zirahuén villamar, fes mexico

March 2011 Friedrich-Ebert-Stiftung – AG QUIZ 1

Mexico’s Economy – A Quick Overview

Input to the Conference „Union Coordination in the Automobile Industry –

Building Briges“Mexico City

September 30th - October 3rd, 2013

Zirahuén Villamar, FES Mexico

September 2013 Friedrich-Ebert-Stiftung – Mexico


Mexico: A Big Economy, an Unbalanced Society

GDP Size (2012)

Source: World Bank http://databank.worldbank.org/data/download/GDP.pdf

Household and Personal Income (2010)

• A Middle-Class Nation?

• … not so actually.

Source: National Institute of Geography and Statistics (INEGI)http://www.inegi.org.mx/inegi/contenidos/espanol/prensa/Boletines/Boletin/Comunicados/Especiales/2013/junio/comunica6.pdf


Class Houseohold People% of total

Upper

Middle

Low


Economic Performance – The Quest for Stability and...

• After a traumatic and volatile 80s decade, a new culture of economic stability• Big national efforts to gain external credibility in order to set foundations for

economic activities within the North American integration process• Reforms for the new Mexican economy• NAFTA enters into force in January 1st 1994 • Greater role of market forces and private actors, lesser for State policies and

public players and interventions• A big opening to World economy: goods, services and finances• Credibility meant stability:

– Inflation (Single aim, autonomous Central Bank)– Public finances (Zero deficit)– Exchange rate (rather free flotation)

• Financial crisis in 1995 (Tequila effect), with further effects on the real economy the following years

• A decoupling national economy: those sectors and activities (few regions and players as well) linked to the NAFTA and those (most of regions and population) not in the NAFTA orbit



Economic Performance – … the Unwanted but Logical Result: Low Growth

Rationale• After the second trauma of 1995 crisis,

the culture of stability and equilibria was reinforced

• Further reforms in public finances, monetary fundamentals and more free trade agreements

• In order to fulfill such goals, little or none chances for economic public policies were left

Results• Mediocre GDP growth, quite below

potential calculations• Real 30-year-average: 2% growth• Exchange rate benefits exports of

particular goods and lots of imports, but it doesn’t foster the internal market

2008-2013• When the crisis arose, there were no

countercyclical meassures available• In 2009 Mexico got the worst GDP

performance in Latin America• The recovery has been weak • Updated forecasts are getting more and

more pessimistic for the upcoming years


Source: Organization for Economic Co-operation and Development (OECD) http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-surveys-mexico-2013_eco_surveys-mex-2013-en#page16


Poverty – A Vulnerabilities ApproachMultimensional,

2012 DataDeprivationsEducationHealth ServicesSocial SecurityQuality and Spaces of the DwellingBasic Household ServicesAccess to food

Results45.5% of population living in poverty (53.3 mill)Modererately poor: 37.7% of population, income under $180 usd / month (urban) or $115 usd /month (rural) (41.8 mill)Extremely poor: 9.8% of population, income under $86 usd /month (urban) or $62 usd / month (rural) (11.5mill)


Source: National Council for the Evaluation of Social Development Policy (CONEVAL) http://www.inegi.org.mx/inegi/contenidos/espanol/prensa/Boletines/Boletin/Comunicados/Especiales/2013/junio/comunica6.pdf


Labour – Not a Matter of Unemployment…

People at work Unemployment rate• Structural unemployment is below 6%• Even during the worst year of the crisis

(2009), this number was the peak• Latest data (August 2013) shows a 4.78%

Source: El Economista, September 20th, 2013 http://eleconomista.com.mx/industrias/2013/09/20/desempleo-cede-su-menor-nivel-seis-meses

• Total population: 118 mill. (ca.)• Economically Active Population: 52 mill. (ca.)• Working population: 49 mill. (ca.)


Source: National Institute of Geography and Statistics (INEGI)http://www.inegi.org.mx/inegi/contenidos/espanol/prensa/boletines/boletin/Comunicados/Especiales/2012/Diciembre/comunica3.pdf


Labour – …but of Informal Employment

Informal Employment• Around 60% of employment is informal: 29 mill.• Much of the employment growth has been in informal jobs• It means people (workers and their families) with no social

protection• Low added-value sectors/activities• Many workers are self-employed• Geographical characteristics: Informal Employment is

concentrated in Southern and Center States



ProductivityWorking a lot…

What• People in Mexico work 2,250 hours a year, more

than the OECD average of 1,776 hours. • 29% of employees work very long hours, much more

than the OECD average of 9%Why• Low salaries force people to find another job to

compensate their incomes• High number and hours of unpaid activities to be

performed • Low productivity economic activities (informal sector)

…because of low Productivity• As a whole, Mexico has the lowest Labour Productivity

among OECD countries

• Total Factor Productivity, has actually decreased nearly 10% compared to 1991

• In some particular fields, Productivity is similar to other economies

• This national differences underline the disparities, whether geographical or by income


Source: Organization for Economic Co-operation and Development (OECD) http://www.oecdbetterlifeindex.org/countries/mexico/ and http://dx.doi.org/10.1787/888932708674

Source: Organization for Economic Co-operation and Development (OECD) http://dx.doi.org/10.1787/888932706546


Low and Stagnated Productivity• In the last decade, the national average Labour Productivity has decreased• Ups and downs are due to the economic cycle: all in all, they are recoveries to

certain levels but not true growth• A significant part for low growth of GDP lies on this reason


Source: National Institute of Geography and Statistics (INEGI) http://www.stps.gob.mx/bp/secciones/conoce/areas_atencion/areas_atencion/web/productividad/Aspectos.pdf

Labour Productivity Index GDP Index Working Population Index


Labour costsFeatures• In order to attract foreign investments

and to foster local competitiviness Mexican labor costs have constantly decreased compared to those of other emerging industrial countries competitors (vr.gr. China and Brazil)

• This trend has its origins not only in diminishing Mexican costs by itself (flexibilization of the labour market regulation) but also in the improvements of other countries’ salaries

Effects• Little or inexistent options for an internal

market driven economic growth• A robust race to the bottom behavior

Source: Organization for Economic Co-operation and Development (OECD) http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-surveys-mexico-2013_eco_surveys-mex-2013-en#page16



The Reforms The new Government (2012-2018) and the Pact for Mexico• Great expectations• Political, economical and social agreement among main Political Parties

Reforms• Labour Law (2012, before new Government took office)• Education (passed on August 2013)• Finances and Banking (passed on September 2013)• Energy (Oil and Electricity) (being disscussed now)• Fiscal (being discussed now)

Programmes• Cruzade against Hunger (Ministries and Agencies co-ordination)• Democratization of Productivity (National Development Plan’s Goal)• Formalizing Employment Programme (part of the Fiscal Reform)



Thank you!

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