Mexico - Pestle Analysis 2018

Country Profile Series
Mexico
In-depth PESTLE insights
Reference Code: ML00002-020
Publication Date: March 2018
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PESTLE COUNTRY ANALYSIS REPORT: MEXICO ML00002-020/Published 03/2018

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OVERVIEW
Catalyst
This profile analyzes the political, economic, social, technological, legal and environmental (PESTLE) structure in
Mexico. Each PESTLE factor is explored in terms of four parameters: current strengths, current challenges, future
prospects and future risks.
Summary
Key findings
Mexico’s democratic set-up is strong; however, uncertainty over future US policy remains a
concern
Mexico has a robust democratic setup. Formal government institutions are defined by the constitution drafted in 1917,
which is regarded as an expression of popular opinion that ensures civil and labor rights, electoral democracy, and
national sovereignty. The drafters of the constitution, inspired by social and liberal political philosophy, prescribed a
republican system of government with separate powers for the executive, the legislature, and the judiciary. They further
recognized a broad range of political and social rights including the right to freedom of expression, the right to unionize,
and the right to conduct peaceful protests against the authorities.
If the new American president sets out to put his words into action, there will be dire consequences for Mexico. The
economy of the country is closely knit with its North American neighbors (Canada and the US) under the NAFTA
agreement. The value of its bilateral trade with the US is close to half of its total GDP, with the US purchasing more than
three quarters of its total exports. Moreover, around 35 million Mexicans living in the US send around $25 billion in
remittances back to Mexico. With Mr. Trump in the White House, these bonds might just come under immense strain. In
January 2018, the Trump government imposed a 30% tariff on the imports of solar panels and washing machines, which
does not exclude Mexico. As of February 2018, the new president has also decided to build a wall along the Mexican
border.
Free trade agreements (FTAs) are a major strength; however, continuing overdependence on the
US is a cause for concern
After the implementation of the NAFTA in 1994, Mexico’s trade with the US and Canada has almost tripled. The country
has around 44 FTAs in place with several countries and other parties, including Guatemala, Honduras, El Salvador, the
European Free Trade Area, and Japan. More than 90% of Mexico’s trade falls under FTAs. FTAs have substantially
liberalized the country’s trade regime. The agreement is expected to open up a lot of new markets for Mexico and will
reduce its dependence on the US. The country has accelerated talks at the beginning of 2018 to update a free trade
agreement with the European Union as part of the strategy to decrease its reliance on the United States, which accounts
for 80% of its total exports.
With Mexico’s trade and financial linkages to the US, its economy is sensitive to US economic cycles. Consequently, the
fluctuations in Mexico’s output have become synchronized with those of the US economy since the country joined the
NAFTA in the 1990s. Three key links to the US economy are through trade—especially manufacturing, remittance
inflows and financial markets. According to the CIA – The World Factbook, around 81.0% of Mexico’s exports went to the
US in 2016. Mexican manufacturing firms are integrated with the US supply chain, raising their vulnerability to adverse
developments in the US economy. Significant dependence on a single country is too big a risk to take, especially with Mr.

Trump in White House, who has vowed to build a wall between both the countries in his campaigns.
Mexico has achieved full health coverage for its population, but addressing high levels of
inequality is still a major challenge
In 2012, Mexico achieved universal health coverage for all its citizens with a national health insurance program called
Seguro Popular, first introduced in 2001. There are three stages of the universal health coverage: universal enrollment
that enables the use of benefits from a publicly organized insurance fund; access on a regular basis to a comprehensive
package of services that also has financial protection for all; and universal effective coverage accounts for high-cost
services in order to prevent financial shocks.
However, Mexico has perennially suffered from a severely uneven distribution of wealth, adding to the existing
socioeconomic problems faced by the country. Individuals residing in the northern states, especially within areas that
border the US, enjoy a higher standard of living over their counterparts in the largely rural southern regions of the
country. The northern areas house prominent industrial clusters that provide employment opportunities for jobseekers.
Furthermore, new employment opportunities are lower in the south, where agriculture is still the dominant sector.
Regional variations in growth also present a stark image of the growth enjoyed by the country, with the frontier states
getting a large chunk of the overall development.
Mexico has a strong aerospace sector, but low government incentives to R&D expenditure limits
innovation
Mexico boasts of an aerospace sector that is among the most vital engineering industries in the world today. Over 260
Mexican companies provide aerospace engineering services and equipment. Due to the strategic importance of the US-
Mexico borders, many aerospace companies are developing in that region. In fact, Mexico’s aerospace sector, which
began as an assembly industry, has grown to manufacture sophisticated aero-parts and fuselages. The industry is well
supported by specialist education and training programs. The importance of this sector can be gauged from the fact that
it employs around 32,000 people in 16 Mexican states.
However, the country needs to innovate in the export-oriented sectors given the challenges it faces. Providing impetus to
research and development is one of the key factors for Mexico to raise its productivity and living standards. However,
government incentives to research and development in Mexico are among the lowest in the OECD, having experienced a
sharp decline. This could be harmful in the long run as companies will find it less attractive to invest in R&D,
compromising Mexico’s ambitions of being on the frontier of technology.
New laws have been introduced for infrastructure development; however, corruption and a poor
criminal justice system remain causes for concern
The law on Public-Private Partnership was enacted in January 2012. The law is intended to regulate the formation of
partnerships between the public and the private sectors in an effort to provide services and build infrastructure to improve
social welfare and to increase investment levels in Mexico. The law enables the private sector to submit its own
proposals to relevant government agencies in case of opportunities. The bill will be able to address the need for
improved schools, hospitals and infrastructure that the previous government was unable to fulfill.
Criminals are rarely convicted in Mexico, with impunity rate more than 90%. According to the 2017 Global Impunity
Index, Mexico ranked fourth from the bottom out of 69 nations evaluated. Many opinion polls have also shown that crime
is the biggest concern among citizens. Mexico has been ranked one of the lowest countries for safety in the OECD Better
Life Index. The country scored very low in the rule of law and ranked high in corruption among the OECD countries.
Although the government has proposed reforms to beef up the national anti-corruption system through constitutional
changes, questions still persist over its effectiveness in bringing down corruption and injustice.
Mexico’s biodiversity is a major asset, but the low taxes on transport fuel is a cause for concern
Overall, the biodiversity in Mexico's forests is noteworthy. Mexico is one of the world's five high biodiversity countries,
home to no less than 26,000 species of vascular plants (of which 48% are endemic) and to nearly 2,800 known species
of amphibians, birds, mammals, and reptiles (of which 34% are endemic). Mexico is also one of the few nations in the
world where indigenous and local communities (in this case around 80%) own most of the forests.
However, Mexico charges relatively low transport fuel taxes. The country has a comparatively low tax share from the sale
of gasoline and diesel, which indirectly encourages the consumption of carbon rich fuels and leads to more pollution. The
price of scarce energy resources should take into account environmental and social costs, and introducing a tax is an
effective way to curb reckless use of these. The failure to adhere to such a system could impede Mexico's emergence as
a green economy.
PESTLE highlights
Political landscape
 The general elections held on July 1, 2012 were won by the Institutional Revolutionary Party (Partido
Revolucionario Institucional [PRI]), which had been in the opposition for 12 years following the 2000 elections.
Enrique Pena Nieto is the newly elected president.
 Mexico was ranked in the 20.0 percentile on political stability and absence of violence in 2016. This indicator
measures perceptions of the likelihood that the government will be destabilized or overthrown by
unconstitutional or violent means, including domestic violence and terrorism. The high incidence of drug-related
violence is one of the reasons for the country's low score in this indicator.
Economic landscape
 According to the IMF, Mexico posted a general government budget deficit of 2.85% of GDP in 2016, which is
forecasted to come down further to 1.4% of GDP by 2017 and expected to widen to remain at 2.5% in 2018.
The government’s reform measures should help in propping up government revenue in the medium term and
help to reduce the deficit. Mexico’s gross debt for 2017 is estimated to be around 53.26% of GDP.
 As of July 2017, S&P revised its sovereign credit outlook to BBB+ with a stable outlook from the negative
outlook earlier. The upward revision was due to the improved debt prospects of the country.
Social landscape
 According to MarketLine, as of 2017, an estimated 26.9% of the Mexican population is aged 14 years and
below, while just 7.1% are 65 years or older. Approximately 65.99% of the population is aged between 15 and
64 years old. This implies that Mexico has a large working age population.
 There is constant struggle for supremacy among the country's drug cartels, which has led to a rise in murders
over the last few years. With many cartels branching into other crimes, the problem has compounded in the
recent years.
Technological landscape
 According to MarketLine, mobile penetration was estimated at 90.4 per 100 people in 2017 with total
subscribers at 111.7 million. Mobile subscribers grew by an average of 6.0% during 2008-17.
 However, the country’s expenditure on R&D is very low. Hence, President Nieto has promised to invest a
greater percentage of GDP on Science and Technology.

Legal landscape
 Legal procedures in Mexico are often time-consuming. The large number of pending cases in various courts of
the country and the alleged judicial corruption are frequently criticized.
 According to the 2018 Index of Economic Freedom published by the Heritage Foundation and the Wall Street
Journal, the country currently ranked as the 63rd freest economy in the world with a score of 64.8. The country
improved in the indicators of property rights, judicial effectiveness, government spending, tax burden, labor
freedom, monetary freedom, trade freedom and investment freedom.
Environmental landscape
 According to MarketLine, CO2 emissions declined from 450.1 million metric tons in 2008 to 428.0 million metric
tons in 2015. It is expected that carbon dioxide emissions will rise in the near future because of growing
industrialization and transportation.
 Mexico has initiated several steps to combat its environmental degradation, but the primary focus must be the
strict implementation of policies in order to protect the country’s biodiversity.
Key fundamentals
Table 1: Mexico – key fundamentals

Indicators 2015 2016 2017 2018f 2019f 2020f 2021f
GDP, constant 2010 1.22 1.25 1.27 1.30 1.33 1.37 1.41
prices ($ trillion)
GDP growth rate (%) 2.65 2.29 2.27 1.97 2.49 2.84 2.90
GDP, constant 2010 10,156.58 10,261.03 10,368.20 10,449.93 10,590.05 10,772.36 10,968.13
prices, per capita ($)
Inflation (%) 2.72 2.82 6.04 3.88 3.23 3.10 3.10
Exports, total as a 35.06 38.05 39.90 39.19 37.53 36.16 34.77
percentage of GDP
Imports, total as a 37.77 40.82 42.62 41.86 40.34 38.87 37.45
percentage of GDP
Mid-year population, 119.94 121.43 122.90 124.34 125.76 127.14 128.49
total (millions)
Unemployment rate 4.35 3.88 3.42 3.26 3.22 3.12 3.08
(%)
Mobile penetration 85.99 88.23 90.44 92.29 93.83 95.11 96.18
per 100 people
SOURCE: Country Statistics, MarketLine MARKETLINE

TABLE OF CONTENTS
Overview .................................................................................................................................................................... 2
Catalyst ........................................................................................................................................................................... 2
Summary ......................................................................................................................................................................... 2
Key findings ................................................................................................................................................................. 2
PESTLE highlights ......................................................................................................................................................... 4
Key fundamentals ........................................................................................................................................................ 5
Key Facts and Geographic Location ............................................................................................................................12
Key facts ........................................................................................................................................................................ 12
Geographical location ................................................................................................................................................... 13
PESTLE Analysis .........................................................................................................................................................14
Summary ....................................................................................................................................................................... 14
Political analysis ............................................................................................................................................................ 15

Overview .................................................................................................................................................................... 15
Current strengths ...................................................................................................................................................... 15
Current challenges ..................................................................................................................................................... 15
Future prospects........................................................................................................................................................ 16
Future risks ................................................................................................................................................................ 16
Economic analysis ......................................................................................................................................................... 18

Overview .................................................................................................................................................................... 18
Reforms expected to boost growth ........................................................................................................................... 20
Future risks ................................................................................................................................................................ 22
Social analysis ............................................................................................................................................................... 23

Overview .................................................................................................................................................................... 23
Future risks ................................................................................................................................................................ 24
Technological analysis ................................................................................................................................................... 27

Overview .................................................................................................................................................................... 27

Future risks ................................................................................................................................................................ 29
Legal analysis ................................................................................................................................................................ 30

Overview .................................................................................................................................................................... 30
Future risks ................................................................................................................................................................ 31
Environmental analysis ................................................................................................................................................. 32

Overview .................................................................................................................................................................... 32
Future risks ................................................................................................................................................................ 33
Political Landscape ....................................................................................................................................................35
Summary ....................................................................................................................................................................... 35
Evolution ....................................................................................................................................................................... 35
Pre-independence ..................................................................................................................................................... 35
The 20th century ....................................................................................................................................................... 35
2000–18 ..................................................................................................................................................................... 36
Structure and policies .................................................................................................................................................... 37

Key political figures.................................................................................................................................................... 37
Structure of government ........................................................................................................................................... 37
Composition of the parliament ................................................................................................................................. 38
Key policies ................................................................................................................................................................ 39
Economic and social .................................................................................................................................................. 39
Foreign ....................................................................................................................................................................... 39
Performance .................................................................................................................................................................. 40
Governance indicators ............................................................................................................................................... 40
Outlook .......................................................................................................................................................................... 41
Economic Landscape ..................................................................................................................................................42
Summary ....................................................................................................................................................................... 42
Evolution ....................................................................................................................................................................... 42
1960–2000 ................................................................................................................................................................. 42
2001–17 ..................................................................................................................................................................... 42

Financial system ........................................................................................................................................................ 43
Banking sector ........................................................................................................................................................... 44
Insurance ................................................................................................................................................................... 44
Performance .................................................................................................................................................................. 44
Monetary situation .................................................................................................................................................... 50
Employment .............................................................................................................................................................. 52
Outlook .......................................................................................................................................................................... 52
Social Landscape ........................................................................................................................................................53
Summary ....................................................................................................................................................................... 53
Evolution ....................................................................................................................................................................... 53

