economy To faster change

The size of the Mexican economy is much smaller than that of the United States. Mexico’s gross
domestic product (GDP) was an estimated $1.0 trillion in 2010, about 7% of U.S. GDP of $14.6
trillion. Mexico’s economy was hit harder than most Latin American countries during the global
recession of 2009 but showed strong economic growth in 2010. In 2009, Mexico’s the percent
change in Mexico’s real GDP growth was -6.1%, while that of the United States was -2.6%. In
2010, Mexico’s economy experienced a higher than expected growth rate of 5.0%, while the U.S.
economy experienced a somewhat lower growth rate of 2.8%. Although the Mexican economy
appears to be recovering, job creation in Mexico’s manufacturing sector remains weak and could
dampen Mexico’s economic prospects over the long-term.2
The immigration issue has received much attention by political leaders in recent years, and it is
one that can be linked to the economic situation in Mexico, although it has social and political
aspects as well. In March 2008, there were approximately 12 million unauthorized immigrants
living in the United States, with 59% from Mexico.3 Economic conditions in Mexico, as well as
in other countries, such as poverty and unemployment, are a major factor related to the migration
issue. Per capita income in Mexico is significantly lower in Mexico than in the United States. In
2010, Mexico’s per capita GDP in purchasing power parity4 was $15,720, or 67% lower than U.S.
per capita GDP of $47,160. Ten years earlier, in 2000, Mexico’s per capita GDP in purchasing
power parity was $10,561, or 70% lower than the U.S. amount of $35,265. The lower income
levels in Mexico, combined with higher poverty rates, have contributed to the migration of
workers from Mexico to the United States. These workers often send money to their families in
Mexico to help provide food and shelter. Although there is a notable income disparity with the
United States, Mexico’s per capita GDP is relatively high by global standards and falls within the
World Bank’s upper-middle income category.
The Mexican economy is very much tied to the U.S. economy because of Mexico’s reliance on
the United States as an export market and the relative importance of exports to its overall
economic performance. Exports accounted for 32% of Mexico’s GDP in 2010 (see Table 1). The
United States is, by far, Mexico’s most important partner in trade and investment, while Mexico is
the United States’ third-largest trade partner after China and Canada. Many economists and other
observers have focused much attention on the ongoing transformation of Mexico into a
manufacturing-for-export nation since the late 1980s and the importance of exports to its
economy. After oil and gas, most of Mexico’s exports are manufactured goods. Over 80% of
Mexico’s exports are headed to the United States.
Mexico’s reliance on the United States as a trade partner appears to be diminishing, although
slightly. Between 2004 and 2009, the U.S. share of Mexico’s total imports decreased from 56% to
48%, while the share of total Mexican exports going to the United States decreased from 89% to
81%.6 Mexico’s share of the U.S. market has lost ground since 2002. In 2003, China surpassed
Mexico as a top supplier of U.S. imports, and Mexico now ranks third, after China and Canada, as
a source of U.S. imports. Because over 80% of Mexico’s exports are destined for the United
States, any change in U.S. demand can have strong economic consequences in Mexican industrial
sectors.
Mexico ranks second among U.S. export markets and is the United States’ third-largest trading
partner in total trade (exports plus imports). In 2010, 12% of total U.S. merchandise exports were
destined for Mexico and 12% of U.S. merchandise imports came from Mexico. After the
significant decrease in trade in 2009 that resulted from the global economic downturn, U.S.-
Mexico trade increased considerably in 2010. U.S. exports to Mexico increased 25% in 2010
from $105.7 billion to $131.6 billion. U.S. imports from Mexico increased 40% in 2010, from
$176.3 billion to $228.8 billion. In 2009, U.S. exports to Mexico decreased by 19.6%, while
imports from Mexico decreased by 18.5%. Mexico’s second-largest trading partner is China,
accounting for approximately 6% of Mexico’s exports and imports.
Although some of the increase in U.S.-Mexico trade since the 1990s could be attributable to
NAFTA, there are other variables that affect trade, such as exchange rates and economic
conditions. Mexico’s currency crisis of 1995 limited the purchasing power of the Mexican people
in the years that followed and also made products from Mexico less expensive for the U.S.
market. Economic factors such as these played a role in the increasing U.S. trade deficit with
Mexico, which went from a $1.4 billion surplus in 1994 to a $97.2 billion deficit in 2010 (see
U.S. imports from Mexico increased from $85.0 billion in 1997 to $216.3 billion in
2008, and then decreased to $176.3 billion in 2009 before increasing to $228.8 billion in 2010.
U.S. exports to Mexico increased from $68.4 billion in 1997 to $131.5 billion in 2008, and then
decreased to $105.7 billion in 2009 before increasing to $131.6 billion in 2010