By Kate Madley
Brazil is the economic powerhouse of Latin America, well-known as one of the BRIC* countries, but there is also an abundance of activity in the region’s second largest economy – Mexico.
The global downturn created a divide in Latin America with open economies holding up better than others. Countries such as Peru, Chile and Mexico are growing faster than the global average, while Argentina and Brazil are seeing slowing growth.
In terms of GDP, Mexico ranks just ahead of South Korea. In 2011, its economy grew faster than Brazil, with GDP growth of 4% compared to Brazil’s 2.7%. Forecasts suggest Mexico will see the strongest growth in Latin America by the end of the year.
An export orientated economy, more than 90% of Mexican trade is under Free Trade Agreements, a total of 12 FTA’s across 44 countries, including the European Union’s ‘Global Agreement.’
This has led to the elimination of all tariffs on EU-origin industrial goods, meaning Welsh exporters can compete on equal terms with exporters from the USA and Canada.
Mexico has a population of around 115 million, and a workforce of 78 million. As of September 2012 the unemployment rate fell to just 4.7% of the workforce, the lowest level for nearly four years.
Mexico is the world’s biggest exporter of Blackberrys, fridge-freezers and flat screen televisions. Historically, the country has been associated with major problems with drug trafficking, but is fast becoming recognised as a hotbed of export activity. The aircraft and automobile industries are among Mexico’s largest industries.
Car makers such as Volkswagen AG, Honda Motor Co and Fiat SpA have all announced expansions in Mexico in the past year. Exports of manufactured goods from Mexico are greater than the rest of the Latin American region put together.
Mexico’s strategic global position acts as a bridge between Latin America and the US. Currently, America’s biggest source of imports is China, but Chinese factory wages have quintupled in the last ten years and oil prices have trebled, so there is call for manufacturers ‘closer to home.’ On present trends, it is predicted that by 2018 America will import more from Mexico than any other country.
Increase in foreign direct investment is attributed to Mexico’s FTA with North America and Canada, known as the North American Free Trade Agreement (NAFTA). This lucrative agreement allows businesses duty-free access to the world’s largest consumer market through Mexico. In 2010, the value of foreign direct investment was $19.8 billion.
The Mexican government is actively working to reduce bureaucracy and improve competitiveness. Analysts forecast the Mexican economy to be larger than the UK’s by 2040 and the world’s seventh largest economy by 2050.
BRIC – Brazil, Russia, India and China