Demographic composition ........................................................................................................................................ 53
Education ................................................................................................................................................................... 55
Performance .................................................................................................................................................................. 56
Healthcare ................................................................................................................................................................. 56
Education ................................................................................................................................................................... 57
Outlook .......................................................................................................................................................................... 57
Technological Landscape ...........................................................................................................................................58
Summary ....................................................................................................................................................................... 58
Evolution ....................................................................................................................................................................... 58

Intellectual property .................................................................................................................................................. 58
Patents ....................................................................................................................................................................... 58
Performance .................................................................................................................................................................. 59
Outlook .......................................................................................................................................................................... 60
Legal Landscape .........................................................................................................................................................61
Summary ....................................................................................................................................................................... 61
Evolution ....................................................................................................................................................................... 61

Judicial system ........................................................................................................................................................... 61
Tax regulations .......................................................................................................................................................... 62
Performance .................................................................................................................................................................. 62
Effectiveness of the legal system............................................................................................................................... 62
Outlook .......................................................................................................................................................................... 63
Environmental Landscape ..........................................................................................................................................64
Summary ....................................................................................................................................................................... 64

Evolution ....................................................................................................................................................................... 64

Environmental regulations ........................................................................................................................................ 64
Performance .................................................................................................................................................................. 64
Environmental impact ............................................................................................................................................... 64
Outlook .......................................................................................................................................................................... 65
Appendix ...................................................................................................................................................................66
Ask the analyst .............................................................................................................................................................. 66
About MarketLine ......................................................................................................................................................... 66
Disclaimer ...................................................................................................................................................................... 66

LIST OF FIGURES
Figure 1: Map of Mexico 13
Figure 2: Resilience of the economy, 2011-2016 19
Figure 3: Growth disparity, GDP per capita growth, 2005-14 20
Figure 4: Declining dependency of the oil sector, 1994-2016 and 1980-2015 21
Figure 5: Public social spending by broad policy area and total net social spending,
2013/14 25
Figure 6: High inequality, 2014 26
Figure 7: Unequal GDP growth across states (GDP growth over 2007-2016 or latest) 26
Figure 8: Business R&D as percentage of gross domestic expenditure on R&D, 2005 &
2015 28
Figure 9: Tax subsidy rates on R&D expenditures, 2017 29
Figure 10: Environmentally related taxes, 2014 34
Figure 11: Mexico – political events timeline 37
Figure 12: Mexico – key political figures 37
Figure 13: Political composition in Chamber of Deputies 39
Figure 14: Evolution of GDP growth rate in Mexico, 2007–17 43
Figure 15: GDP and growth rate in Mexico, 2012-22f 45
Figure 16: Sectoral composition of GDP in Mexico, 2017 46
Figure 17: Agricultural output of Mexico, 2012-17 47

Figure 18: Industrial output of Mexico, 2012-17 48
Figure 19: Services output of Mexico, 2012-17 49
Figure 20: External trade of Mexico, 2012–16 50

Figure 21: CPI and CPI-based inflation in Mexico, 2012-22 51
Figure 22: Number of unemployed individuals and the unemployment rate in Mexico, 2012-
22f 52
Figure 23: Religious composition in Mexico (2010 census) 55

Figure 24: Public Expenditure on healthcare in Mexico, 2010-16 56
Figure 25: Public expenditure on education in Mexico, 2009–15 57
Figure 26: Internet users and penetration, 2013-17 60

Figure 27: Mexico – judicial structure 62
Figure 28: Carbon dioxide emissions in Mexico, 2008–15 65

LIST OF TABLES
Table 1: Mexico – key fundamentals 5
Table 2: Mexico – key facts, 2018 12
Table 3: Analysis of Mexico’s political landscape 15
Table 4: Analysis of Mexico’s economy 18
Table 5: Analysis of Mexico’s social system 23

Table 6: Analysis of Mexico’s technology landscape 27
Table 7: Analysis of Mexico’s legal landscape 30
Table 8: Analysis of Mexico’s environmental landscape 32
Table 9: Mid-year population by age and gender in Mexico (percentage of population),

2017 54

Key Facts and Geographic Location
KEY FACTS AND GEOGRAPHIC LOCATION

Key facts
Table 2: Mexico – key facts, 2018
Country and capital

Full name United Mexican States
Capital city Mexico City (Distrito Federal)
Government
Government type Federal presidential republic
Head of state and government President Enrique Pena Nieto
Population (2017 est.) 124.57 million
Currency Mexican peso
GDP per capita (purchasing power parity) (2017 est.) $19,500
Internet domain .mx
Demographic details
Life expectancy (2017 est.) 76.1 years (total population)
73.3 years (men)
79.0 years (women)
Ethnic composition (2012 est.) Mestizo (Amerindian-Spanish) (62%), predominantly Amerindian

(21%), Amerindian (7%) and other (10%)
Major religions (2010 est.) Roman Catholic (82.7%), Pentecostal (1.6%), Jehovah's Witnesses
(1.4%), other Evangelical Churches (5%), other (1.9%), none (4.7%)
and unspecified (2.7%)
Country area 1,964,375 sq. km
Languages (2005) Spanish only (92.7%), Spanish and indigenous languages (5.7%),
indigenous only (0.8%), unspecified (0.8%)
Exports Manufactured goods, oil and oil products, silver, fruits, vegetables,
coffee, cotton
Imports Metalworking machines, steel mill products, agricultural machinery,

electrical equipment, automobile parts for assembly and repair,
aircraft, aircraft parts, plastics, natural gas and oil products
SOURCE: CIA – The World Factbook MARKETLINE

Key Facts and Geographic Location
Geographical location
Mexico is to the west of the Gulf of Mexico and the Caribbean Sea, and to the east of the North Pacific Ocean. It
borders Guatemala and Belize in the south and the US in the north.
Figure 1: Map of Mexico

PESTLE Analysis
PESTLE ANALYSIS
Summary
The July 2012 elections saw the return to power of the Institutional Revolutionary Party (Partido Revolucionario
Institucional [PRI]), after being in opposition for 12 years. Enrique Pena Nieto was elected president of Mexico after he
defeated candidates from the Party of the Democratic Revolution (Partido de la Revolución Democrática [PRD]) and
the National Action Party (Partido Accion Nacional [PAN]).
On the economic front, the country has strong growth prospects due to the reforms of the government. These reform
measures have brightened the country’s growth prospects in the near term. But if the new American president sets out
to put his words into action, there will be dire consequences for Mexico. The economy of the country is closely knit with
its North American neighbors (Canada and the US) under the NAFTA agreement. The value of its bilateral trade with
the US is close to half of its total GDP, with the US purchasing three quarters of its total exports. Around 35 million
Mexicans living in the US send around $25 billion in remittances back to Mexico. With Mr. Trump in the White House,
these bonds might just come under immense strain.
In 2012, Mexico achieved full health coverage for all of its citizens, with a national health insurance program called
Seguro Popular, which was first introduced in 2001. However, poor healthcare spending by Mexico compared to
Organisation for Economic Co-operation and Development (OECD) standards has resulted in a fragile healthcare
system with insufficient resources. The poor performance of the education system is also a major source of concern.
The government has passed the education reform bill, which can be expected to improve the quality of teaching in
Mexican schools.
Mexico has a strong technical workforce, which has encouraged multinational companies to open manufacturing
centers across the country. Mexico also has a strong aerospace sector that is among the most vital engineering
industries in the world today.
Mexico has introduced a law on Public-Private Partnership (PPP Law) to regulate the formation of partnerships
between companies in the public and private sectors. This legislation is an effort to increase investment, provide
services and build infrastructure. Mexico’s new federal Anti-Corruption in Public Contracts Law to curb corruption came
into effect from June 12, 2012. However, judicial delays and a large number of pending cases continue to tarnish
Mexico’s legal system, and concerns about effective intellectual property rights (IPR) implementation remain across the
entertainment, pharmaceutical, software, and publishing industries.
Mexico is considered one of the top five countries globally in terms of biodiversity; however, air and water pollution are
major areas of concern, with Mexico City considered one of the most polluted cities in the world. The country has
received aid from the World Bank and from the Forest Investment Program (FIP) in order to develop a stronger forest
protection plan. The country has a comparatively low tax share from the sale of gasoline and diesel, which indirectly
encourages the consumption of carbon rich fuels and leads to more pollution.

PESTLE Analysis
Political analysis
Overview
The July 2012 elections saw the return to power of the PRI after being in opposition for 12 years. Enrique Nieto
became president after defeating candidates from the PRD and the PAN. The election was tainted by accusations of
vote buying. The PRD, which was in second place in the elections, suggested that the PRI was behind a massive vote-
buying scheme. The focus of the new president is on bringing in reforms. Human rights abuse is an area in which
Mexico has drawn international criticism.
Table 3: Analysis of Mexico’s political landscape

Current strengths Current challenges
■ Strong democratic setup ■ Electoral fraud and violence
Future prospects Future risks
■ Improving ties with Canada ■ Uncertainty over US policy
SOURCE: MarketLine MARKETLINE
Current strengths
Strong democratic setup
Mexico has a robust democratic setup. Formal government institutions are defined by the constitution drafted in 1917,
which is regarded as an expression of popular opinion that ensures civil and labor rights, electoral democracy, and
national sovereignty. The drafters of the constitution, inspired by social and liberal political philosophy, prescribed a
republican system of government with separate powers for the executive, the legislature, and the judiciary. They further
recognized a broad range of political and social rights including the right to freedom of expression, the right to unionize,
and the right to conduct peaceful protests against the authorities.
Current challenges
Electoral fraud and violence
The last presidential election in Mexico was tainted by accusations of vote buying. The PRD, which was placed second
in the election, suggested that the PRI was behind a massive vote-buying scheme. Vote buying and other kinds of
fraud were used by the PRI during their 71 years of rule until they were defeated in 2000 by the PAN. After the July 1,
2012 elections, the PAN accused the PRI candidate Enrique Pena Nieto’s campaign of acquiring about 9,500 prepaid
gift cards worth nearly $5.2 million. Nieto has also been accused of exceeding the $330 million campaign funding limit
and buying favorable coverage from Mexico’s television giant Televisa. After the elections, many people were seen
rushing to the stores to redeem their gift cards, which they claimed were given to them by the PRI. In mid-2013, video
footage showed PRI party members planning to use the federal anti-poverty program’s handouts to win votes ahead of
the local elections in the state of Veracruz. The return of the PRI to power amid allegations of vote buying is a negative,
as Nieto promised that his party has learned from its past mistakes. The allegations raise doubts about proposed
political reforms that were expected to be implemented by the PRI.
Violent incidents that occurred before the election are another major area of concern. These include the intimidation,
assault and murder of candidates running for public office by political rivals, criminal gangs and others. Although, the

PESTLE Analysis
2012 presidential election was relatively peaceful, the July 2013 local elections saw major violence. Jaime Orozco
Madrigal, a mayoral candidate, was found dead in the state of Chihuahua. In the same state, another mayoral
candidate named Jaime Orozco Madrigal from the Institutional Revolutionary Party was killed after being taken from his
house. In June 2013, in the southern state of Oaxaca, Nicolas Estrada Merino, leader of the Party of the Democratic
Revolution, was shot fatally in a sugarcane field; Isaac Lopez Rojas, a deputy mayoral candidate from the leftist
Cardenista Party, was kidnapped and killed in the state of Veracruz in the same month. In addition, six candidates were
killed between February and July 2013, and another was wounded. Most of the major parties were affected in the
violence and many candidates dropped out of the elections. The reported violence was mainly in small towns where
criminal organizations had a stronger hold and wanted their preferred candidates to win.
Similarly, ahead of the June 2015 mid-term elections, violence continued to rise. In February 2015, in the municipality
of San Francisco Nuxano, Oaxaca state, a local candidate from the opposition and two other individuals were killed.
Further, social media recordings revealing various incidents of bribery and corruption in the run up to the elections
speak volumes about the malpractices. In June 2016, incidents of violence linked to the elections of governors in
Veracruz erupted when reports of attacks and text messages warning people not to vote came to light. These incidents
point to a perilous situation in which the state is unable protect its candidates contesting elections: this undermines the
basic principles of democracy.
Future prospects
Improving ties with Canada
The relations between Canada and Mexico got strained when the previous Prime Minister Stephen Harper imposed
visa requirements on Mexican visitors. The former Conservative government imposed such restrictions in order to
prevent an influx of asylum-seekers from Mexico. This move angered Mexican leaders and deterred legitimate Mexican
business travelers and tourists from travelling to Canada.
The new Canadian Prime Minister, Justin Trudeau, has promised better relations between the two countries by lifting
the visa requirements for Mexican citizens. Improving ties between Canada and Mexico will imply that all three NAFTA
partners, including the US, will be able to work together on a trilateral energy and climate deal. Trudeau hopes to
negotiate a clean energy and environment agreement with the US and Mexico. The assured removal of the visa
restriction will make such a prospect more plausible.
Despite NAFTA being in place for 20 years, the bilateral trade between the two countries is not as strong as the trade
between Canada and the US. Agreements like NAFTA, the Canada-Mexico Joint Action Plan of 2014 will be
advantageous for trade between the two countries only when the cordial relationship between the leaders of Canada
and Mexico is established. The new president, Justin Trudeau, looks to further strengthen the ties between both the
sides in the wake of uncertainty over future US policy, with Mr. Trump in White House. In October 2017, Mexico and
Canada along with their counter parts from Peru and Chile met in Colombia for a potential trade deal between the
nations.
Future risks
Uncertainty over the US policy
With the change of guard in the US presidency, the direction of the future foreign policy between both sides has come
under a great deal of uncertainty. As far as the campaign rhetoric of the new president Donald Trump goes, he has
labeled the Mexicans as both “rapist and killers”. He has also threatened the carmakers that have investments in
Mexico with imposition of tariffs. This has already led Ford to cancel its plan to build a plant in Mexico worth $1.6 billion.

