Economics

What Are The Biggest Industries In Mexico?

Tobacco, aerospace, petroleum, mining, etc., are some of Mexico's biggest industries.

Tobacco, aerospace, petroleum, and mining among others are some of Mexico's biggest industries. They all play a significant part in the economy of the country. As per the International Monetary Fund, Mexico has the world’s 11th largest GDP by purchasing power parity and 16th largest in nominal terms. Administrations have improved the microeconomic fundamentals of Mexico since the 1994 crisis. Even though the 2002 South American crisis did not significantly affect the country, there were low growth rates following a short period of stagnation. In spite of this, Mexico was among the Latin American countries that were most affected by the recession of 2008, with its GDP dropping by over 6% during that year.

The Economy of Mexico

The economy of Mexico has had an unparalleled microeconomic stability resulting in the significant reduction of interest and inflation rates and increased per capita income. However, there are wide gaps between the country’s southern and northern states, the poor and rich, and the rural and urban population. Some of Mexico’s unsolved issues include the reduction of income equality, the improvement of infrastructure and the modernization of labor laws and tax systems. In 2013, the country’s tax revenues altogether amounted to 19% of the GDP recording the lowest among OECD nations. The Mexican economy comprises of rapidly developing industrial and modern service sectors; the country has also had an increase in private ownership.

Regional Player

The recent Mexican administrations have extended their competition in natural gas distribution, ports, electricity generation, railroads, airports, and telecommunication with the aim of upgrading infrastructure. Since the economy of Mexico is export-oriented, over 90% of the country’s trade falls under the free trade agreements (FTAs) which comprise of over 40 countries such as Israel, most of South and Central America, Japan, and the EU. The North American Free Trade Agreement (NAFTA) is the most influential regional organization entered by the US, Mexican, and Canadian governments in 1992 but came into effect in 1994. Trade with the country’s two northern partners amounted to 55% of its imports and nearly 90% of its exports in 2006. The General Congress of the United Mexican States has recently approved judicial reforms, significant tax, and pension reforms. At present, the reform of the oil industry is being debated. In 2016, 15 companies in Mexico were on the list of largest companies in the world on the Forbes Global 2000.

The Industry Sector in Mexico

As a whole, Mexico’s industrial sector has benefited from the liberalization of trade. In the year 2000, the industrial sector accounted for 50% of all the export earnings. One of the country’s most significant manufacturers includes the automotive industry, as well as food, electronics, and oil. Other major industries in the country include the energy, tourism, finance and banking sectors among others.

Automotive Industry

The standards of quality for the Mexican automotive industry are internationally recognized and differ from that found in the developing nations and the other Latin American countries because it operates as big assembly manufacturers. Mexico’s automotive industry not only engages in developmental activities and research but also produces technologically complex components. For instance, the country designs nearly 70% parts of the new Volkswagen Jetta Model. Chrysler, General Motors, and Ford, also known as the ‘Big Three’ have been operating in the country as of the 1930s. Nissan and Volkswagen established their branches sometime around the 1960s while BMW, Mercedes-Benz, Toyota, and Honda later joined the Mexican automotive industry.

Maquiladora Industry

Manufacturing plants that take in imported raw materials and produce goods for domestic consumption and export on behalf of foreign companies commonly known as maquiladoras have become Mexico’s trade landmark. The maquiladora sector in the country has heavily benefited from NAFTA to the extent that real income coming from this sector has increased from 1994 by 15.5%. In spite of this, the non-maquiladora sector’s real income has been able to grow much faster. Other sectors of the Mexican industry are now benefiting from the free trade agreement. In the last five years, there has been an increase in shares of non-border states’ exports and a decrease in shares of maquiladora-border states’ exports.

Food Industry

In comparison to Western European countries and the US, large portions of the country’s industrial economy are the manufacturing of food which includes some world-class companies. However, the Mexican regional industry remains undeveloped, and some national brands in Mexico have even become international.

Electronics Industry

The countries electronic industry has experienced tremendous growth within the last ten years with the country having the world’s sixth largest electronics industry behind China, the US, Japan, South Korea and Taiwan. The country is North America’s second-largest exporter of electronics particularly to the US having exported electronics worth approximately $71.4 billion during the year 2011.

Oil Industry

According to the country’ constitution, its mineral resources are considered to be the nation’s property. In this regard, the Mexican government together with several private investors is in charge of administering the country’s energy sector. The country is the world’s sixth-largest oil producer, producing about 3,700,000 barrels daily. Pemex, a Mexican publicly-owned company is responsible for research, oil exploration as well as the sale of oil, and it is the second largest Latin American company after Petrobras found of Brazil and the largest in Mexico.

New Industries in Mexico

At present, the country is working on the development of an aerospace industry while the regional air jet fuselages and the assembly of helicopters are still in progress. Bombardier, Bell, MD Helicopters, and Cessna are foreign firms that build regional jet fuselages, helicopters, and aircrafts in the country. Even though the aircraft industry in Mexico is mostly foreign just like its automotive industry, the country has established its firms such as Aeromarmi which is a company that builds light propeller airplanes. Another example is Hydra Technologies, a company building Unmanned Aerial Vehicles also known as drones such as the S4 Ehecatl.

The Labor Force of Mexico

Both the WTO and the OECD have ranked the country’s workers as the world’s most hard-working individuals in regards to the number of hours worked annually. Despite a hard-working labor force, the profitability per person-hour in Mexico remains significantly low.

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