MEXICO

United Mexican States

Estados Unidos Mexicanos

COUNTRY OVERVIEW

LOCATION AND SIZE.

Mexico is a country located in North America and is bordered by the United States to the north, Belize and Guatemala to its south, the Gulf of Mexico to its east and the North Pacific Ocean to its west. The country's total area is 1,972,550 square kilometers (761,601 square miles), or nearly 3 times the size of Texas. Its capital, Mexico City, is located in the south-central part of the country.

POPULATION.

As of July 2000, the population of Mexico was estimated to be 100,349,766. This is 19,099,766 more than the 1990 population of 81,250,000, reflecting a ten-year increase of 23.5 percent. In 2000, the birth rate was estimated to be 23.15 per 1,000. This was more than 4 times the death rate of 5.05 per 1,000. Based on a projected annual growth rate of 1.8 percent, the population is expected to number approximately 120 million by the year 2010.

People of Indian/Spanish heritage (mestizo) are estimated to account for 50 to 60 percent of the population of Mexico. Indians are from 25 to 30 percent, Caucasians from 9 to 15 percent, and Africans are a very small part of the population. These estimates of racial groupings are tenuous at best because Mexicans do not characterize themselves in racial terms. Groups are defined culturally so that the term "mestizo" means someone who is culturally Mexican in language, dress, and perspective. Someone who does not speak Spanish but speaks an Indian dialect and dresses in traditional Indian wear would be considered Indian, even if that individual were Caucasian. Accordingly, during the course of one's life, it is possible for someone to change their ethnic grouping by simply adopting the language and habits of another ethnic group. Indeed, in Mexico an increasing number of Indians are becoming mestizos by adopting the Spanish language and de-emphasizing their Indian customs.

The Mexican population is also a relatively young population; 4 percent are older than 65 while 34 percent are under 14. It is also an urban population; 70 percent of the population lives in urban areas while 30 percent lives in rural areas (50 percent lived in rural areas in 1950). The 3 largest cities in Mexico are Mexico City, Guadalajara, and Netzahual-coyotl. Mexico City is the largest metropolis in the world, with population estimates ranging between 18 and 20 million. In 1999, Guadalajara and Netzahual-coyotl were estimated to have populations of 1.65 million and 1.25 million people, respectively.

The nature of the population of Mexico is notable in at least 2 other respects. First, in 1973 Mexico became the first country in Latin America to adopt a population control policy. The policy was needed because from 1940 to 1970, Mexico's population had increased by 250 percent. Overcrowding in cities and unemployment were serious problems. Indeed, Mexico had become a victim of its own success. The Mexican death rate had decreased as a result of advances in preventive

medicine and sanitation, making it possible to control such diseases as yellow fever. The death rate was 33.2 per 1,000 members of the population in 1905, but by 1970 it was 10.1 per 1,000. Despite this decrease in the death rate, the fertility rate (the number of children born to each woman) had remained constant during this time. The end result was an increase in the population so that it grew an average of 3.4 percent per year from 1960 to 1970. Since the institution of the population policy, the rate of growth of the population has gradually decreased to an average of 1.8 percent per year (1995-2000). The second respect in which the population of Mexico is interesting has to do with the sizeable net migration of Mexicans to the United States. Estimates from 1990 are that there were 13.5 million people of Mexican origin living in the United States. Of those 13.5 million, 4 to 5 million had been born in Mexico. Unfortunately, because of the problem of unemployment from overpopulation, a number of Mexicans have come to the United States illegally in the recent past. By 1996, 2.7 million Mexicans were estimated to be living in the United States illegally. Indeed, the number of Mexicans coming to the United States legally is roughly equivalent to the number entering the country illegally (approximately 150,000 per year). Unfortunately, immigration authorities face a never-ending battle because many expelled immigrants simply return as soon as they are deported from the United States.

INDUSTRY

MINING.

Fuel and nonfuel mining accounted for 1.2 percent of Mexico's GDP in 1999. Traditionally, the sector has employed a small percentage of the workforce. For example, in 1997 it employed 0.3 percent of the Mexican labor force. Despite these small numbers, fuel mining is important in Mexico because the oil revenue that the government receives from the state oil company Pemex (Petróleos Mexicanos) is a large part of its budget (32.5 percent in 1999). Further, oil is an important component of the country's export revenues (7.3 percent in 1999). Indeed, in 1999, it ranked fifth in the world in terms of the oil that it produced (3.34 million barrels/day). Its oil reserves are estimated to be 58.2 billion barrels of oil (40 years of production), some of the highest reserves in the world. Most (56 percent) of these reserves are located in the Gulf of Mexico. The remaining reserves are found in southern Mexico (Chiapas).

