The Mexican Economy

Given the geographic proximity, it’s no surprise that Mexico is one of the United States’ top trading partners. The close trading relationship between the countries is due in part to the United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA in July 2020. The USMCA is in place to create more balanced, reciprocal trading among the countries which helps support better jobs and stable growth across the North American economy.

After a few years of modest growth, the economy in Mexico has re-emerged as a top 15 global economy. Most financial forecasts see this growth continuing over the next five years, averaging around a 2% growth in GDP per year. Much of this growth has come from increased stability, both politically and economically, across the country since the end of the pandemic.

This growth and stability have created renewed interest from foreign trade partners in recent years. With an influx of Foreign Direct Investment (FDI) and nearshoring, Mexico’s growth is projected to remain steady in the years to come.

In fact, Mexico is one of the largest recipients of FDI in the world, receiving more than USD 35 billion in 2023. The U.S. is the largest investor in Mexico, accounting for nearly 40% of the investment in 2023. But countries like Spain, Canada, Japan, and Germany have also shown an interest in Mexico over recent years.

As expected, China is another major player in this space. While exact numbers aren’t clear, what is clear is that China has steadily increased its investment into Mexico each year since 2020. Official numbers have China at about $235 million in FDI through the first half of 2024, but unofficial data suggests that number is well north of $1 billion. Much of this comes in the form of factories that produce anything from vehicles to electronics, which raises the question of whether China is trying to bypass American tariffs through these factories.

Looking at Mexico, it’s not difficult to see why foreign investors have taken such an interest in the country. Geographically it is well situated as a close trading partner with the U.S., but it also serves as a natural avenue to North America and Latin America. It also has an abundance of natural resources, allowing a variety of industries to flourish. Mexico is also well-connected in the global market, as a member of USMCA, OECD, G20, and the Pacific Alliance. Finally, the country boasts a large and relatively well-qualified workforce and a very reasonable cost of labor.