanded by 3. % in real terms in 2011, as compared to 5. 5% in 2010. This slackening was primarily due to lower growth in goods and services exports, which increased by 6. 7% in real terms (21 . 7% in 2010) in the face of the slowdown in the world economy and the United States in particular. The rate of import growth also moderated to 6. 8%, from 20. 5% in 2010. The current account deficit widened slightly to 0. 8% of GAP (0. 3% in 2010) as the services and income balances turned more sharply negative Mexico will grow over 3. 5% in 2012 thanks to its competitiveness and stability.

Mexico current GAP growth exceeds the levels seen before the 2009 recession, despite the US recovery not being especially intense. This is due to: * Gains in competitiveness * A domestic scenario of stability with stable inflation and favorable financing conditions that boost domestic demand . 3. Inflation The inflation in Mexico was recorded at 3. 57 % in December 2012. Inflation rate in Mexico is reported by Banc De Mexico. Historically, from 1974 until 2012, Mexico inflation rate averaged 27. 88% reaching an all-time high of 179. % in February 1988 and a record low of 2. 91% in November, 2005. In Mexico, the inflation rate measures a broad rise or fall in prices that consumers pay for a standard basket of goods. Mexico defaulted on its external debt in 1982, and experienced several years of inflation.


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