PESTLE Analysis
In the start of January 2017, he again reaffirmed his promise to make the Mexicans pay for the wall between both the
countries. At the same time, he also brought the operations of another automobile giant, General Motors, under radar.
He has threatened the carmaker with considerable border tax for manufacturing some of its parts for the Chevrolet
Cruze in Mexico. Furthermore, the Japanese carmaker Toyota was also threatened with a significant border tax, in
case it goes ahead with its plan to build a new plant worth $1 billion in Guanajuato state in central Mexico. All of this
has led the Mexican president to scrap his meeting with Mr. Trump.
If Mr. Trump sets out to put his words into action, the consequences will be dire for Mexican economy. The new
president has also threatened to impose a tariff of 20% on all Mexican goods. The economy of the country is closely
knit with its North American neighbors (Canada and the US) under the NAFTA agreement. The value of its bilateral
trade with the US is close to half of its total GDP, with the US purchasing three quarters of its total exports. Around 35
million Mexicans living in the US send around $25 billion in remittances back to Mexico. With Mr. Trump in the White
House, these bonds might just come under immense strain. In January 2018, the Trump government imposed a 30%
tariff on the imports of solar panels and washing machines, which does not exclude Mexico. As of February 2018, the
new president has also decided to build a wall along the Mexican border.

PESTLE Analysis
Economic analysis
Overview
Mexico is a member of the NAFTA with Canada and the US, and became the first Latin American member of the
OECD in 1994. The economy depends heavily on commercial relations with the US and remittances from migrant
workers based there. Investments by automotive manufacturing companies like Nissan are expected to accelerate the
pace of economic development and generate jobs. However, informal employment and a strong dependence on the
US economy are a cause for concern.
Table 4: Analysis of Mexico’s economy

■ Active participation in FTAs ■ Growth disparity
■ Resilient economy
■ Reforms expected to boost growth
■ Strong dependence on the US e onomy
■ Declining dependence on the oil sector
Current strengths
Active participation in FTAs
After the implementation of the NAFTA in 1994, Mexico’s trade with the US and Canada has almost tripled. The
country has around 44 FTAs in place with several countries and other parties, including Guatemala, Honduras, El
Salvador, the European Free Trade Area, and Japan. More than 90% of Mexico’s trade falls under FTAs. FTAs have
substantially liberalized the country’s trade regime. The agreement is expected to open up a lot of new markets for
Mexico and will reduce its dependence on the US. The country has accelerated talks at the beginning of 2018 to
update a free trade agreement with the European Union as part of the strategy to decrease its reliance on the United
States, which accounts for 80% of its total exports.
Resilient economy
Though posting dismal growth numbers since the mid-2014, due to the crash of oil prices, the economy has been
resilient off late especially since the beginning of 2016. Domestic demand remains the key driver of this growth. This
demand has been bolstered by the recent structural reforms, which have led to the decline for consumer prices,
especially on electricity and telecom services. The reforms are also hedging a low inflation environment while pushing
up the credit expansion, which has boosted the real wage and employment levels in the economy. Declining peso has
made its non-oil exports competitive in the international market. In case, the US embarks on an expansion and
renovation of its infrastructure, Mexico will be the benefactor of a strong import demand from the US.

PESTLE Analysis
Figure 2: Resilience of the economy, 2011-2016
6
Year on Year (%)
4
2
0
-2
-4
2011 2012 2013 2014 2015 2016
Net exports Private consumption GDP
6.00
Percentage
5.00
4.00
3.00
2.00
2011 2012 2013 2014 2015 2016
Unemployment rate Inflation
SOURCE: OECD MARKETLINE
Current challenges
Growth disparity
The structural reforms and sound economic policies followed by the government in the past decade have bolstered the
open nature of the economy. North and Central Mexico have flourished in this era of sound support and reforms
provided by the government, but that’s not true for the entire country. Like many of its developing counterparts, Mexico
too suffers from high levels of inequality in which the south continues to be drifting apart in terms of growth from north
and central parts of the country. Mexico needs to target its infrastructural spending’s and the focus of its reforms in the
South, in case the government wants to bring inclusivity as far as growth of the country is concerned.

PESTLE Analysis
Figure 3: Growth disparity, GDP per capita growth, 2005-14

130
120
2005=100
110
100
90
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
5 fastest-growing states 5 slowest-growing states
Future prospects
Reforms expected to boost growth
The government reformed the oil and gas sector as Mexico's oil production, a boon for the country in the 1980s and
1990s, declined drastically during 2003–12, mainly due to a lack of new projects to replace the state controlled
Cantarell field. Pemex, the state-owned oil company, lacked the funds and the expertise for deep-water exploration as
the federal government appropriates one-third of its revenues—around 8% of GDP. The oil deposits in the shallow
waters of the Gulf of Mexico are nearly depleted, and output from the main Cantarell oil field has fallen from 2.10 million
barrels per day to 460,000 barrels per day. According to the US Energy Information Administration, post reform, oil
production is expected to go above 3.0 million barrels per day by 2020 and 3.5 million barrels per day by 2040.
Pemex’s monopoly in the oil and gas sector is enshrined in the Mexican constitution. The oil giant has been given
exclusive rights both upstream and downstream: this monopoly has reduced its operating efficiency. Bloated pension
liabilities, low labor productivity and an aging workforce have hampered its output. The government passed reforms in
2013, which allows private sector investment in the oil and gas sector. Foreign investment would bring in the funds and
expertise needed to unlock Mexico’s vast deep-water potential. The reforms will help to turn around the Mexican oil and
gas industry and help Pemex to become an internationally competitive firm. The reform of the electricity market is also
expected to make the market competitive. According to OECD estimates, on the assumption of immediate
implementation of the reforms, the productivity growth in electricity and the gas sector could increase by 0.32% after
five years.
Apart from that, the Mexican president has announced for the liberalization of petrol imports from April 1, 2016. This
move is an important element of the energy reforms and has attracted interest and positive response from both
domestic and foreign investors. These investors include the ones keen on participating in the mid-stream segment of
the market. The measure is likely to reduce the negative impact of the continuous decline in global oil prices. Apart
from this, efforts have been made to open up telecom sectors too. Various national institutions have been strengthened
under the new National Productivity Commission, which has bolstered the competition authority in the country, while
PESTLE Analysis
expanding sectoral regulators at the same time.
Declining dependency on the oil sector
According to the OECD’s 2017 Economic Survey on Mexico, the dependency of the oil sector on the economy has
been declining as the Mexican economy is diversifying its economy. The direct contribution of the oil sector to the GDP
has declined from 9.3% in 1994 to 6.6% in 2010 and further to 4.9% in 2016. With the country diversifying its export
basket, the share of oil exports to total exports of the Mexican economy has declined from 17.8% in 2008 to 6.1% in
2015. The share on oil in the public revenue declined at a significant pace from 39.4% in 2012 to 19.8% in 2015.
Figure 4: Declining dependency of the oil sector, 1994-2016 and 1980-2015
Oil sector contribution to the GDP (1994-2016)

12.0
10.0
Percentage of the GDP
8.0
6.0
4.0
2.0
-
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Oil sector in GDP (direct) Oil sector in GDP (indirect)
Public sector dependency on oil is declining

80
70
60
50
Percentage
40
30
20
10
0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Share of oil exports in total exports Share of oil revenues in total public revenues

PESTLE Analysis
Future risks
Strong links with the US economy
Mexico’s trade and financial links make its economy highly dependent on US business cycles. Consequently, Mexico’s
output fluctuation has become closely synchronized with that of the US, especially since the country joined the NAFTA
in the 1990s. Three key links with the US are through trade (especially manufacturing), remittance inflows and financial
markets. According to the CIA – The World Factbook, around 81.1% of Mexico’s exports went to the US in 2015.
Mexican manufacturing firms are deeply integrated into the US supply chain, which raises their vulnerability in case of
adverse developments in the US economy. A significant dependency on a single country is too big a risk to take.
According to the IMF, a one standard deviation increase in the US GDP will raise Mexican GDP growth by 0.6
percentage points.
Evidence from simple correlation coefficients (ranges between -1 and +1; +1 implies a strong correlation between two
random variables, while -1 means shows perfectly opposite movements and 0 means no correlation) show how
strongly Mexico has become linked with the US economy. According to the IMF, pre-NAFTA, the correlation coefficient
between the US and Mexico’s real GDP was 0.02 while post-NAFTA it is far stronger at 0.87. The correlation between
the US and Mexican manufacturing sectors has become stronger—from 0.11 before Mexico signed the NAFTA, to 0.75
after. Links between US and Mexican investments have also become stronger (0.16 to 0.75). Other variables such as
US imports and Mexican exports were negatively correlated before NAFTA (-0.04), while in the post NAFTA period
they have become strongly interrelated (correlation coefficient of 0.92).
Similar results have been found between US consumption and Mexican exports over the same period (-0.24 to 0.68).
Mexico faced the pain of being highly interlinked with the US economy during the 2009 economic crisis when the
economy contracted by 4.58%, and the country lost more than one million jobs and $66 billion in exports. As the global
financial meltdown affected Mexico due to its dependence on the US, it becomes increasingly important for Mexico to
develop trade bases in other countries.
Further, remittances are another area where Mexico has become heavily dependent. A large number of Mexican
workers are employed in the US house construction industry: this has become more correlated to the US housing
boom. Lastly, high financial integration with the US and the rest of the world is another important source of potential
financial spillovers. Around half of the FDI comes from the US is followed by Spain, as of 2010, which indicates the
importance of the US economy.
Due to quantitative easing, a major chunk of the money had flowed into emerging markets, propping up asset prices.
However, with the US Fed ending its quantitative easing program, a lot of that money has now moved to the US
markets to take advantage of the high bond yields. This in turn has negatively affected the currency and depressed
asset prices in Mexico. Emerging markets experienced heavy capital outflows, resulting in a drop in stock and asset
prices, and a fall in the currency after the US central bank slowed its quantitative easing program. Therefore, a surge in
financial market volatility related to uncertainty about the rise in US interest rates could heavily influence the Mexican
economy and make it vulnerable to external risks. In addition, if the new American president sets out with his
protectionist agenda as promised by him in campaigns, it can have a disastrous impact on the country’s trade balance.
The enormity of the country’s dependence on its trade with its powerful neighbor makes its economy highly vulnerable
to the policies of the US.

PESTLE Analysis
Social analysis
Overview
In 2012, Mexico achieved universal health coverage for all its citizens, with a national health insurance program called
Seguro Popular, which was first introduced in 2001. However, poor healthcare spending compared to OECD standards
has resulted in a fragile healthcare system with insufficient resources. The government has brought in reforms in the
education sector. Apart from that, the menace of the drug cartels continues to worry the government. In addition, rising
inequality does not bode well for the overall development of the economy.
Table 5: Analysis of Mexico’s social system

■ Universal health coverage ■ Insufficient healthcare spending and resources
■ Education system reform ■ High inequality
Current strengths
Universal health coverage
In 2012, Mexico achieved universal health coverage for all its citizens, with a national health insurance program called
Seguro Popular, which was first introduced in 2001. There are three stages of universal health coverage: universal
enrollment that enables the use of benefits from a publicly organized insurance fund; access on a regular basis to a
comprehensive package of services that also has financial protection for all; and universal effective coverage accounts
for high-cost services in order to prevent financial shocks. The government has maintained its commitment to universal
health coverage amid an economic slowdown.
Current challenges
Insufficient healthcare spending and resources
According to OECD Health Data 2016, Mexico’s health spending has been one of the lowest among OECD countries.
The current expenditure on health stood at 5.8% of the GDP as compared to 8.5% of GDP for Chile in 2016.
Even healthcare supply in Mexico is low compared to OECD standards. The number of physicians per 1,000 of the
population was 2.4 in Mexico, below the OECD average of 3.2 in 2015. Compared to the OECD average of 8.1 nurses
per 1,000 of the population, Mexico had only 2.8 nurses per 1,000 of the population in 2015. The number of hospital
beds in Mexico was 1.5 per 1,000 of the population in 2015, lowest among all OECD nations in the same year. The
advancement of science and technology has increased the availability of diagnostic technology such as computed
tomography (CT) scanners and magnetic resonance imaging (MRI) units in most OECD countries. However, being
expensive, the number of MRIs units in Mexico was lower compared to other OECD countries at 2.4 per million
population in 2015 compared to the OECD average of 14.5. The government has to take active steps to improve the
healthcare system and bring it up to OECD standards.

PESTLE Analysis
Future prospects
Education system reform
Mexico has a high level of investment opportunities, yet the country’s failing education system at different levels is a
major source of concern. It seems that the high spending goes mostly toward paying the salaries of teachers, and little
is done for building and maintaining the infrastructure in schools. As a result, the students suffer, as they are deprived
of basic infrastructure facilities such as electricity, potable drinking water and toilets. Furthermore, corruption in the
system has enabled the buying and selling of teaching jobs in the country. Some individuals receive jobs even with low
qualifications, reducing the quality of instruction.
The reality of the education system has been displayed through a 2012 documentary called De Panzazo, which roughly
means “barely passing”. The government has passed a host of legislation to improve the education standards in the
country. The General Education Act, the Law of the National Institute for Educational Evaluation and a new
professional teaching service law is expected to raise the education standards over the medium term. The National
Institute for Educational Evaluation is to assess and evaluate the teachers periodically. Along with that, the Secretariat
of Public Education has to design, organize and implement teaching curriculum. These laws are expected to tackle the
most pressing issues in the Mexican education system. A new education model has been adopted in Mexico after 58
years as part of the education reform initiated by the president in 2013. The new model will be implemented for the first
time in the 2018-2019 academic year.
Future risks
High inequality
Mexico has perennially suffered from a severely uneven distribution of wealth, adding to the existing socioeconomic
problems faced by the country. Individuals residing in the northern states, especially within areas that border the US,
enjoy a higher standard of living over their counterparts in the largely rural southern regions of the country. The
northern areas house prominent industrial clusters that provide employment opportunities for jobseekers. Furthermore,
new employment opportunities have diminished in the South, where agriculture is still the dominant sector. The
regional variation in growth also presents a stark image of the growth enjoyed by the country, with the frontier states
getting a large chunk of the overall development.
According to OECD, Gini Index (a measure of income inequality) stood at 0.459 in 2014, which is the highest among all
OECD nations. On a scale of 0–1, 0 signifies no income inequality while 1 stands for a highly unequal income
distribution. The economic crisis thus widened inequality, as the poor were affected more than the rich. High inequality
levels create political, social and economic challenges, and stifles social mobility. Taxes and benefits need to be
reformulated and redistributive policies need to be framed to challenge high inequality.

