Mexico-Economy

Overview: From a colonial economy based largely on mining, especially silver, in the twentieth century, the economy has diversified to include strong agriculture, petroleum, and industry sectors. Strong growth from 1940-80 interrupted by series of economic crises, caused in part by massive overborrowing. 1980s marked by inflation and lowering standard of living. Austerity measures and introduction of free-market policies led to a period of growth from 1990-94. Membership in North American Free Trade Agreement (NAFTA) in 1993 led to hopes of continued economic growth. However, growing trade deficit and overvalued exchange rate in 1994 financed by sale of short-term bonds and foreign- exchange reserves. Series of political shocks and devaluation of new peso in late 1994 caused investor panic. Inflation soared, and massive foreign intervention was required to stabilize situation. Although overall economy remains fundamentally strong, lack of confidence makes short-term prospects for strong growth unlikely.

Gross Domestic Product (GDP): Estimated at US$370 billion in 1994; approximately US$4,100 per capita.

Currency and Exchange Rate: Relatively stable throughout most of twentieth century, the peso (Mex$) began to depreciate rapidly during economic crisis of 1980s. In January 1993, peso replaced by new peso (NMex$) at rate of NMex$1 = Mex$1,000. Exchange rate in January 1993, US$1 = NMex$3.1; rate in April 1997, US$1 = NMex$7.9.

Agriculture: Contributed 8.1 percent of GDP in 1994. Main crops for domestic consumption corn, beans, wheat, and rice. Leading agricultural exports coffee, cotton, vegetables, fruit, livestock, and tobacco.

Industry: Mining, manufacturing, and construction contributed 28 percent of GDP in 1994. Industrialization increased rapidly after 1940. By 1990 large and diversified industrial base located largely in industrial triangle of Mexico City, Monterrey, and Guadalajara. Most industrial goods produced, including automobiles, consumer goods, steel, and petrochemicals. World's sixth largest producer of petroleum and major producer of nonfuel minerals.

Energy: More than 120 billion kilowatt-hours produced in 1993, about 75 percent from thermal (mostly oil-burning) plants, 20 percent from hydroelectric, and the rest from nuclear or geothermal plants. One nuclear plant with two reactors at Laguna Verde in Veracruz State. Huge petroleum deposits discovered in Gulf of Mexico in 1970s. In 1995 sixth-largest producer of oil and had eighth-largest proven reserves.

Exports: US$60.8 billion in 1994. Manufactured exports include processed food products, textiles, chemicals, machinery, and steel. Other important export items are metals and minerals, livestock, fish, and agricultural products. Major exports to United States are petroleum, automotive engines, silver, shrimp, coffee, and winter vegetables.

Imports: US$79.4 billion in 1994. Main imports are metal-working machines, steel-mill products, agricultural machines, chemicals, and capital goods. Leading imports from United States include motor vehicle parts, automatic data processing parts, aircraft repair parts, car parts for assembly, and paper and paperboard.

Debt: Massive foreign debt. Buoyed by discovery of large petroleum reserves, government borrowed heavily in 1970s. When severe recession hit in 1982, government declared moratorium on debt payments, precipitating international economic crisis. Austerity measures and renegotiation of the debt eased crisis, but in 1995 debt stood at US$158.2 billion.

Balance of Payments: Large trade deficits from 1989 to 1993 pushed current account deeply into deficit. Dramatic improvement in trade balance in 1994 and 1995, however, nearly eliminated deficit. Heavy international borrowing allowed international reserves to rise to US$15.7 billion at end of 1995.

Fiscal Year: Calendar year.

Data as of June 1996