Mexico

Article Outline

Introduction; Land and Resources; People; Arts; Economy; Government; History

Forestry and Fishing

Mexico has significant forest resources, despite the fact that much of the nation’s land is semiarid and many of the forests that existed prior to the arrival of Europeans have been lost to logging and erosion. It is estimated that nearly two-thirds of what is now Mexico was covered by forests in the early 1500s; by 2005 forests covered only 34 percent of the country. Almost all logging has been placed under strict government supervision, but this has failed to halt deforestation. Between 1970 and 1985 Mexico lost about one-sixth of its woodlands.

The most commercially valuable woods are pine, spruce, cedar, mahogany, logwood, and rosewood. Other important forest products include pitch, resins, and charcoal. Mexico does not produce enough wood pulp to meet its demand for paper products and the country imports much of its paper and cardboard. Mexico’s pine and oak forests are found largely in the nation’s mountainous central and northern regions. Tropical hardwoods such as mahogany are found in the tropical rain forests of southern Mexico. The country’s most important timber resources are located in the states of Chihuahua, Durango, Michoacán, Oaxaca, and Jalisco.

Fishing has increased in importance, symbolized by the fact that Mexico now devotes a cabinet-level agency to its development and protection. The most valuable fishery resources are found in the Gulf of Mexico, especially the states of Campeche and Veracruz; the Gulf of California, bordering the states of Sonora and Sinaloa; and the Pacific Ocean, notably off the coast of Baja California. The most important seafood export is tuna, and shrimp is increasingly valuable to the domestic market.

Mining

Mining, especially of silver and copper, has historically been the most important extractive industry in Mexico. Although petroleum production has surpassed the mining of metals in importance, Mexico remains a major producer and exporter of silver. It also operates one of the largest salt extraction facilities in the world in Guerrero Negro in the state of Baja California Sur. Its chief mining regions are Chihuahua, Durango, Hidalgo, and Zacatecas. In 2001 Mexico ranked fifth in the world in crude petroleum production. It is also among the world’s top producers of celestite, silver, sodium sulfate, antimony, white arsenic, bismuth, fluorite, and graphite.

Manufacturing

Mexico has moved away from an economy dominated by oil revenues in the early 1980s, to one in which diversified manufacturing plays a much more significant role. In 2005 manufacturing accounted for 17.7 percent of the nation’s GDP. The development of manufacturing in Mexico has included two important subsectors: an assembly and light manufacturing sector (whose businesses are known as maquiladoras in Spanish) that is concentrated largely along the country’s northern border with the United States, and a capital-intensive sector that includes industries such as steelmaking and automobile manufacturing.

Many large foreign companies, owned primarily by U.S. and Japanese investors, have located hundreds of maquiladoras in Mexico. These businesses produce specific parts of products to be sold in or exported from the home country, or they import parts from abroad, assemble the products in Mexico, and then ship the completed products back to the home country. This sector has been one of the fastest growing in the Mexican economy, contributing significantly to economic growth, and providing new employment even during the years that followed the 1994 economic crisis.

Mexican factories produce motor vehicles, cement, sulfuric acid, petrochemicals, metals, rubber products, plastics, paper products, and a variety of consumer goods, including cigars and cigarettes, textiles, clothing, shoes, glassware, beer and soft drinks, household appliances, and radios and televisions. Mexico built a thriving iron and steel industry after World War II, with much of this manufacturing capacity located in the city of Monterrey. Mexico doubled its steel production between 1970 and 1980, although production remained stagnant throughout the 1980s. In recent years Mexico’s capital-intensive industries, such as steelmaking, have become more competitive as modern factories with automated equipment have been built. Production of steel began to grow again in the 1990s, and some Mexican businesses acquired control over foreign companies.

Mexico’s most important manufacturing centers include the combined urban area of the Federal District and Mexico State, as well as the cities of Monterrey and Guadalajara. Since the late 1970s, Mexico has attempted to decentralize its manufacturing base and to encourage foreign investment in areas of central Mexico outside of Mexico City or the Federal District. While the nation has achieved some success in this area, most of Mexico’s poorer, rural regions have not attracted industry.

Energy

Most electricity in Mexico is produced by thermal power plants that burn coal or oil. In 2003 these plants accounted for 83 percent of the nation’s electrical generation. Hydroelectric power, the next largest source, accounted for 9 percent. Nuclear power generated 5 percent, and geothermal and other sources produced the remainder.

The nation’s major hydroelectric plants can be found in five mountainous states: Chiapas, Guerrero, Michoacán, Puebla, and Mexico. The Federal Electric Commission is responsible for the development of hydroelectric power. Natural gas, stored in small propane tanks, is widely used by Mexican households for cooking and heating water. Although the nation has major natural gas supplies, it has not developed the underlying infrastructure to supply its manufacturing industries or businesses.