PESTLE Analysis
Figure 5: Public social spending by broad policy area and total net social spending,
2013/14
100.0
90.0
80.0
70.0
Percentage of GDP
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Portugal
Czech Republic
Luxembourg
Poland
OECD
France
Japan
Belgium
Mexico
Denmark
Austria
Norway
Ireland
Italy
Israel
Turkey
Greece
Spain
Germany
Slovenia
Hungary
Canada
Chile
Sweden
Netherlands
UK
Switzerland
The US
Australia
Iceland
Finland
Latvia
Korea
New Zealand
Estonia
Slovakia
Pensions (old age and survivors) Income support to the working age population
Health Other social services
Public social expenditure Total net social (OECD)

PESTLE Analysis
Figure 6: High inequality, 2014
Gini Co-efficient
0.50
Co-efficent 0 = no inequality, 1= complete inequality
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
MEX
FIN
LTU
ISR
LVA
GRC
ITA
NLD
NOR
SVN
FRA
CZE
TUR
USA
NZL
PRT
AUS
DEU
LUX
BEL
EST
ESP
CAN
IRL
AUT
ISL
SWE
SVK
CRI
GBR
KOR
CHE
POL
HUN
DNK
Figure 7: Unequal GDP growth across states (GDP growth over 2007-2016 or latest)
35
30
25
GDP growth
20
15
10
5
0
MEX frontier MEX MEX laggard Latin American OECD
countries

PESTLE Analysis
Technological analysis
Overview
Mexico has a strong technical workforce, which has encouraged multinational companies to open manufacturing
centers across the country. Mexico also boasts of an aerospace sector that is among the most vital engineering
industries in the country. However, the level of innovation in Mexico is low, as can be seen from the small number
patents granted by the USPTO in 2015. Nevertheless, the increase in startups should provide impetus to technological
development.
Table 6: Analysis of Mexico’s technology landscape

■ Strong technical workforce ■ Low R&D spending
■ Leading hub for the aerospace sector
■ Low subsidies from the government for R&D
■ Startups and high tech manufacturing
expenditure
Current strengths
Strong technical workforce
Mexico is renowned for its cheap and reliable labor, which is perfect for assembling vehicles, consumer durables, and
other goods in the export assembly plants know as maquiladoras, which line the border with the US. More intricate
engineering and design work is traditionally carried out in developed regions such as the US, Europe, and Japan, but
with assembly work increasingly migrating to countries such as India and China, Mexico has turned its attention to the
development of a technical workforce in order to stay in the global race. Over the past decade or so, the nation’s
policymakers have successfully encouraged greater enrollment in four-year degree programs in engineering,
developed a group of technical institutions that grant two-year degrees, and initiated advanced training programs with
multinational companies. This has resulted in the country developing its technical workforce.
Leading hub for the aerospace sector
Mexico boasts of an aerospace sector that is among the most vital engineering industries in the world today. Over 260
Mexican companies provide aerospace engineering services and equipment. Due to the strategic importance of the
US-Mexico borders, many aerospace companies are developing in that region. In fact, Mexico’s aerospace sector,
which began as an assembly industry, has grown to manufacture sophisticated aero-parts and fuselages. The industry
is well supported by specialist education and training programs.
The factors that have helped Mexico set up and develop aerospace manufacturing include lower production costs,
skilled labor, and well-established industrial infrastructure. Furthermore, it is one of the world’s largest recipients of
aerospace foreign direct investment. The continuous growth of the aerospace sector will boost the advancement of the
technological sector of the country.

PESTLE Analysis
Current challenges
Low R&D spending
Mexico’s public investment in science and technology is poor. According to the OECD, as of 2016, gross R&D
expenditure (GERD) was 0.50% of GDP, which is way lower than OECD average of 2.3%. The country needs to
increase its investment in higher education, and to create an environment to enable greater exchange between
academia and industry to create more high-technology jobs. The government should frame policies that encourage
businesses to spend more of their R&D budgets on high-tech manufacturing, knowledge-intensive market services and
non-resource-based manufacturing industries as in other OECD countries.
The level of innovation in Mexico is low, as can be seen from the small number of patents granted by the USPTO to
enterprises in the country. Indeed, according to the MarketLine, the number of patents granted to the country was 203
in 2015. The number of patents was still significantly below the totals recorded by Brazil and India, which were granted
381 and 3,415 patents, respectively, in the same year. This indicates that the country has a long way to go in terms of
innovation. This has also resulted in the lack of skill sets among the general population, which has jeopardized the
process of quality hiring by businesses.
Figure 8: Business R&D as percentage of gross domestic expenditure on R&D, 2005 &
2015
Business R&D as percentage of gross domestic expenditure on

90.0 R&D
80.0
70.0
60.0
Percentage
50.0
40.0
30.0
20.0
10.0
0.0
Switzerland (2004, 2015)
Ireland (2014)
Czech Republic
Israel
Belgium
OECD
Japan
Russia
Austria
France
Denmark
Norway
Turkey
Portugal
China
Slovenia
Hungary
EU28
Italy
Poland
Estonia
Mexico
Germany
Canada
Korea
The US
Sweden
Iceland
Netherlands
Spain
Greece
Finland
United Kingdom
Luxembourg
Latvia
New Zealand
Australia (2004, 2013)
South Africa (2013)

Chile (2007, 2015)
Slovak Republic
2015 2005

PESTLE Analysis
Future prospects
Startups and high tech manufacturing
The rising number of start-ups in Mexico points to strong entrepreneurial activity in the country. With around half of the
population below the age of 30 and number of technology graduates rising fast, the country has all the ingredients to be
on the frontiers of technology. On a per capita basis, Mexico has three times more engineering graduates than the US.
Further, many start-ups are using the power of technology and globalization to solve problems facing the country.
There are numerous other entrepreneurs starting their own business in the fields of robotics and other high-end
technology. In the recent past, Mexico has done well in attracting investment in high-end technological manufacturing.
The city of Tijuana in Mexico has recently become Northern America’s electronics assembly hot spot. Given its
proximity to the US, Mexico is stated to be the next big manufacturing destination.
Future risks
Low subsidies from the government for R&D expenditure
The country needs to innovate continuously in export-oriented sectors given the challenges it faces. Providing impetus
to R&D is the key to raising productivity and living standards. However, the Mexican government’s incentives to R&D is
among the lowest in the OECD—as shown in figure below—and have recently suffered a sharp decline. The 1 minus
the B index shows Mexico’s provides very less incentive for R&D expenditures. The B index measures the before-tax
income needed by a firm to break even on $1 of R&D outlays. This could be harmful in the long run as companies will
find it less attractive to invest in R&D, hindering the country’s goal to be on the frontiers of technology.
Figure 9: Tax subsidy rates on R&D expenditures, 2017
0.45
0.40
0.35
0.30
0.25
1-B Index
0.20
0.15
0.10
0.05
0.00
-0.05
Japan
Slovakia
Canada
Italy
Greece
Russia
The US
France
Ireland
Norway
Portugal
Lithuania
Korea
Austria
Belgium
Poland
Turkey
Denmark
Hungary
Spain
Chile
Latvia
UK
South Africa
Brazil
Mexico
Germany
China
Iceland
Netherlands
Slovenia
Czech Republic
Australia
Sweden
Finland
Switzerland
Luxembourg
New Zealand
Large, profitable firm SME, profitable firm Large, loss-making firm SME, loss-making firm

PESTLE Analysis
Legal analysis
Overview
Mexico has introduced the PPP Law to regulate the formation of partnerships between the public and private sectors in
an effort to provide services, build infrastructure to improve social welfare, and increase investment. Mexico’s new
federal Anti-Corruption in Public Contracts Law came into effect on June 12, 2012. However, judicial delays and a large
number of pending cases continue to plague Mexico’s legal system. Also, concerns over lax IPR enforcement remain
across the entertainment, pharmaceutical, software and publishing industries. The country has brought in reform to
bring down unfair competitive practices in certain near monopolized sectors, such as telecommunications and
broadcasting.
Table 7: Analysis of Mexico’s legal landscape

■ Infrastructure law ■ Concerns about IPR implementation
■ New federal Anti-Corruption in Public
■ Large number of pending cases
Contracts Law
■ Tax reforms ■ Poor criminal justice
■ Opening up of various sectors
Current strengths
Infrastructure law
The PPP Law was enacted in January 2012. The law regulates the formation of partnerships between the public and
private sectors in an effort to provide services, build infrastructure to improve social welfare and increase investment.
The law enables the private sector to submit its own proposals to the relevant government agencies in case of
opportunities. The law also allows the government to enter into contracts with a private company for up to 40 years.
The private company needs to have the ability to execute and develop infrastructure projects in order to enter into a
public-private partnership agreement. The law grants companies legal certainty and any disputes concerning the
agreement will be resolved by arbitration. The bill will be able to address the dire need for schools, hospitals, and other
infrastructure projects that the previous government was unable to address.
New federal Anti-Corruption in Public Contracts Law
Mexico’s new federal Anti-Corruption in Public Contracts Law came into effect on June 12, 2012. Any foreign or
Mexican individual or corporation found taking a direct or indirect advantage when procuring contracts with the Mexican
federal government will face legal action. The law lays down regulations on sanctions and charges the Ministry of
Public Administration would be able to slap on violators. An investigation can be started at the ministry’s sole discretion
or based on a sworn statement by a government entity, public servant, or person with relevant knowledge. The law also
has provisions for a possible reduction of sanctions for those who voluntarily confess to their participation in unlawful
conduct either during the procedure or before it. In July 2016, President Enrique Pena Nieto signed a series of
anticorruption laws, which together constitute the Anti-Corruption system, which should serve as an effective way to
PESTLE Analysis
curb corruption and make the country more transparent. The new anti-corruption laws entered into force in July 2017.
Current challenges
Concerns about IPR implementation
Although Mexican law protects IPR, enforcement is ineffective, and pirated goods are available throughout the country.
Piracy in Mexico mainly affects the entertainment, pharmaceutical, software, and publishing industries. According to a
BSA global software piracy study, the country's software piracy rate was 52% in 2015, with the estimated commercial
value of unlicensed software totaling $980 million. The office of the US Trade Representative has been critical of the
country’s IPR regulatory system, stating that Mexico’s enforcement efforts and IPR laws do not conform to global
standards. It is because of this that the country is still retained on the watch list in its 2017 Special 301 Report. Large-
scale piracy continues to be a major challenge to the country.
Large number of pending cases
Despite having a multi-tiered judicial system, a large number of cases are still pending in various courts, and it takes a
long time for a plea to be heard at the Supreme Court of Justice. The judicial system is slow to resolve cases and is
vulnerable to corruption. Judicial delays have become increasingly common, leading to longer trial periods. Moreover,
unnecessary delays in the delivery of a final verdict result in prisoners languishing in jails under harsh conditions. A
large number of custodial deaths in the country’s prisons have been internationally criticized.
Future prospects
Tax reforms
The government brought in reforms in the taxation system to garner more revenue with the implementation of fiscal
reforms in 2014. According to the OECD, Mexico’s tax revenue was around 17.2% of GDP, well below the average of
OECD (34.3%) in 2016. Tax reform has resulted in an increase in tax collections. The increase in tax revenue has
helped to make up for some of the loss in oil revenue. The government has made major reforms to most types of taxes,
including corporate, personal, consumption and energy taxes. Moreover, the reform aims to eliminate loopholes and
streamline the tax structure.
Opening up of various sectors
The government opened up the telecommunications and media sector in 2013. The establishment of a new regulatory
and competition agency (IFT) focused on telecommunications and broadcasting will help in bringing competition to the
sector, which has for long been dominated by a few companies. These reforms could boost competition and bring
down prices in the near term. There is an ample scope for further reduction in foreign investment and trade barriers as
seen in the foreign investment restrictiveness.
Future risks
Poor criminal justice
With impunity rate of more than 90%, attributed to an inefficient legal system and corruption, Mexican courts rarely
convict criminals. According to the 2017 Global Impunity Index, Mexico ranked fourth from the bottom out of 69 nations
evaluated. Many opinion polls have also shown that crime is the biggest concern among citizens. Mexico has been
ranked one of the lowest countries for safety in the OECD Better Life Index. The country scored very low in the rule of
law and ranked high in corruption among the OECD countries. Although the government has proposed reforms to
strengthen the national anti-corruption system through constitutional changes, questions still persist over its
effectiveness in bringing down corruption and injustice.
PESTLE Analysis
Environmental analysis
Overview
Mexico is one of the top five countries in terms of biodiversity. Air pollution is a major concern in Mexico, with Mexico
City considered one of the most polluted cities in the world. Research studies in Mexico City point to the growing threat
of heart ailments due to high concentrations of suspended particulate matter. Moreover, rampant deforestation has
attracted criticism from environmental groups. The Border 2020 US-Mexico environment program was signed on
August 8, 2012 and work is on to address high priority environmental and public health problems along the 2,000-mile
border between the two countries.
Table 8: Analysis of Mexico’s environmental landscape

■ Rich in biodiversity ■ Air pollution
■ Funding for forest protection
■ US-Mexico agreement on border environmental
■ Low taxes on transport fuels/CO2 emissions
issues
Current strengths
Rich in biodiversity
Mexico's biodiversity is noteworthy. Mexican forests contain 50% of the world's pine species and 135 species of oak.
Mexico is one of the few nations in the world where indigenous and local communities own most of the woodland—
around 80% in this case. Tropical forests have traditionally been a source of livelihood for the rural population and
sustain a wide range of mammalian and aquatic species. Prominent rivers, which provide nearly 60% of the country’s
total water, flow through these forests. The country is one of the world's top five high biodiversity nations, home to
almost 26,000 species of vascular plants, of which 48% are endemic, and home to nearly 2,800 known species of
amphibians, birds, mammals, and reptiles, 34% of which are endemic.
Funding for forest protection
In 2012, Mexico received a loan of almost $400 million from the World Bank and the FIP (Forest Investment
Programme) to develop a stronger forest protection plan. As part of the Strategic Climate Fund, the FIP aims to fight
deforestation and prevent the degradation of forests by wildfires. The money will go towards funding programs that
provide instrumental knowledge and resources on global climate change and deforestation. The money will help in
protecting the lands from natural disasters and in creating a more sustainable Mexico. The new developments will have
a favorable impact on the Mexican population as well as on the environment. Community managed forest programs
have been successful in providing employment to the people while also supporting the climate goals. The program by
the World Bank has helped in bringing 1.8 million hectares under the zone of sustainable management.

