Mexico
Find out more about Mexico’s economic history, learn about some of the most significant
investors in the country and discover where the country’s investment potential lies.
Mexico’s Economic History in Brief
Located in the southern part of North America, Mexico is a federal republic bordering the United States. The country covers nearly two million square kilometers and is the Americas’ fifth largest country. Mexico is home to approximately 120 million people and comprises of 31 states and a special federal entity, Mexico City, which is also the country’s capital.
Dating back to 8,000 BC, pre-Columbian Mexico was identified as a region where several advanced civilizations like the Toltec, Maya, Olmec, and Aztec resided. It has been established as one of the seven cradles of civilization. Since the colonial era, Mexico’s economic history has been largely dependent on resource extraction and agriculture, with a comparatively smaller industrial sector. In later years, massive oil reserves would be discovered in the Gulf of Mexico. However, during these early years, the most prevalent economic influencers were transatlantic merchants and silver mine owners from Spain, and the largest portion of the population consisted of local subsistence farmers.
While it was under Spanish rule, it was expected that Mexico, then known as New Spain, would be a source of wealth because of its mineral riches. After gaining independence in 1821, Spain struggled financially for a number of reasons, including Spanish merchants leaving Mexico to return to Spain and the loss of a supply of mercury, which adversely affected mining. Wars followed and economic growth was further stunted after the price of oil dropped in the 1980s. Since then, Mexico has grown and has started attracting foreign investment.
Investment Opportunities
Because of its large and strong domestic market, capacity for high-tech products, political stability, and low inflation, Mexico has become a prime investment destination in recent years. Some of the main areas in which investment opportunities in Mexico exists are mining, manufacturing, petroleum, the automotive industry, and aerospace.
Mining – The mining industry in Mexico is flourishing. With output in Mexico sharply rising since the 1990s, it reached a peak of 60 million tons in 2014 and became one of the largest producers of metals and minerals in the world.
Manufacturing – In the 1960s, the manufacturing industry in Mexico grew quickly after US companies opened factories with the aim of assembling products in Mexico. What were initially only basic assembly lines, soon evolved into complex manufacturing operations, including the manufacturing of major industrial, personal and technological products. Although the inexpensive commodity manufacturing market has been largely absorbed by China, Mexico continues to attract US manufacturers requiring low-cost solutions closer to home. The low landed costs in Mexico are attractive while the proximity to the US enables production and technical personnel to coordinate activities while the political risk is minimal. As wages are higher in Mexico than in China, the workforce is generally skilled and educated.
Petroleum – Mexico’s petroleum industry makes it the 11th largest oil producer in the world and the fourth largest in the Western Hemisphere, surpassed only by the US, Canada and Venezuela. The petroleum industry is vital to the country’s economy and generates as much as 10% of all export earnings every year.
Automotive – For the past decade the automotive industry in Mexico has become the most lucrative field for foreign investment. Investment announcements from luxury motor vehicle manufacturers like Audi, BMW, and Mercedes-Benz have given Mexico excellent credentials in assuring its growth in this sector. Mexico became the fifth largest exporter of light vehicles in the world as well as the sixth largest vehicle producer in the world.
Aerospace – With an annual growth of close to 20% over the past decade, Mexico has firmly established its reputation as an international leader in the aerospace sector. There are over 270 companies and support entities in Mexico in this industry in sx states in Mexico: Nuevo Leon, Chihuahau, Baja California, Queretaro, and Sonora. Over 40,000 people are employed and equipment worth billions of dollars is exported every year. One of the most successful companies in this sector is Bombardier. Since arriving in Mexico in 2006, the company has invested over US$500 million in their plants.
Companies Investing in Mexico
One of the major players in the Mexican investment sphere is Grupo México, the biggest mining corporation in the country, and also one of the biggest copper producers in the world. Grupo México products include copper, iron, and ore, and its railway transport division operates the biggest rail fleet in the country. Another major Mexican company that attracts noteworthy investment is Grupo Bimbo – a multinational bakery product manufacturing company with its headquarters in Mexico City. Grupo Bimbo is the largest baking company in the world with brands including Bimbo, Ricolino, Ideal, Barcel, Marinela, Tia Rosa, Sara Lee, Mrs Baird’s, Wonder Read, and Oroweat. Some of the biggest bakeries in the United States, Canada, Mexico, Chile, and Spain are operated by Grupo Bimbo. The company also has one of the largest distribution networks in the world, with over 52,000 routes.
Conclusion
Mexico is the 15th largest recipient of foreign direct investment (FDI) in the world and is known as one of the emerging countries most open to FDI. Mexico is the 11th largest economy in the world and has an exceptionally skilled and highly stable labor force. Over the past decade, there has been exponential growth in investment in mining, manufacturing, petroleum, and the automotive industry. By 2014, foreign direct investment into Mexico reached UA$22.6 billion and it is currently a leader in the international manufacturing market. More than 26 states in the United States depend on Mexico as the main destination for exports. Mexico has an open economy with guaranteed access to global markets through a series of free trade agreements. It is strategically placed geographically and continues to be a prime mining destination, despite its tumultuous past in this industry. It is anticipated that Mexico will continue to hold this status with a strong mineral portfolio that includes abundant resources of copper, iron, gold, zinc, and silver.
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