Petróleos Mexicanos (Pemex) directs the extraction and production of petroleum-based energy. Mexico’s major petroleum-processing plants are located in the cities of Minatitlán in Veracruz State, Ciudad Madero and Reynosa in Tamaulipas State, Salamanca in Guanajuato State, and Atzcapotzalco in the Federal District. Most of Mexico’s oil fields are located in the Gulf of Mexico or along the Gulf Coast. Until 1994 gasoline for use in automobiles was sold only in government-franchised retail stations; after 1994 privately owned retail stations were permitted to operate in the country.

Foreign Trade

Foreign trade is a crucial element in Mexico’s economic growth. By signing the North American Free Trade Agreement (NAFTA) with the United States and Canada in 1992, Mexico’s leaders decided that the nation’s economic future lay with trade and with developing a competitive, export-oriented economy. The treaty led to a lowering of tariff barriers in all three countries. Despite the fact that Mexican labor costs are far lower than those in the United States, many Mexican businesses producing products for the Mexican market could not compete with their U.S. counterparts and were forced out of business. Most of these were medium and small companies, but their closings have contributed significantly to unemployment rates since 1994.

As a consequence of Mexico’s major economic crisis in 1994, and the subsequent decrease in the relative cost of goods produced in Mexico, the country’s export sector played an essential role in its economic recovery. The depressed economy produced a favorable balance of trade with Mexico’s largest trading partner—the United States. This meant that the value of goods exported from Mexico to the United States exceeded the value of goods exported from the United States to Mexico. In 1994, the first year that NAFTA was in effect, trade between the United States and Mexico totaled more than $100 billion, reflecting an increase of 23 percent over the previous year. Mexico’s prolonged economic crisis resulted in a drop in trade between the two countries in 1995. Nonetheless, the value of U.S. exports to Mexico in 1995 was still 11 percent higher than it was in 1993, the last pre-NAFTA year.

The economic effects of NAFTA have been hotly debated in Canada, Mexico, and the United States. The Mexican government and NAFTA supporters in the United States claim that the growth of export industries slowed Mexico’s economic slide in 1996, and that exports actually helped to launch an economic recovery by the end of that year. The output of Mexico’s border assembly factories, or maquiladoras, from January to August 1996 was 17 percent higher than the output for the same period in 1995. Similarly, multinational auto manufacturers operating in Mexico saw a sharp increase in export activity—the production of passenger cars for export rose by 23 percent in 1995 and the production of trucks for export leapt 132 percent during the year.

Critics of the trade pact claim that NAFTA has primarily benefited multinational companies operating in Mexico, while doing little to benefit the vast majority of Mexico’s citizens. While Mexico’s overall economic indicators showed an increase in foreign trade after the institution of NAFTA, real wages continued to fall throughout the country and poverty rates remained constant. Living conditions for many Mexicans worsened after NAFTA was put into place. NAFTA opponents say this is possible because export-oriented companies can take advantage of cheap Mexican labor without relying on the purchasing power of Mexican families. Since the products are being sold abroad, the success of the export industries does not hinge on Mexican citizens being paid enough to be able to buy their products.

Mexico’s chief trading partners, in terms of the value of Mexico’s exported goods, are the United States, Canada, Germany, Japan, Spain, Chile, and Brazil. Most of the goods imported into Mexico come from the United States, Japan, Germany, Canada, China, South Korea, and Taiwan. Mexico is also one of the largest trading partners of the United States (along with Canada and Japan), even though the Mexican economy is much smaller than that of either of those two countries.

In addition to NAFTA, Mexico is a member of a number of other trade organizations or agreements. Mexico belongs to the Latin American Economic System (known in Spanish as the Sistema Económico Latinoamericano, or SELA), an organization founded in 1975 to promote cooperation between the member countries in Latin America and to accelerate economic and social development within these countries. In 1980 Mexico became a party to the General Agreement on Tariffs and Trade (GATT), a treaty and trade organization that worked to reduce tariffs, quotas, and other trade barriers between nations. Mexico is also a member of the Latin American Integration Association (known in Spanish as the Asociación Latinoamericana de Integración, or ALADI), an organization founded in 1981 to foster balanced economic development in Latin America. In 1993 Mexico became the first Latin American member of the Asia-Pacific Economic Cooperation (APEC) forum, an organization dedicated to promoting global free trade. In 1994 Mexico joined the Organization for Economic Cooperation and Development (OECD), which seeks to promote economic growth through global cooperation and trade. The next year, Mexico became a founding member of the World Trade Organization (WTO). The WTO replaced GATT and aims to promote and enforce global trade laws and regulations.

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Forestry and Fishing

Mining

Manufacturing

Energy

Foreign Trade