PESTLE Analysis
Current challenges
Air pollution
Air pollution remains a major challenge to the Mexican government, and extremely high levels of air pollution are a
particular problem in Mexico City. In August 2007, the American Journal of Respiratory and Critical Care Medicine
reported that air pollution in Mexico City was more harmful to children than cigarette smoke. A survey of 3,170 eight-
year-olds indicated that air pollution harms lung development, and may cause chronic lung diseases. In April 2010, a
post-mortem study of 21 young individuals who lived and died in Mexico City found that their hearts showed the
adverse effects of air pollution. Mexico City has high levels of suspended particulate matter that causes damage or
disease in the human body. The University of Montana study showed that air pollution damages the heart and leads to
an increased risk of heart disease and heart attacks. The various anti-pollution policies initiated in the last two decades
have lowered smog in Mexico City, but a lot more needs to be done in this field. In the first week of March 2016, the
skies of Mexico City were covered by thick and choking smog, causing the authorities to be alarmed and to check the
effectiveness of the policies to curb pollution since 2005. In May 2016, the officials of Mexico City banned 40% of
vehicles, while issuing the cutback on emissions of industries. The new rules already keep one-fifth of the vehicles off
the road.
Future prospects
US-Mexico agreement on border environmental issues
The Border 2020 US-Mexico Environment program was signed on August 8, 2012 and work is going on to address
high priority environmental and public health problems in the 2,000 mile border region. This followed the Border 2012
environmental agreement. The Border 2020 program will focus on ways to reduce pollution in water, air, and on land. It
also aims to reduce exposure to chemicals from accidental releases or terrorism and improve environmental
conditions. This is the latest environmental program implemented under the 1983 US-Mexico La Paz Agreement.
During 2012–20, the focus of the program will be on reducing air pollution, improving access to clean and safe water
along with improving the quality of water, promoting waste management, increasing joint preparedness for
environmental and emergency response, and enhancing compliance assurance and environmental stewardship. The
program will benefit both countries and improve environmental conditions.
Future risks
Low taxes on transport fuels/CO2 emissions
Mexico charges relatively low transport fuel taxes. The country has a comparatively low tax share from the sale of
gasoline prices and diesel, which indirectly encourages consumers to consume more carbon rich fuels leading to more
pollution. The price of scarce energy resources should take into account the environmental and social costs, and
introducing a tax is an effective way to curb the reckless use of non-renewable natural resources. Moreover, the
distortive pricing mechanism is inhibiting the development of green technologies and entrepreneurship. Failure to
adhere to such a system could become an impediment to Mexico's emergence as a green economy in the future.

PESTLE Analysis
Figure 10: Environmentally related taxes, 2014
5.0%
4.0%
3.0%
Percentage of GDP
2.0%
1.0%
0.0%
Hungary
Japan
France
Belgium
Norway
Portugal
Austria
Denmark
Turkey
OECD
Mexico
Ireland
Israel
United States
Canada
Spain
Poland
Germany
Chile
Iceland
Sweden
Italy
Switzerland
Australia
Czech Republic
Netherlands
Slovenia
New Zealand
Luxembourg
Korea
Greece
Finland
Estonia
United Kingdom
Slovak Republic
-1.0%
Energy products Motor vehicles and transport Other environmentally related taxes

Political Landscape
POLITICAL LANDSCAPE
Summary
Political stability has largely been maintained in Mexico since the early 1990s. President Ernesto Zedillo’s regime
during the mid-1990s introduced long-awaited reforms to the Mexican electoral systems, which were initiated to create
a level playing field for opposition parties. Furthermore, during the early 2000s the Vicente Fox government supported
the reforms and pledged to implement additional legislation to overhaul the existing political and economic landscape.
His reign was followed by Felipe Calderon, whose government encouraged free trade and regional co-operation.
The general elections held on July 1, 2012 were won by the PRI after the party had been in opposition since the 2000
elections. Prior to that, the PRI had ruled Mexico for 71 years with an iron grip, and its hegemony was marked by large-
scale corruption. Enrique Pena Nieto was sworn in as president on December 1, 2012, having won 38.21% of the vote.
The Party of the Democratic Revolution (Partido de la Revolución Democrática [PRD]) candidate Lopez Obrador was
defeated by a narrow margin, while National Action Party (Partido Accion Nacional [PAN]) candidate Josefina Mota
was placed third.
Evolution
Pre-independence
The Olmecs established the first civilization in Mexico, and were the rulers from 200–400 BC. The later Maya (300–900
AD) and the Aztec (1200–1521 AD) rulers based their kingdoms on the traditions of the Olmecs. The Aztecs occupied
most of Mexico by the beginning of the 16th century. Their belief that their god Quetzalcoatl would one day come and
reclaim his land was exploited by Spanish explorer Hernan Cortes, allowing him to capture the whole of the Aztec
empire in just two years. In 1808, the ruler King Fernando VII was deposed by Napoleon, who declared that his brother
Joseph Bonaparte would be king.
However, the news of the Spanish ruler’s overthrow led to widespread uproar. Dissatisfaction with the colonial
administration and the discrimination against Criollos (Mexicans descended from Europeans) at all levels of
government were some of the main reasons for the widespread rebellion that followed. This revolt was led by the
Criollo parish priest Miguel Hidalgo y Costilla; however, it was crushed after the execution of Hidalgo by firing squad in
1811. Following the death of Hidalgo, Jose Maria Morelos Pavon took over the revolutionary movement and laid siege
to Mexico City. Nevertheless, the colonial forces triumphed and Morelos met the same fate as Hidalgo.
1847–48 wars proved to be very costly to Mexico, as it lost vast tracts of land to the US. In 1863, Maximilian, the
Archduke of Austria, came to power with the help of Napoleon III and the conservatives of Mexico. However,
Maximilian was defeated by Benito Juarez, who was in turn defeated by his former ally, Porfirio Diaz. Diaz ruled until
1911, when he was overthrown by a group of generals and political leaders. This incident led to a civil war lasting 20
years, in which over one million people lost their lives.
The 20th century

A single political party, the PRI, dominated the political scene of Mexico for more than 70 years. Plutarco Elias Calles
was the founder of the PRI, and became president in 1924. The PRI remained in power despite huge challenges, such
as the killing of hundreds of protesters in 1968 and the rise of the Zapatista movement in 1994. President Zedillo
oversaw comparatively free elections in 2000, and the PRI's rule ended with the election of Vicente Fox of the PAN .

Political Landscape
2000–18
After his election, President Fox resolved to intensify economic and political reform, declare war on organized crime,
and introduce the Immigrant Worker Program in conjunction with the US. However, by the end of President Fox’s term
many of his structural reform programs remained unfulfilled. The 2006 general election was fought between Felipe de
Jesus Calderon Hinojosa, a PAN candidate and former Fox administration energy minister, and Andres Manuel Lopez
Obrador, a PRD candidate and former mayor of Mexico City.
A strong ideological dichotomy was evident in the nationwide campaigns of these two candidates. Calderon pledged
the continuation of reform programs by encouraging greater foreign investment and enhancing Mexico’s
competitiveness in the global market, and vowed to promote free trade and democratic reforms. Obrador, on the other
hand, pledged to address deep-rooted poverty and social inequality, and to stall neoliberal reforms. He vowed to create
substantial job opportunities through massive funding of public works, and to renegotiate the NAFTA to protect the
interests of Mexican farmers by preventing the import of US corn. In addition, Obrador resolved to dismantle the hostile
commercial oligopolies that had emerged from the large-scale privatization of state-owned assets during the 1990s.
Official figures released by the independent Federal Electoral Institute confirmed Calderon’s narrow victory in the
elections; however, Obrador’s allegations of election rigging and skepticism about the authenticity of the results led to
demonstrations by his supporters. By mid-2006, Mexico had accomplished reasonable progress in terms of stabilizing
the economy and alleviating poverty. Nevertheless, disparities remain stark in terms of the distribution of wealth. Crime
and corruption are high, and the less developed states in the south continue to trail the prosperous northern regions,
fueling illegal immigration to the US. Former President Calderon’s campaign against drug cartels, involving around
45,000 Mexican troops, has led to thousands of deaths since 2006, which in turn has led to a rise in organized crime
across the country. Hundreds of thousands joined marches throughout Mexico to protest against a continuing wave of
killings and kidnappings. The Mexican army, along with US troops, managed to neutralize the drug traffickers in the
Ciudad Juarez region along the US-Mexico border. The general elections held on July 1, 2012 were also won by the
PRI, after it had been in opposition for 12 years. Enrique Pena Nieto was elected president, winning 38.21% of the
votes. The PRI retained its majority with 203 seats in the Chamber of Deputies in the mid-term elections held in June
2015. The next general elections in Mexico are scheduled to be held on July 1, 2018.

Political Landscape
Figure 11: Mexico – political events timeline
1910–30 1931–70 1971–95 1996–2005 2006 Onwards
• In 1910, Emiliano • In 1934, President • In 1976, Mexico • In 1995, the • In 2009, the
Zapata led the Epic Lazaro Cardenas discovered huge government and the opposition PRI won
Revolution. started oil offshore oil reserves. EZLN reached an 48% of seats in the
nationalization, agreement on Chamber of Deputies
• In 1911, Mexican • In 1993, Mexico
industrialization and greater autonomy for in the mid-term
dictator Porfirio Diaz ratified the NAFTA
land reforms. the indigenous congressional
was overthrown, with the US and
Mayans. elections.
replaced by liberal • In 1942, Mexico Canada.
President Francisco declared war on Japan • In 1997, PRI lost the • In 2010, President
• In 1994, the guerrilla
Madero. and Germany. elections and overall Calderon called on
rebellion by the
majority in the lower the US for shared
• In 1913, Madero was • In the 1960s, the Zapatista Army of
house of parliament. responsibility against
assassinated and nationwide unrest due National Liberation
drug trafficking. The
Victoriano Huerta to unequal wealth (EZLN) was • In 2000, Vicente Fox
US President Barack
assumed power, who distribution was suppressed by the of the Alliance for
Obama signed into
resigned a year later. suppressed by the government. Change won the
law a $600 million bill
He was succeeded government. presidential
• In August 1994, to put more personnel
by Venustiano elections.
• In 1968, clashes Institutional and equipment along
Carranza.
between student Revolutionary Party • In 2001, the the US-Mexico
• In 1917, a new demonstrators and (PRI) candidate government passed border.
constitution was security forces in Ernesto Zedillo a bill that increased
• In the 2012
adopted for Tlatelolco, Mexico Ponce de Leon won the rights of the
presidential elections,
permanent City, killed hundreds of the presidential indigenous people.
the PRI came in
democracy. protestors. elections.
power after 2000,
However, Carranza’s
being in opposition
murder in 1920 led to
for 12 years. Enrique
civil war.
Pena Nieto became
the new president.
Structure and policies

Key political figures
 President Enrique Pena Nieto.
Figure 12: Mexico – key political figures

Enrique Pena Nieto became president in the 2012 presidential elections. He is a
member of the PRI party. He completed his post graduation in business from
Monterrey Institute of Technology and Higher Education (ITESM). He served as the
governor of the state of Mexico from 2005 to 2011. His victory in 2012 brought the
PRI in power after being in opposition for 12 years. As the newly elected president
he has promised to improve the growth rate of the economy and the sagging oil
production. He has also promised to carry on the drug war initiated by his
predecessor.
Structure of government
Mexico is a federal republic consisting of 31 states and a federal district. Mexico’s political system has traditionally
concentrated power in the executive branch, so that the president—who is the head of both the state and the

Political Landscape
government—exercises substantial executive authority. In addition, he functions as the chief of the armed forces.
Presidents are directly elected by a simple majority of registered voters in the 31 states and the federal district and
serve a term of six years. Unlike many other countries, the Mexican constitution does not account for a separate
position of vice president. In the case of an abrupt vacancy during the first two years of the presidential term, Congress
designates an interim president, who in turn must call a special presidential election to complete the term of the
deceased or deposed president. If the vacancy occurs during the latter four years, Congress designates a provisional
president, who then completes the presidential term. The president bears the sole authority to dismiss and appoint all
cabinet secretaries except the attorney general, whom he cannot fire without the consent of the Senate.
Legislative powers are entrusted with the bicameral Congress. The 128-seat Senate is the upper house and the 500-
seat Chamber of Deputies is the lower house.
Key political parties
The PRI ruled the country from 1929 until the early 1990s. Traditionally, the PRI has ideologically been a center-left
party, representing the working class of Mexico and blending nationalism with a redistributionist public policy. However,
during the mid-1980s the technocratic members of the party gained prominence over the populist members, and
encouraged the adoption of market-oriented reforms. Until the early 1980s, the PRI had a dominant position in the
Mexican political system, with the opposition parties posing little threat to its authority. The trend changed considerably
during the mid-1980s, however, when parties on the left and right began to pose a greater threat to PRI candidates. On
the right, the PAN defeated the PRI by attaining the presidency in 2000, ending seven decades of PRI control over the
legislative branch. The general elections held on July 1, 2012 were won by the PRI after it had been in opposition for
12 years since the 2000 elections.
The PAN ended the PRI’s rule of over seven decades in the 2000 elections. Its powers are concentrated within the
wealthier states of North and Central Mexico. The PAN derived its early support from the Roman Catholic Church, the
business community, and other sectors estranged by the left-wing populist policies charted by previous PRI
governments. It lost the 2012 general election to PRI.
The PRD favors social welfare policies, and disapproves of most reform policies initiated during the mid-1980s.
Although the party follows the socialist policies of previous communist and left-wing governments, it is controlled by
former PRI leaders.
Composition of the parliament

Currently, the PRI is the largest party, with 203 seats in the Chamber of Deputies. The PAN won 108 seats and the
PRD won 56 seats.

