The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

Economic change: Mexico is missing the main target

The informal economy in effect blocks growth, so why is no one proposing tax and social security reform to bring workers and companies into the formal sector?

rd_banner_column-780



The Mexican economy has been remarkably a consistent performer since the 1994 tequila crisis. 

Annual GDP growth has averaged 2.48% and, while there have been some peaks and troughs, economic performance has been remarkably consistent regardless of who has formed the government. It hasn’t mattered whether they are relatively left or right-leaning, whether they have majorities or minorities in congress, are reformist or managerial, or whether they have been boosted or battered by international events.

The outgoing government is an interesting example: the reforms introduced at the beginning of Enrique Pena Nieto’s administration got everybody very excited. Who remembers economists in 2014 excitedly forecasting long-term sustainable GDP growth of above 5% following structural reforms of Mexico’s telecommunications, energy and financial industries?

Maybe that is why markets have shrugged off Andrés Manuel López Obrador (Amlo)’s victory in the presidential elections. Does it even matter who is in power?

A GDP growth rate of 2.5% is clearly below potential for this low-cost economy. 

As Nuno Matos, chief executive of the rapidly-growing HSBC Mexico, points out, the low credit penetration gives an amazing opportunity. If the credit-to-GDP ratio grew to 60% (not high even by emerging markets standards), it would imply 10% compound annual credit growth for 37 years – a great potential run for the banks and the economy.




You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree