Page 60 - STRATEGY Magazine

SPECIAL INSIGHT: BUSINESS AND ECONOMIC LANDSCAPE
Outlook: Mostly Sunny, with a Chance of Hurricane
Mexico’s economy has come a long way in the past 30 years, and although more must be done, recent structur- al reforms are poised to unleash a new era of dynamism—if headwinds from north of the border do not blow the economy off course.
As an open and export-oriented economy, Mexico’s potential at times seems unlimited, but the nation may be singularly vulnerable to global headwinds. With a population of nearly 130 million, Mexico is now the world’s 15th-largest economy and Latin America’s leading exporter. Before the advent of NAFTA in 1994, it was a largely oil-dependent economy, but it has since gone through tremendous structural changes, spurred by economic deregulation, strict monetary and fiscal policies, and a series of reforms. Today,
the manufacturing sector contributes just over 17 percent of total GDP and ac- counts for 90 percent of the value of total exports. Still, there are plenty of chal- lenges to be met: much of the economy is informal, regional income disparity is increasing, and there is low productivity among small and medium-sized enter- prises (SMEs).
NUTS AND BOLTS ... AND MORE
The primary sectors of the Mexican econ- omy are manufacturing, tourism, ser- vices, agriculture, and extraction indus-
tries, including oil and gas. Exports are healthy, particularly since NAFTA, start- ing in 1994, dramatically increased trade between Mexico and its North American neighbors. The nation is holding its own against China, with large numbers of for- eign-owned factories locating to Mexico over the past two decades. Even during the recent global downturn, Mexico continued to enjoy positive growth, and while the falling peso has led to high- er-than-normal inflation, the govern- ment is taking fiscal measures to control the rate.
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