Political Landscape
Figure 13: Political composition in Chamber of Deputies
Other, 133
PRI, 203
PRD, 56
PAN, 108
Key policies
Economic and social
The government’s policies will focus on implementation of the structural reforms that were approved by the parliament
in 2013–14. In terms of the medium term growth prospects, a lot seems to be riding on the successful implementation
of the structural reforms which should address the problems such as labor market inefficiencies and weak competition
in certain key domestic sectors, low levels of lending by the banking system and poor educational outcomes. The
budget for 2017 has the intent of taking the country back to primary surplus. Expenditure cuts amounting to more than
1% of GDP from the previous year were announced. The budgetary cuts will be enacted mostly in expenditures
pertaining to communication, transportation and tourism. The fiscal outlook of the country is a little uncertain due to the
low oil prices. However, the rise in tax intake due to the 2014 fiscal reforms has helped the government in mitigating
major fiscal losses.
The earthquake in September 2017 caused damage in the Greater Mexico city area, and in the Mexican state of
Puebla and Morelos including the collapse of more than 40 buildings. The 2018 budget earmarked total spending of
$276.9 bn of which 1% to be spent on rebuilding the areas affected by the earthquake. The government projects a
primary budgetary surplus of 0.9% of GDP in 2018.
Foreign
Mexico's foreign policy centers on defending and championing the principles of non-intervention and self-determination
and believes that by doing so, it strengthens its sovereignty. The Mexican government defends the rights and interests
of Mexicans living abroad. The main objectives of Mexican foreign policy are:
Political Landscape
 To protect and fortify Mexico’s sovereignty and independence
 To broadly deepen Mexico’s political, economic, cultural, and co-operative relationships with all regions
 To take advantage of globalization in order to provide a boost to the country’s development.
The country is a signatory of the NAFTA since 1994, and maintains strong relations with Canada and the US; however,
Mexico's points of conflict with the latter include illegal migration, border security, and trade issues. The US provides
support (including military support) to help curb drug-related issues on the US-Mexico border. The US continues to
remain Mexico’s most dominant trade and investment partner. Mexico has a very strong network of FTAs. The direction
of relations with respect to the US remains shrouded in mystery with Donald Trump being the new president, His
campaign promises, including that of building a wall throughout the Mexican border, seems menacing as far as the
relations between both the sides are concerned.
Performance
Governance indicators
The World Bank report on levels of governance used factors such as voice and accountability, political stability and
absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption as indicators for
214 countries and territories over 1996–2016. Daniel Kaufmann of Brookings Institution, Massimo Mastruzzi of the
World Bank Institute, and Aart Kraay of the World Bank Development Economics Research Group conducted the
study. For any country, a percentile rank of zero corresponds to the lowest possible score and a percentile rank of 100
corresponds to the highest possible score.
Mexico was ranked in the 43.84 percentile on voice and accountability in 2016. This indicator measures the extent to
which a country's citizens are able to participate in selecting their government, and looks at how well citizens' rights to
freedom of expression and freedom of association are protected, along with freedom of the media.
Mexico was ranked in the 20.0 percentile on political stability and absence of violence in 2016. This indicator measures
perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent
means, including domestic violence and terrorism. The high incidence of drug-related violence is one of the reasons for
the country's low score in this indicator.
Mexico was ranked in the 59.62 percentile on government effectiveness in 2016. This indicator measures the quality of
public and civil services, the degree of governmental independence from political pressures, the quality of policy
formulation and implementation, and the credibility of the government's commitment to such policies. Sustained efforts
by consecutive governments to implement necessary economic and social reform policies resulted in Mexico faring well
on this indicator.
Mexico was ranked in the 64.42 percentile on regulatory quality in 2016. Regulatory quality measures the ability of the
government to formulate and implement sound policies and regulations that permit and promote private sector
development. The country's ranking in this indicator reflects the expedited implementation of policies and regulations
for the private sector.
Mexico was ranked in the 33.17 percentile on rule of law in 2016. This indicator measures the extent to which agents
have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, the police,
and the courts, as well as the likelihood of crime and violence.
Mexico was ranked in the 23.08 percentile on control of corruption in 2016. Control of corruption measures the extent
to which public power is exercised for private gain, including both petty and grand forms of corruption. Corruption is
Political Landscape
perceived to be quite significant in the country.
Outlook
The July 2012 elections saw the return of the PRI to power after being in opposition for 12 years, with Enrique Pena
Nieto taking office on December 1, 2012. The July 2012 presidential election was tainted by accusations of vote
buying. The PRD, which was placed second in the election, claims that the PRI was behind a massive vote-buying
scheme. Similarly, before the June 2015 mid-term elections, there have been cases of corruption and violence. On the
brighter side, Nieto has engaged himself in implementing the much-needed structural reforms to address the deep-
seated problems plaguing the economy. The polls from a reputable domestic institution Reforma has put the
president’s approval rating at only 12%, which is lowest ever for a president for over two decades. This low rating was
a direct result of the anger of the masses over the recent gasoline price hike. The government also needs to improve
its poor track record in terms of protecting human rights of its citizens.
Externally, the direction of relations with respect to the US remains shrouded in mystery with fiery promises from the
side of Mr. Trump since assuming his office has put the direction of country’s future foreign policy in jeopardy. With the
expectations of more such incidents of hateful attitude towards the Mexican immigrants and Hispanics in general from
Trump’s presidency, an inevitable trade war is already on the cards.

Economic Landscape
ECONOMIC LANDSCAPE
Summary
Mexican economy is primarily an export-oriented economy as reflected in its highly active participation in FTAs with
several countries, including the European Union, Japan, Israel and most of Central and South American countries.
Owing to its close ties with the US, the economy of Mexico was adversely affected after the September 11 terrorist
attacks and 2008 recession. The economy is witnessing growing service and industrial sectors, with increasing private
investment. The relations with the US, with Donald Trump at the helm of affairs, remain a cause of concern for the
country.
Evolution
1960–2000
Between the early 1960s and late 1970s, successive governments in Mexico placed particular emphasis on
industrialization and import substitution, and followed prudent fiscal and monetary policies to promote growth while
restraining inflation. During the 1970s, government subsidies and unsustainable expenditure in the public sector led to
high inflation and wild fluctuations in economic performance—a situation that worsened due to the country’s massive
international debt and its dependence on oil export revenues. The mid-to-late 1980s were characterized by periods of
economic difficulties and stagnant growth. Monetary policy was severely restrictive and public spending was sharply
curtailed. GDP grew at an average rate of just 0.1% per year between 1983 and 1988.
In the late 1980s and the early 1990s, far-reaching market-oriented structural reforms were undertaken. These included
the privatization of several state-owned entities, liberalization of foreign investment laws, deregulation of the financial
services sector, and cross-border mitigation of tariff and non-tariff trade barriers. These reforms culminated with the
signing of the NAFTA in 1994, which was followed by an influx of $148 billion in foreign direct investment (FDI) over the
next decade. From 1988 to 1994, GDP growth averaged 2.6%, largely sustained by exports and the massive increase
in foreign investments in the country. Nonetheless, the abrupt fall of the peso in the international market in December
1994 compelled the government to grant greater autonomy to the central bank. Economic growth rebounded in the late
1990s, but the recovery was threatened by the spillover effects of the 2001 US recession.
2001–17
The Mexican economy entered recession in 2001 following the September 11 terrorist attacks in the US. Tourism is
now one of the largest sources of foreign exchange in Mexico. The resorts of the Yucatan peninsula on the Caribbean
coast have shown immense growth and the Pacific coast has increased in popularity as a major tourist destination.
Mexico registered an average growth rate of around 2.29% during 2001–08. The country's GDP growth dropped from
3.15% in 2007 to 1.40% in 2008 due to declining external demand. Subsequently, the economy contracted by 4.70% in
2009. However, the Mexican economy rebounded with a growth of 5.11% in 2010, largely driven by external demand.
In 2011 and 2012, the economy recorded a growth rate of 4.04% and 4.02%, respectively. In 2013, growth slowed
drastically to 1.36%, however, it rebounded to 2.27% in 2014, based on strong export demand. According to
MarketLine, during the period from 2015-2017, the economy grew at average annual rate of 2.40%, driven by the
strong manufacturing and services sector. The growth is expected to be 1.97% in 2018 as compared to 2.27% growth
rate recorded in 2017.

Economic Landscape
Figure 14: Evolution of GDP growth rate in Mexico, 2007–17
6.00
4.00
2.00
Growth rate (%)
0.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-2.00
-4.00
-6.00
Year

Financial system
Financial authorities and regulators
Banco de Mexico, the country's central bank, is an autonomous institution in terms of its operations and management.
Its main function is to manage the currency of the domestic economy. In performing this function, the bank prioritizes
protection of the currency’s purchasing power and stability. Its other key functions include promoting and developing
the financial system and ensuring the optimal functioning of the payment system.
Immediately after assuming executive control in 1982, President Miguel de la Madrid authorized the establishment of
private brokerage houses to accomplish financial transactions in the domestic capital market. This resulted in the
formation of the first significant stock market in Mexico, the Bolsa Mexicana de Valores (BMV). By the early 1990s, the
BMV had become one of the world’s fastest growing stock markets. The buoyancy in the stock market was the
outcome of an increase in confidence in prospective economic investors, anticipation of lower interest rates, and the
approval of the NAFTA. The BMV is a public company, and trades debt instruments, stocks, and debentures, among
other instruments. It is Latin America's second largest exchange, after Brazil’s Bovespa; however, the BMV remains
reasonably small when compared to its North American counterparts such as the New York Stock Exchange. The
Economic Landscape
market capitalization of the BMV was $355.72 billion, as of March 2017.
Banking sector
The top five banks in Mexico are BBVA Bancomer, Banco Nacional de México (Banamex), HSBC México, Banco
Azteca, and Banco Mercantil del Norte. Most Mexican banks are highly profitable and well capitalized, since lending is
primarily financed through deposits, while investments in securities make up a very small share of total assets. Low
credit penetration and a low loan-to-deposit ratio provide huge opportunities for credit expansion among these banks.
Insurance
According to MarketLine, the Mexican insurance market is expected to generate total gross written premiums of $26.8
billion in 2018, representing a compound annual growth rate (CAGR) of 8.0% between 2012 and 2018. In comparison,
the US and Canadian markets will grow with CAGRs of 1.65% and 3.2%, respectively, over the same period, to reach
respective values of $1,402.9 bn and $115.0 bn in 2018.
The non-life insurance segment is expected to be the market's most lucrative in 2018, with total gross written premiums
of $14.5 billion, equivalent to 53.9% of the market's overall value. The life insurance segment will contribute gross
written premiums of $12.4 billion in 2018, equating to 46.1% of the market's aggregate value.
The performance of the market is forecast to decelerate, with an anticipated CAGR of 5.8% during the period from
2018-2021, which is expected to drive the market to a value of $31.8 billion by the end of 2021. Comparatively, the US
and Canadian markets will grow with CAGRs of 1.94% and 2.6%, respectively, over the same period, to reach
respective values of $1,486.4 billion and $124.2 billion in 2021.
Performance
GDP and growth rate
According to MarketLine, the Mexican economy contracted by 4.70% in 2009. But the economy bounced back to
growth of 5.11% in 2010, driven by strong external demand. In 2011 and 2012, the economy recorded a growth rate of
4.04% and 4.02%, respectively. In 2013, growth slowed drastically to 1.36%, however, it rebounded to 2.25% in 2014,
and 2.65% in 2015 based on strong export demand. According to MarketLine, in 2016 and 2017, the economy grew at
moderate rate of 2.29% and 2.27%, respectively, driven by the strong manufacturing and services sectors.
The growth was based on the strong export based manufacturing sector due to strong demand from the US and a
weakening peso. According to MarketLine, the economy is expected to grow modestly by 1.97% in 2018.

Economic Landscape
Figure 15: GDP and growth rate in Mexico, 2012-22f
1.80 4.50
1.60 4.00
1.40 3.50
Growth rate (%)

1.20 3.00
$ trillion
1.00 2.50
0.80 2.00
0.60 1.50
0.40 1.00
0.20 0.50
0.00 0.00
2012 2013 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Year
GDP Real GDP growth rate

Economic Landscape
GDP composition by sector
In 2017, the service sector is expected to account for 64.6% of the country's GDP, with industry accounting for 31.7%
and agriculture accounting for the remaining 3.6%.
Figure 16: Sectoral composition of GDP in Mexico, 2017
Agriculture, 3.6%
Industry, 31.7%
Services, 64.6%

Economic Landscape
Agriculture
The country’s main agricultural exports were tomatoes, peppers, avocados, and fresh vegetables. According to
MarketLine, agricultural output grew by 10.5% in 2017, as compared to 13.6% growth recorded in 2016.
Figure 17: Agricultural output of Mexico, 2012-17
800.00 16.00
700.00 14.00
600.00 12.00
Growth rate (%)

500.00 10.00
MXN billion
400.00 8.00
300.00 6.00
200.00 4.00
100.00 2.00
- 0.00
2012 2013 2014 2015 2016 2017
Year
Agriculture output Growth rate

Economic Landscape
Industry
Mexico’s free trade zones are the main drivers of the country’s industry, and are dedicated to exporting to the US.
Mexico is one of the world's leading producers of many minerals, including silver, fluorite, zinc, mercury and is the one
of the largest oil producers in the world. According to MarketLine, industry sector’s output growth averaged 7.1% during
2012-17. According to MarketLine, it is expected to grow by 8.0% in 2018.
Figure 18: Industrial output of Mexico, 2012-17
14.00 9.0
8.0
12.00
7.0
10.00
6.0
8.00 5.0
MXN trillion
Growth rate (%)

6.00 4.0
3.0
4.00
2.0
2.00
1.0
- 0.0
2012 2013 2014 2015 2016 2017
Year
Industry output Growth rate

Economic Landscape
Services
The services sector is the largest in the Mexican economy, accounting for an estimated 64.6% of GDP as of 2017. In
recent years, major transnational retailers have expanded their base in the country. Travel and tourism is a major
subsector of services in Mexico. According to MarketLine, service sector’s output growth averaged around 6.4% during
2012-17. According to MarketLine, it is forecasted to grow by 7.99% in 2018.
Figure 19: Services output of Mexico, 2012-17
25.00 10.00
9.00
20.00 8.00
7.00
Growth rate (%)

15.00 6.00
MXN trillion
5.00
10.00 4.00
3.00
5.00 2.00
1.00
- 0.00
2012 2013 2014 2015 2016 2017
Year
Services output Growth rate
Fiscal situation
According to the IMF, Mexico posted a general government budget deficit of 2.85% of GDP in 2016, which is
forecasted to come down further to 1.4% of GDP by 2017 and expected to widen to remain at 2.5% in 2018. The
government’s reform measures should help in propping up government revenue in the medium term and help reduce
the deficit. Mexico’s gross debt for 2017 is estimated to be around 53.26% of GDP.
Current account
According to the IMF, Mexico's current account deficit stood at 2.19% of GDP in 2016. The IMF expects the deficit to
narrow down to 1.73% of GDP in 2017.
Exports and imports
According to the IMF, Mexico’s exports reached a total of $398.0 billion in 2016, as compared to $403.5 billion in 2015.