The first oil well was drilled in 1869. The Constitution of 1917 gave the Mexican government the right to all Mexican subsoil resources including oil. Accordingly, in 1938 the government nationalized the petroleum industry. Foreign companies were compensated for their holdings in 1943.

From 1957 to 1971 Mexico's industrial sector grew to such an extent that the country became a net importer of oil. The increasing demand for oil by the Mexicans exceeded the production of oil by the state. However, production of oil increased significantly in 1972 when sizeable oil deposits were discovered in the southern Mexico.

In 1995, the government privatized the exploration for natural gas and since then several companies have been given permits to explore for natural gas in Mexico. Non-fuel mining accounted for only 1.1 percent of GDP and 0.3 percent of exports in 1999. In the same year, the top 4 minerals mined were silver (1.06 million pounds), gold (1,039 pounds), copper (321,000 tons), and zinc (321,000 tons). Silver is the most valuable mineral mined in Mexico. Indeed, Mexico is the leading silver producer in the world, producing more than 16 percent of the world's silver. Most of this silver is mined in the country's "Silver Belt," a region that extends from the central part of the country into the northeast. Mexico is one of the world's top producers of copper as well.

MANUFACTURING.

Manufacturing has provided an enormous boost to the Mexican economy since the 1980s, increasing from 25 percent of total exports in 1982 to nearly 90 percent in 1999. In 1999, manufacturing accounted for 20.8 percent of GDP and employed 16.9 percent of the labor force in 1997. The top 4 categories of items manufactured in 1999 were metal products, machinery, and equipment (29.9 percent of manufacturing output); food, beverages, and tobacco (24.7 percent); chemicals, petroleum products, rubber, and plastics (15.1 percent); and clothing and footwear (8.4 percent). These top 4 categories also employed 83 percent of the labor force. Although manufacturing output grew by 5.2 percent per year on average from 1994 to 1999, it is important to note that metal products, machinery, and equipment grew by an average of 9.2 percent per year during that same period.

The growth of the manufacturing sector reflects Mexico's shift from a country concerned with only supplying and protecting its own needs to one that vigorously pursues other markets. Indeed, the story of Mexican manufacturing is about the surrender of nationalism for globalism. In the early 1950s, under a policy of import substitution, the government provided incentives for manufacturers to produce the items that Mexican consumers were importing (thereby "substituting" Mexican goods for imports). This policy worked, and Mexican manufacturing output grew by 9 percent in the 1960s and 7 percent in the 1970s. However, by 1982 total government spending was so large that it was equivalent to 47 percent of the Mexican GDP. Additionally, the government was spending more than it was taking in and that budget deficit was equivalent to 18 percent of GDP. This spending produced a drag on the economy and consumer demand decreased. Manufacturing output, which depended on consumer demand, decreased as well (down 10 percent from 1981 to 1983, and 6 percent in 1985).

In view of the preceding realities, in 1985 the administration of President de la Madrid changed Mexico's policy from one of import substitution to one of export promotion. Clearly, the manufacturing sector has benefited nicely from this change in policy, especially the maquiladora sector, which is made up of factories that are located along the American/Mexican border. The factories on the Mexican side accept materials often from American factories on the American side of the border, assemble them and then either re-export them or ship them internally for sale to Mexican consumers. Maquiladoras manufacture automobile engines, and electronic equipment such as stereos, televisions, and household appliances. American companies benefit from this arrangement because of the lower cost of labor in Mexico. It has been estimated that 49 percent of Mexican manufacturing output was produced by the maquiladora sector in 1999. In the same year, there were 3,436 maquiladora plants that employed 1.2 million Mexicans, or roughly 20 percent of the manufacturing labor force. Some of the items produced by these plants included clothing and textile products (1,035 plants) and electronic parts and materials (533 plants). Mexico City and its suburbs, Guadalajara, and Monterrey are also centers of a great deal of manufacturing output.

Forcing Mexican manufacturers to compete in an open economy is a policy that has had costs as well as benefits. Specifically, the manufacturing sector has enjoyed robust growth in output and exports, but many manufacturing enterprises that were once protected from competition by the Mexican government through tariffs are no longer protected. Because a very large percentage of Mexican manufacturers are small with fewer than 250 workers, some of them have not been able to withstand the pressures of competing in an international marketplace. However, the increase in manufacturing output over the past 5 years suggests that the surviving manufacturers are doing well.

TOURISM.

