Mexican Economy



The Mexican economy is the world’s 15th biggest as measured by Gross Domestic Product (2016, IMF data).

With a GDP of over 1 trillion USD we should pay attention to it, shouldn’t we?

What we care about is Forex trading.

Since the Mexican peso is one of the ten most traded currencies in the world, and my news feed covers Mexican events, I figured we should pay attention.

In this fashion, I would group Mexico with China, Sweden, Russia, and South Africa (there’s a few others like Brazil).

The cool country club (pun intended).

Their currencies aren’t traded like the eight majors (even though a few of them are more traded than NZD, the latter is preferred by conservative traders).

However, they are big, mean, and their currencies are next in line when it comes to making money trading forex.

But enough about that.

Let’s talk Mexico.

Mexican Economy Profile

GDP of about 1 trillion USD. Cool.

What about their population?

Mexico’s population is about 125.2 million people, according to World Bank statistics.

The closest countries in terms of population seem to be Japan (126.8 million), Russia (142 million), and Philippines (101.8 million).

Mexico’s Per capita GDP?

$18,900 according to the CIA World Factbook (2016).

Thus, Mexico ranks 90th in the world in this metric (remember in nominal GDP they’re 15th).

Neighbors?

Saint Martin (89th), Lebanon (91st), and Iran (92nd).

A shout-out for Mexicans and FX Peso traders out there.

What about major industries in Mexico?

According to some academic papers, about half of Mexico’s exports come from the industrial sector.

Mexico seems to be well diversified with strong industries in automobiles, textiles, mining, construction, and food and beverages, among many others.

The Mexican economy also seems to boast a strong electronics sector.

Tell me about international trade, how open is Mexico?

According to some more World Bank statistics, Mexican exports of goods and services represented 35.36% of GDP in 2015.

Mexican imports of goods and services rose to 37.47% of GDP.

This yields a trade deficit.

In terms of total trade, we have Mexico at 72.8%, which is very, very open.

To put this in context, USA’s number is around 30%, while Canada’s (US’s neighbor up north) is 60%.

A good explanation is the United States economy is way bigger than that of Canada or Mexico.

Bigger than yours…

And a huge chunk of Canada’s and Mexico’s trade is with the United States (with a huge domestic market which consumes, consumes, and consumes).

This leaves us with flows which represent a small quantity for the US’s GDP, but a larger one for the considerably smaller neighbors’ GDPs.

Note: think about it like this: imagine US and Mexico’s total trade is 100 USD. Since US’s GDP is 18 times that of Mexico, those 100 USD are much smaller to the US’s economy than the Mexican economy, hence the difference in openness.

End of note.

Hope that note cleared the air a bit. It was getting crowded…

Great. Let’s talk debt now.

Mexican Debt Autopsy

Mexico’s government debt to GDP is 47.9%, which is quite conservative in comparison to the United Kingdom (89.3%), Eurozone (89.2%), and the United States (106.1%).

By the way…

Have you guessed why we always use variables as percent of GDP in order to compare countries?

You’ve probably guessed by now.

We can’t compare actual amounts because economies have different sizes (as measured by Gross Domestic Product).

Thus, in order to compare, we find out how much debt is as percent of GDP, or how much exports are in terms of GDP in said country.

This way, we can say the US’s total trade is 30% of its GDP, while Mexico’s is 72% (of Mexico’s GDP).

With that small detour aside…

Tell me about household debt in Mexico.

16.4% of GDP…

Debt Freeeeeeeee… (see what I did there?)

Wow, I didn’t expect that.

Just, wow.

Compare that to other G20 countries like Switzerland (128.4%), Australia (123.1%), Canada (101%), USA (79.5%)… you get the idea.

Even European countries are in the 60s and 50s.

Closest G20 countries in this variable?

Turkey (18.2%), Indonesia (17%), and India (10.2%). India is actually the lowest, so the Mexican economy has the second lowest household debt to GDP in the G20.

And that’s it for now.

See you soon,

Emil Christopher,

The Forex Economist

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