Economic Landscape
The total imports for the country were $427.0 billion in 2016. According to CIA – The World Factbook, the key export
partner of Mexico in 2016 was the US, accounting for 81.0% of total exports. On the other hand, the major importing
partners in 2016 were the US (46.6%), China (18.0%) and Japan (4.6%).
Figure 20: External trade of Mexico, 2012–16
1,000.00
900.00 859.92
838.28 825.04
819.54
793.60
800.00
700.00
600.00
$ billion
500.00 434.77
441.92 427.01
406.68 419.33 418.00
386.92 400.21 403.51
400.00 398.03
300.00
200.00
100.00
-
2012 2013 2014 2015 2016
Exports Imports Total
External debt
According to CIA – The World Factbook, Mexico’s total external debt was $480.5 billion as of December 2017.
International investment position
Foreign direct and portfolio investments
FDI inflows declined from $33.18 billion in 2015 to $26.74 billion in 2016, according to UNCTAD World Investment
Report 2017.
Credit rating
As of July 2017, S&P revised its sovereign credit outlook to BBB+ with a stable outlook from the negative outlook
earlier. The upward revision was due to the improved debt prospects of the country.
Monetary situation
Overview
Banco de Mexico is the country’s central bank and its apex financial institution. It is autonomous in terms of
management and operations, and its primary function is to manage the currency of the domestic economy, seeking to
Economic Landscape
ensure the long-term stability and purchasing power of the peso. Moreover, it promotes the healthy development of the
financial system by ensuring the smooth operation of the payment system.
Inflation
Inflation has mostly followed a downward trend since the late 1980s, when it exceeded 150%. This accomplishment
was largely attributable to the commitment of successive governments and the autonomy of the central bank with
regard to the formulation and implementation of prudent fiscal and monetary policies. Consumer price index (CPI)
inflation rates as recorded by the central bank have been largely steady since 2005. According to MarketLine, inflation
averaged 3.9% during 2012-17. In 2017, inflation was 6.0%, up from 2.8% in 2016. In 2018, it is expected to decline to
3.9%, according to the forecasts of MarketLine.
Figure 21: CPI and CPI-based inflation in Mexico, 2012-22
160.0 7.0
140.0 6.0
120.0
5.0
Consumer price index
100.0
prcentage (%)
4.0
80.0
3.0
60.0
2.0
40.0
20.0 1.0
0.0 0.0
2012 2013 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Consumer price index Inflation
Interest rates
In February 2016, the central bank raised its benchmark interest rate by 0.5 percentage point to 3.75%. Since then it
has increased its interest rate four times by 0.5 percentage points each time, taking the interest rate up at 5.75%, as up
till January 2017. In March 2017, the bank raised its interest rate to 6.5% and further by 50 bps to 7.0% in June 2017.
In the December 2017 monetary policy committee meeting, the bank raised its benchmark interest rate by 25 bps to
7.25% on higher inflationary risks.

Economic Landscape
Employment
According to MarketLine, Mexican unemployment rate averaged around 4.39% during 2012-17. In 2018,
unemployment rate is estimated to be 3.26%.
Figure 22: Number of unemployed individuals and the unemployment rate in Mexico,
2012-22f
3.0 6.00
2.5 5.00
Unemployment (million)
Unemployment Rate (%)

2.0 4.00
1.5 3.00
1.0 2.00
0.5 1.00
- -
2012 2013 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Year
Total unemployment Rate of unemployment (%)
Outlook
Due to structural reforms being brought in by the Mexican government, Mexico’s medium-term outlook is better. Mexico
is considered to have strong growth prospects due to its anticipated commercial growth and its proximity to the US. But
with Donald Trump in the White House, the old bonds might just come under strain. The automobile sector is
expanding rapidly, with large investment inflows to the sector. This is in turn is boosting non-oil exports in the medium
term and helping the economy in diversifying. There have been large investment inflows to the automobile sector,
which should boost non-oil exports in the medium term. The reforms in the banking sector are expected to boost credit.
The increasing public debt due to declining oil revenues continues to be a problem for the economy. Moreover, with Mr.
Trump’s pledge to get jobs back in his country and his hateful campaign against Mexicans, the Mexican economy might
just became a casualty of its neighbor’s protectionist agenda.

Social Landscape
SOCIAL LANDSCAPE
Summary
Although the government has made serious attempts to alleviate poverty, nearly half of Mexico’s population still resides
within the United Nations (UN)-defined poverty bracket, implying that their basic needs are unfulfilled. Furthermore, the
inhabitants of the rural southern regions do not have access to basic facilities such as health, sanitation, and education.
Another feature of Mexican society is the existence of a large informal work sector; employees in this sector do not
have access to social security or medical benefits. Health services are provided by both public and private entities. In
2012, Mexico achieved universal health coverage for all its citizens, with a national health insurance program called
Seguro Popular introduced in 2001. However, poor healthcare spending in Mexico compared to OECD standards has
resulted in a fragile healthcare system with insufficient resources.
Evolution
In 1989, the then President Salinas de Gortari undertook principal initiatives in the area of social policy known as
Mexico’s National Solidarity Program (Programa Nacional de Solidaridad [PROSANOL]). He concentrated on
developing areas including health, education, nutrition, housing, and employment in order to benefit Mexicans who
lived in extreme poverty. The Zedillo administration (1994–2000) undertook a methodical reform of social welfare,
including the substitution of PROSANOL for a new federal poverty alleviation program, Progressa, and the
decentralization of most of the welfare funds previously assigned to PROSANOL and other federal programs. After
assuming office in 2000, President Fox continued with the policies of his predecessor. In 2002, he replaced Progressa
with Oportunidades, expanding the reach of the original program considerably and continuing the decentralization
process.
The government has also worked on improving its healthcare and welfare services for the aged. In November 2010, the
country sought the help of the World Bank to tackle poverty in the country, by increasing financing for the
Oportunidades Program, which will help over five million low-income families, or 25 million people. The country has
received $366.7 million for its Program of Quality Schools (Programa Escuelas de Calidad) to undertake school
improvement plans, monitoring, supervision, and evaluation. The government has proposed a universal social security
scheme and passed an education reform bill seeking to improve the quality of education in schools.

Demographic composition
Composition by age and gender
According to MarketLine, as of 2017, an estimated 26.9% of the Mexican population is aged 14 years and below, while
just 7.1% are 65 years or older. Approximately 65.99% of the population is aged between 15 and 64 years old. This
implies that Mexico has a large working age population.

Social Landscape
Table 9: Mid-year population by age and gender in Mexico (percentage of population),

2017
Age Female Male
0–4 8.65 9.43
5–9 8.57 9.34
10–14 8.56 9.31
15–19 8.54 9.20
20–24 8.42 8.91
25–29 8.16 8.46
30–34 7.66 7.72
35–39 7.12 6.81
40–44 6.87 6.55
45–49 6.16 5.77
50–54 5.44 4.88
55–59 4.60 4.07
60–64 3.54 3.07
65–69 2.61 2.27
70–74 2.00 1.73
75–79 1.47 1.23
80+ 1.62 1.24

Social Landscape
Religious composition
Roman Catholicism is the main religion, with 82.70% of the population identifying themselves as Roman Catholic in the
2010 census. Protestants are the second largest religious group, accounting for almost 1.60% of the total population.
Figure 23: Religious composition in Mexico (2010 census)
Other Evangelical Churches Other, none and

5% unspecified, 9.30%
Jehovah's Witnesses,
1.40%
Protestant, 1.60%
Roman Catholic, 82.70%
Education
Overview
System of education
Almost all children attend elementary school, and around three out of every four attend middle and junior high school.
Nevertheless, a high dropout rate from high school traps most Mexicans in a vicious circle of poverty and low skilled
work. This has further fueled the wave of illegal immigration to the US, principally driven by individuals in search of
greener pastures. According to a Paris-based program for international student assessment, around half of Mexico’s
15-year-old children lack proper math and science skills.
Healthcare services
The General Health Law governs the country's healthcare system. The Secretariat of Health has a range of functions,
including developing Mexican Official Standards related to healthcare, providing direct healthcare to patients,
generating health-related statistics, supervising sanitation facilities, evaluating the quality of services, and operating the
National System of Epidemiologic Monitoring.

Social Landscape
The Popular Insurance Scheme provided many Mexicans with access to doctors, medicines, and treatments according
to their needs. This public insurance scheme covers 1,400 ailments, including illnesses that require expensive
treatment such as leukemia, breast cancer, and cervical-uterine cancer. In 2012, Mexico achieved universal health
coverage for all its citizens, with a national health insurance program called Seguro Popular introduced in 2001.
Performance
Healthcare
According to MarketLine, the average healthcare expenditure as a percentage of GDP was 3.1% during 2010-16. In
2016, public healthcare expenditure was 3.5% of GDP as compared to 3.0% of GDP in the previous year.
Figure 24: Public Expenditure on healthcare in Mexico, 2010-16
45.0 3.6
40.0 3.5
3.4
35.0
3.3
Percentage of GDP
30.0
3.2
$ billion
25.0
3.1
20.0
3.0
15.0
2.9
10.0
2.8
5.0 2.7
0.0 2.6
2010 2011 2012 2013 2014 2015 2016
Total Healthcare Expenditure Total Healthcare Expenditure as a % of GDP

Social Landscape
Education
The literacy rate for the total population was 94.5% in 2015, as estimated by CIA – The World Factbook. According to
MarketLine, public expenditure on education averaged at 5.1% of GDP during 2005-15. In 2015, public expenditure on
education was at 5.4% of GDP.
Figure 25: Public expenditure on education in Mexico, 2009–15
70.0 5.60
60.0
5.40
50.0
5.20
percentage of GDP
40.0
$ billion
5.00
30.0
4.80
20.0
4.60
10.0
0.0 4.40
2009 2010 2011 2012 2013 2014 2015
Expenditure on education Expenditure as % of GDP
Outlook
Although Mexico has achieved universal health coverage, still the quality of healthcare needs to be improved. The
government remains committed to improving the healthcare and education infrastructure. Another area of concern is
drug related violence, though the government has taken steps to curtail it. Moreover, the country suffers from high
inequality of income, which should come down in the future as new opportunities open up due to liberalization of
various sectors.

Technological Landscape
TECHNOLOGICAL LANDSCAPE
Summary
Mexico has traditionally been unable to attract firms to build major research and development (R&D) facilities in the
country. Consequently, according to the Mexican Academy of Sciences, the country imports more than 90% of its
technology from abroad—this reflects the lack of innovation and low R&D spending in the country.
Evolution
Historically, economic activity in Mexico was based on exploiting the country's vast natural resources, with oil
production accounting for an important share of GDP. The economy was heavily regulated: as a result, Mexican
companies had little incentive to innovate and invest in R&D. Similarly, science and technology (S&T) was largely
missing from the government agenda.
Mexico’s S&T development began around 1930 with the establishment of the National Institute of Health, devoted to
improving the nation’s health. In 1960, the country took the first step toward enlarging its S&T effort through the
creation of the National Institute for Scientific Research, which provided scholarships to fund undergraduate and
graduate education. S&T in Mexico began to develop apace during the 1970s with the expansion of the country's
higher education provision and the creation of a significant number of large public universities. By the end of the 1980s,
Mexican economic policy had changed. Import substitution was discarded, and the country moved towards a
deregulated and open economy. These changes had an impact on science and trade. As the millennium dawned,
Mexican S&T innovation displayed some progress, but as expected, there were enormous gaps.

Intellectual property
The intellectual property of a business is arguably the most important asset that it owns. In Mexico, intellectual property
is protected under the provisions of the NAFTA. These provisions cover many assets, including:
 Data (including computer programming)
 Sound recordings
 Trademarks
 Patents or inventions
 Industrial designs
 Trade secrets
 Geographical indications (use of words or pictures indicating where a product originates)
 Satellite signals and devices to intercept signals.
Patents
Patents for inventions that are new, non-obvious, and have industrial compliances may be registered for 20 years.
According to NAFTA provisions, the following practices are excluded from patentability:
 Plants and animals (other than micro-organisms)

 Diagnostic, therapeutic, and surgical methods for the treatment of humans or animals
 Essential biological processes for the production of plants and animals.
As per the NAFTA provisions, patents may be licensed on privately negotiated terms. The 1991 Mexican law for the
promotion and protection of intellectual property allows for the patenting of a broad range of inventions, including
chemicals, plant varieties and biotechnological processes. Under industry property law, patents last for a period of 20
years.
Traditionally, Mexico has not been a favorable destination for R&D activity. However, the country possesses good
infrastructure for the development of advanced research centers as well as excellent scientists and engineers, who are
often prevented from fulfilling their potential due to a lack of research funding. Moreover, Mexico’s geographical
location is conducive to face-to-face networking with the US. However, majority of the R&D funding still comes from the
government.
Performance
Mexico’s technology space boasts significant opportunities for growth. With growth in foreign investments in almost all
economic sectors and the construction of new economic zones, the scope for development in the IT sector has
increased more than ever before. In recent years, indicators such as the number of Internet users, PCs per capita, and
mobile density have shown significant progress.
Mobile and telecommunications
According to MarketLine, mobile penetration was estimated at 90.4 per 100 people in 2017 with total subscribers at
111.7 million. Mobile subscribers grew by an average of 6.0% during 2008-17. Internet users as of 2017 stood at 77.8
million, with a penetration rate of 62.9% of the total population in the same year. Internet subscribers grew at an
average rate of 13.7% during 2008-17.