Because 7.8 million people (or 21 percent of those employed) in 1997 worked in the restaurant or hotel business, one could conclude correctly that tourism is big business in Mexico. It has been estimated that in 1997 the tourism industry employed 1.8 million people directly. The country has over 8,000 hotels with over 322,000 hotel rooms with another 88,000 nontraditional guest facilities such as villas. Tourists are attracted to popular tourist resorts in places like Cancun and Acapulco, but they often go to visit the monuments and shop in Mexico City as well. American tourists also visit Mexico's border towns. For example, in 1990 Americans made 70 million visits to Mexican border towns, while Mexicans made 88 million visits to American border towns in that same year. It has been estimated that in an average year over 80 percent of tourists to Mexico come from the United States. These American tourists spend quite a bit of money; 10 million tourists spent US$5.4 billion in 1999.

RETAIL AND FINANCIAL SERVICES.

What is remarkable about the Mexico of today is that one can step inside an air-conditioned shopping mall and find most of the amenities of modern life, from televisions to toothpaste. Monterrey, a major city far to the north of Mexico City, typifies this kind of consumer choice. Although finding such a facility in Mexico City or its posh western suburbs especially has not been such an unusual occurrence, the increasing appearance of such retail facilities today in other cities in Mexico speaks volumes about what has happened to retail trade in Mexico in the 1990s. In fact, it has been estimated that up to 45 percent of retail sales in Mexico are made in such large facilities. The remaining 55 percent of retail sales continue to be made by small family-operated businesses. The reason for this change in the 1990s is simple. The opening of the Mexican economy in the 1990s resulted in an influx of foreign retailers. Many Mexican retailers that were not purchased by larger foreign companies have now moved out of the largest urban center to service the smaller Mexican cities. Mexico is now a country with department stores, shopping malls, and discount clubs. It is increasingly beginning to resemble its large American neighbor. Retail sales have been increasing steadily in Mexico each year since 1996.

Mexico's banking system is a remarkably well-developed one. The central bank, the Bank of Mexico, is an independent agency of the government that performs the traditional functions of a central bank. Specifically, it dictates to member banks the amount of money they must keep in reserve and it regulates the nation's money supply. In 1982, in the wake of Mexico's recession and in an effort to contain the flight of capital out of Mexico, the nation's private banks were nationalized by the government. All banks were privatized again by 1992 and as of 1999 there were 39 commercial banks operating in Mexico. As of 1994, the government has allowed Canadian and U.S. banks to open branches in Mexico. Although the banking system is no longer in a state of crisis, the fact remains that all is not well with the Mexican banking system. Bad loans are the critical problems facing Mexican banks. The government has intervened here by setting up a fund to take over the bad debts of banks. This fund had absorbed US$89 billion of debt as of 1999. It is becoming clear that only a small fraction of these debts will be recovered by the government. The matter of what to do with these loans has become an issue of political negotiation.

DEPENDENCIES

Mexico has no territories or colonies.

BIBLIOGRAPHY

Blanchard, Olivier. Macroeconomics, second edition. UpperSaddle River, NJ: Prentice Hall, 2000.

Economist Intelligence Unit. Country Profile 2000: Mexico. London: Economist Intelligence Unit, 2000.

International Monetary Fund. International Financial Statistics Yearbook. Washington, D.C.: International Monetary Fund, 2000.

Miller, Frank. "Mexico: The People." The Encyclopedia Americana International Edition. Danbury, CT: Grolier, 1999.

U.S. Central Intelligence Agency. World Factbook 2000. <http://www.odci.gov/cia/publications/factbook/index.html> . Accessed August 2001.

U.S. Department of State. FY 2001 Country Commercial Guide: Mexico. <http://www.state.gov/www/about_state/business/com_guides/2001/wha/index.html> . Accessed September 2001.

U.S. Library of Congress. Mexico: A Country Study. <http://lcweb2.loc.gov/frd/cs/mxtoc.html> . Accessed December 2000.

—Linz Audain

CAPITAL:

Mexico City.

MONETARY UNIT:

New peso (peso, or NM$). One peso equals 100 centavos. Coins are in denominations of NM$1, 2, 5, 10, and 20, as well as 5, 10, and 20 centavos. Paper currency is in denominations of NM$10, 20, 50, 100, 200, and 500.

CHIEF EXPORTS:

Manufactured goods, oil and oil products, silver, coffee, and cotton.

CHIEF IMPORTS:

Metal-working machines, steel mill products, agricultural machinery, electrical equipment, car parts for assembly, repair parts for motor vehicles, aircraft and aircraft parts.

GROSS DOMESTIC PRODUCT:

US$865.5 billion (purchasing power parity, 1999 est.).

BALANCE OF TRADE:

Exports: US$136.7 billion (f.o.b., 1999 est.). Imports: US$142.06 billion (f.o.b., 1999 est.).

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proposal or expansion? Have you lost hope and you

think there is no way out, and your financial burdens

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