Despite attempts to diversify its economic ties and build its domestic economy, Mexico remains heavily dependent on the United States.
Above all, that dependence is as an export market (approximately 76.8% of Mexico’s exports in 2022 went to the United States) and as a source of remittances, tourism income and investment, according to a U.S. congressional analysis.
While remittances reached a record high of nearly $58.5 billion in 2022, U.S. foreign direct investment in Mexico stood at $110.7 billion in 2021; the U.S. remains Mexico’s leading source of foreign direct investment.
Beginning in the late 1980s, Mexico transitioned from a closed, state-led economy to an open market economy that has signed free trade agreements with 50 countries.
The transition accelerated following the entry into force of the North American Free Trade Agreement (NAFTA) in 1994.
Since NAFTA, Mexico has increasingly become an export-oriented economy, with the value of exports equivalent to 41% of Mexico’s Gross Domestic Product (GDP) in 2021, up from 12% of GDP in 1993.
Mexico remains a supplier of crude oil to the United States, but its main exports to the United States are vehicles and auto parts, automatic data processing machines, and electrical machinery.
Domestic Economy
From 2010 to 2019, Mexico recorded an average annual economic growth rate of 2.7%, but its economy contracted 8.0% in 2020.
Although the global pandemic was the main cause of the 2020 contraction, Mexico’s economy also contracted 0.2% in 2019.
Increased U.S. demand for goods and services, rising vaccination rates, and reopening of businesses fueled a 4-7% economic rebound in 2021.
However, concerns over monetary policy tightening, inflation and lower U.S. growth forecasts led to 3.1% growth in 2022 and a 1.8% growth forecast for 2023.
Mexico’s future growth forecasts are mixed. According to the Organization for Economic Co-operation and Development (OECD), financial exclusion, lack of competitiveness, informal sector employment, corruption and low female labor participation are impediments to Mexico’s medium-term economic performance.