Figure 26: Internet users and penetration, 2013-17
90.0 70.0
80.0
60.0
70.0
50.0
Internet users in millions
60.0
Percentage (%)
50.0 40.0
40.0 30.0
30.0
20.0
20.0
10.0
10.0
0.0 0.0
2013 2014 2015 2016 2017
Year
Number of users Percentage of population
Outlook
With the passage of time, the IT and communications industry has picked up rapidly in Mexico. In recent years, both
the public and private sectors have initiated measures fostering e-commerce and Internet usage. This has further
increased Mexico’s potential and readiness for the development of a digital economy. In addition, the country is
gradually transforming into a favored destination for technology exports, and may soon compete with the likes of India.
Advances in IT and the software industry are expected to speed up development related to the Internet and other
technological areas. However, the country’s expenditure on R&D is very low. Hence, President Nieto has promised to
invest a greater percentage of GDP on S&T.

Legal Landscape
LEGAL LANDSCAPE
Summary
Mexico has a complex legal structure with exhaustive and intricate legal procedures. However, since 2000, the
government has been making somewhat desperate efforts to simplify legal complexities. The judicial structure of
Mexico is comprehensive, and requires the assistance of a large number of legal professionals. Nevertheless, the
judicial process is prone to delays, and greater integrity among courts is needed at all levels.
Evolution
The Mexican judicial system is based on Spanish civil law, with common law traditions retaining some influence.
Contrary to the US version of a common law system, under which the judiciary enjoys a wide range of jurisprudence,
Spanish civil law involves strict compliance with legal codes and minimal jurisprudence. Unlike the US system, where
the courts may rule on basic constitutional matters, the Mexican constitution prohibits the courts from applying its
rulings beyond individual cases. The Mexican judiciary seldom attempts to obstruct the will of the president on major
issues.

Judicial system
Structure of the system
The judicial branch is divided into state and federal level systems. The Mexican judicial system is distinguished into
courts of ordinary jurisdiction (for civil, commercial, and criminal cases) and administrative courts or courts of special
jurisdiction. Federal district courts exercise broad jurisdiction over federal crimes, writ of injunction suits, and civil
controversies. The rulings of federal district courts are examined by the collegiate, the unitary circuit courts, and the
Supreme Court. At the apex level, the Supreme Court consists of justices, including the chief justice. The court
conducts biennial sessions in which it is divided into two chambers: civil and criminal affairs and administrative and
labor affairs. The Supreme Court of Justice is the country’s highest court. The appointment of the Supreme Court
justices is further confirmed by the Senate and the permanent committee.
District and circuit courts are appointed by the federal judicial council, which is a quasi-independent judicial branch
agency chaired by the chief justice of the Supreme Court. At the federal level, after the Mexican Supreme Court the
highest authorities are the Circuit Courts (Colegiados de Circuito) and the District Courts (Juzgados de Distrito). At the
state level, the highest court is the Superior Court of Justice (Tribunal Superior de Justicia), followed by the Courts of
First Instance (Tribunales de Primera Instancia), which handle civil, criminal, and commercial causes. These are
followed by the family courts and bankruptcy courts.
The administrative courts are also classified as federal and state. At the federal level, the courts include the Federal
Boards of Conciliation and Arbitration (Juntas Federales de Conciliacion y Arbitraje), the Court of Agrarian Justice
(Tribunal de Justicia Agraria), the Court of Military Justice (Tribunal de Justicia Militar), the Court of Jurisdiction over
the Electoral Process (Tribunal de Jurisdiccion de Proceso Electoral), and other special courts. Local administrative
courts include the Administrative Court of Contentions (Tribunal Contencioso Administrativo), the Justice of the Peace
Courts (Tribunales Calificadores), and other minor courts.

Legal Landscape
Figure 27: Mexico – judicial structure
Supreme Court of Mexico

(Suprema Corte de Justicia de la Nacion) Special Courts
Federal Boards of Conciliation and Arbitration
(Juntas Federales de Conciliacion y Arbitraje)
State Courts
Superior Court of Justice
Federal Courts (Tribunal Superior de Justicia) Court of Agrarian Justice
Circuit Courts (Tribunal de Justicia Agraria)
(Colegiados de Circuito) Court of Military Justice
(Tribunal de Justicia Militar)
Court of Jurisdiction over the Electoral Process
(Tribunal de Jurisdiccion de Proceso Electoral)
Courts of First Instance

District Courts (Tribunales de Primera Instancia)
(Juzgados de Distrito)
Administrative Court of Contentions

Family courts (Tribunal Contencioso Administrativo)
Bankruptcy courts Justice of the Peace Courts
(Tribunales Calificadores)
Tax regulations
Corporate income tax
As of 2018, the corporate income tax was 30%.
Withholding taxes
Dividends are taxed at 10% when paid to a non-resident, unless reduced by a tax treaty. Interest is taxed on a range
that varies from 4.9% to 35% and royalties (patents and trademarks) withholding tax range varies from 25% to 40%.
Personal income taxes
The income tax rate is progressive up to 35%.
VAT
VAT is levied at the rate of 16%, with 0% rate on food, medicine and other few exceptions.
Performance
Effectiveness of the legal system
The burgeoning number of pending cases in various courts poses a continued threat to the judicial system. According
to the 2018 Index of Economic Freedom published by the Heritage Foundation and the Wall Street Journal, the country
currently ranked as the 63rd freest economy in the world with a score of 64.8. The country improved in the indicators of
property rights, judicial effectiveness, government spending, tax burden, labor freedom, monetary freedom, trade
freedom and investment freedom.

Legal Landscape
Outlook
Legal procedures in Mexico are often time-consuming. The large number of pending cases in various courts of the
country and the alleged judicial corruption are frequently criticized. However, the lengthy business registration process
that in previous years caused significant inconvenience to foreign investors has been relaxed considerably.
Furthermore, the government is making prudent efforts to prevent mistreatment of prisoners and to reduce trial periods.
President Nieto has announced his intention to fight business monopolies. In accordance with that, the
telecommunication and the broadcasting sectors have been opened up to allow more companies to enter. The reform
of the oil and gas industry also shows the commitment of the government to open up sectors and liberalize the
economy. The lifting of entry barriers, along with the proper implementation of competitive laws, will enhance the
competitiveness of the country.

Environmental Landscape
ENVIRONMENTAL LANDSCAPE
Summary
In Mexico, the Secretariat for Environment and Natural Resources is responsible for charting environmental policies
and implementing preservation, protection, and restoration plans. The basic framework of the secretariat stipulates
integrity, transferability, transparency, and institutional improvement. Although not restricted by the Kyoto Protocol in
terms of greenhouse gas emissions, air pollution continues to pose a serious challenge to the country, and the
implementation of environmental conservation policies is less than consistent. The government needs to expedite
policies that will control pollution in major cities.
Evolution
The Mexican environmental landscape witnessed the approval of the air and water conservation law in 1940, and the
early 1970s saw the passing of a law to prevent and control environmental contamination. In 1980, there were reforms
to the national political constitution, including laws to strengthen environmental legislation. The National Development
Plan of 1989–94 included modifications to institutional structures, allowing for the creation of additional institutions that
have their own technical and operative autonomy to tackle environmental problems. The Ministry of the Environment,
Natural Resources, and Fisheries was created in 1994.

Environmental regulations
Overview
The Secretariat for Environment and Natural Resources is the environment ministry of the Mexican government, and is
responsible for implementing protection, preservation, and framing policies for the country's environment and natural
resources. The NAFTA addresses the issue of environmental protection in Canada, the US, and Mexico. However, it
leaves the establishment of environmental regulations and standards up to the three participating countries, with two
exceptions: each must conform to active treaties between the three, and environmental standards must not be
decreased as a means of encouraging investment in business.
Performance
Environmental impact
Industrial energy consumption is associated with greenhouse gas emissions. This has been the case with Mexico,
where greenhouse gas emissions from coke-based power plants and Mexico City's and Guadalajara's dense
manufacturing sectors have been responsible for chronic respiratory problems among residents, especially children
and the aged. Recent surveys conducted by the World Wildlife Fund have suggested that Mexico City is one of the
world’s most polluted cities.
Likewise, industrial effluent emissions to neighboring water reservoirs and streams have led to the spread of
waterborne diseases among residents. Although the government has made efforts to combat this along with other
countries and international organizations, water and air pollution remain a major challenge.
According to MarketLine, CO2 emissions declined from 450.1 million metric tons in 2008 to 428.0 million metric tons in
Environmental Landscape
2015. It is expected that carbon dioxide emissions will rise in the near future because of growing industrialization and
transportation.
Figure 28: Carbon dioxide emissions in Mexico, 2008–15
455.0 3.0
450.0 2.0
445.0
1.0
Metric Tons (Millions)
440.0
0.0
Percentage (%)
435.0
-1.0
430.0
-2.0
425.0
420.0 -3.0
415.0 -4.0
2008 2009 2010 2011 2012 2013 2014 2015
Year
Volume Growth rate
Outlook
A distinctive environmental heritage has long been an asset for Mexico. The government has failed to alleviate air and
water pollution, despite the implementation of environmental conservation programs. Air pollution in the country’s major
cities is currently a cause for concern. The country's depleting and contaminated water resources are another major
impediment to environmental preservation. Consequently, northern regions of the country have been dependent on the
US for water supplies. Mexico has initiated several steps to combat its environmental degradation, but the primary
focus must be the strict implementation of policies in order to protect the country’s biodiversity.

Appendix
APPENDIX
Ask the analyst
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Appendix
MarketLine | JohnANALYSIS
PESTLE COUNTRY Carpenter House,
REPORT: John Carpenter Street |
MEXICO ML00002-020/Published 03/2018
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T: +44(0)203 377 3042, F: +44 (0) 870 134 4371
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PESTLE COUNTRY ANALYSIS REPORT: MEXICO ML00002-020/Published 03/2018

PESTLE COUNTRY ANALYSIS REPORT: MEXICO ML00002-020/Published 03/2018

Table 1: Mexico – key fundamentals

PESTLE COUNTRY ANALYSIS REPORT: MEXICO ML00002-020/Published 03/2018

Key Facts and Geographic Location ............................................................................................................................12

Key facts ........................................................................................................................................................................ 12

Geographical location ................................................................................................................................................... 13

PESTLE Analysis .........................................................................................................................................................14

Political analysis ............................................................................................................................................................ 15

Economic analysis ......................................................................................................................................................... 18

Social analysis ............................................................................................................................................................... 23

Technological analysis ................................................................................................................................................... 27

PESTLE COUNTRY ANALYSIS REPORT: MEXICO ML00002-020/Published 03/2018

Legal analysis ................................................................................................................................................................ 30

Environmental analysis ................................................................................................................................................. 32

Political Landscape ....................................................................................................................................................35

Structure and policies .................................................................................................................................................... 37

Economic Landscape ..................................................................................................................................................42

Structure and policies .................................................................................................................................................... 43

Social Landscape ........................................................................................................................................................53

Structure and policies .................................................................................................................................................... 53

Technological Landscape ...........................................................................................................................................58

Structure and policies .................................................................................................................................................... 58

Legal Landscape .........................................................................................................................................................61

Structure and policies .................................................................................................................................................... 61

Environmental Landscape ..........................................................................................................................................64

PESTLE COUNTRY ANALYSIS REPORT: MEXICO ML00002-020/Published 03/2018

Structure and policies .................................................................................................................................................... 64

Ask the analyst .............................................................................................................................................................. 66

About MarketLine ......................................................................................................................................................... 66

PESTLE COUNTRY ANALYSIS REPORT: MEXICO ML00002-020/Published 03/2018

Figure 2: Resilience of the economy, 2011-2016 19

Figure 3: Growth disparity, GDP per capita growth, 2005-14 20

Figure 4: Declining dependency of the oil sector, 1994-2016 and 1980-2015 21

Figure 6: High inequality, 2014 26

Figure 9: Tax subsidy rates on R&D expenditures, 2017 29

Figure 10: Environmentally related taxes, 2014 34

Figure 11: Mexico – political events timeline 37

Figure 12: Mexico – key political figures 37

Figure 13: Political composition in Chamber of Deputies 39

Figure 14: Evolution of GDP growth rate in Mexico, 2007–17 43

Figure 15: GDP and growth rate in Mexico, 2012-22f 45

Figure 16: Sectoral composition of GDP in Mexico, 2017 46

Figure 17: Agricultural output of Mexico, 2012-17 47

Figure 19: Services output of Mexico, 2012-17 49

Figure 20: External trade of Mexico, 2012–16 50

Figure 23: Religious composition in Mexico (2010 census) 55

Figure 25: Public expenditure on education in Mexico, 2009–15 57

Figure 26: Internet users and penetration, 2013-17 60

Figure 28: Carbon dioxide emissions in Mexico, 2008–15 65

PESTLE COUNTRY ANALYSIS REPORT: MEXICO ML00002-020/Published 03/2018

Table 2: Mexico – key facts, 2018 12

Table 3: Analysis of Mexico’s political landscape 15

Table 4: Analysis of Mexico’s economy 18

Table 5: Analysis of Mexico’s social system 23

Table 7: Analysis of Mexico’s legal landscape 30

Table 8: Analysis of Mexico’s environmental landscape 32

Table 9: Mid-year population by age and gender in Mexico (percentage of population),

PESTLE COUNTRY ANALYSIS REPORT: MEXICO ML00002-020/Published 03/2018

KEY FACTS AND GEOGRAPHIC LOCATION