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5 Surprising Facts About Mexico's Economy

Some facts about the Mexican economy are familiar to us all. But there are many more little-known facts about the Mexican economy that hint at its fundamental robustness.

Germany’s Chancellor Angela Merkel gestures as she makes a toast with a Mexican and German beer known as “Dual” with Mexico’s President Enrique Pena Nieto before dinner at National Palace in Mexico City, Mexico June 9, 2017

The US president has consistently reminded us of the US-Mexico trade deficit in his ongoing campaign to discredit NAFTA, while media outlets in both countries have noted the disproportionate dependence of Mexican exports on the US market.

But there are many little-known facts about the Mexican economy that hint at its fundamental robustness, reasons perhaps why the economy has emerged relatively unscathed from the first six months of the new US administration and the feared “Trump Effect.”

The US had a trade deficit with Mexico before NAFTA

That is right. The trade deficit so often conjured by Trump and company is not something new.

According to data extracted from the Census Bureau, the US also tended to import more goods than export to Mexico before 1994, when the North American Free Trade Agreement (NAFTA) came into effect.

As a matter of fact, the US has had a trade surplus with Mexico for only four years out of the past three decades.

NAFTA did not create this favorable trade balance for Mexico, but it did vastly increase commerce between both nations. US consumer preference for cheaper products manufactured in Mexico prevailed long before NAFTA existed.

Mexico is the largest exporter of beer in the world

Mexico’s industrial capacity is renowned among emerging markets, particularly its vehicle manufacturing segment.

The country holds the 7th position among the top-10 car manufacturers in the world, and automobiles represent the nation’s leading export.

However, it is less widely known that Mexico is the world’s largest exporter of beer, in addition to being an exporter of world-famous beverages.

The country sold USD2.8 billion of the drink to overseas markets in 2016, with around 80% of this going to the US.

That means that one out of every five beers exported in the world was produced in Mexico, surpassing Holland, Belgium, and even Germany in volume. ¡Salud!

Mexico’s consumer-spending-as-percentage-of-GDP is the largest in Latin America

Mexico is not only an export hub.

Its nearly 120-million-strong domestic consumer market is appealing not only for local firms but also for major international retailers such as Walmart. Such companies have a strong and established footprint in the country.

Compared with other Latin American nations, Mexico has the largest household final consumption expenditure as percentage of GDP, according to World Bank data.

Consumer spending in Mexico represented 67% of the country’s GDP, while that of Argentina and Brazil hit 65% and 63%, respectively.

But this difference is not just a one-year trend. The share of consumer spending in Mexico’s GDP has been the largest in Latin America since 2004.

Mexico has the largest amount of cash in circulation in Latin America

Mexico was the country with the largest amount of cash in circulation in Latam in 2015, overtaking Brazil which had held the title for the preceding five years.

Since 2010, the use of cash by Mexicans has increased steadily, representing about 60% of the nation’s GDP in 2015, according to a report carried out by the consultancy firm Tecnocom.

As the report shows, there are two main reasons why the use of cash has risen in Mexico: high commission fees in banks, and the fact that many Mexicans are reluctant to place themselves under the authority of the Mexican tax authority.

Remittances are the third most important inflow of foreign currency

The money that Mexicans living in the US send to their relatives is third biggest inflow of dollars for the country. Standing at around USD26 billion every year, remittances are more important than oil revenues, but fall just behind earnings from car and food exports.

About 50% of this money is sent from the US states of California, Texas, and Illinois; nearly 97% of the total comes from the US and Canada.

Last year set a record for remittances sent to Mexico, partly because of currency devaluation. The strong depreciation that the peso has experienced over the past two years, losing about 30% of its value at one point, has been good news for those with foreign currency incomes and their families.