The Light at the End of the Tunnel: Long-Term Economic Prospects for Mexico

THE END of NAFTA is coming and to some, Mexico’s economic prospects look grim.

While being restricted from the United States market may be painful in the short term, it will likely help Mexico’s ongoing economic diversification. Dependence on the United States has been a crutch for the Mexican economy. Losing that crutch will make Mexico stronger in the long term.

The North American Free Trade Act prompted a manufacturing boom in Mexico, which has changed the face of its economy. Here is a list of its top 10 exports for 2015.

  1. Vehicles: US$90.4 billion (23.7% of total exports)

  2. Electronic equipment: $81.2 billion (21.3%)

  3. Machines, engines, pumps: $58.9 billion (15.5%)

  4. Oil: $22.8 billion (6%)

  5. Medical, technical equipment: $15.2 billion (4%)

  6. Furniture, lighting, signs: $9.9 billion (2.6%)

  7. Plastics: $8.3 billion (2.2%)

  8. Gems, precious metals, coins: $7.1 billion (1.9%)

  9. Iron or steel products: $5.7 billion (1.5%)

  10. Vegetables: $5.6 billion (1.5%)

from http://www.worldstopexports.com/mexicos-top-exports/

Cut off from NAFTA, Mexico will be left with a surplus of vehicles, electronics, and machinery.

Mexico must find new markets for its exports quickly. Luckily, it is in a strong position to do so. According to the Mexican trade and investment ministry, ProMexico

Since it has signed trade agreements in three continents, Mexico is positioned as a gateway to a potential market of over one billion consumers and 60% of world´s GDP.

Mexico has a network of 10 FTAs with 45 countries, 32 Reciprocal Investment Promotion and Protection Agreements (RIPPAs) with 33 countries, 9 trade agreements (Economic Complementation and Partial Scope Agreements) within the framework of the Latin American Integration Association (ALADI)…

http://www.promexico.gob.mx/en/mx/tratados-comerciales

While the next few years will be chaotic, Mexico has the free trade deals and the diversifying economy needed to succeed long term.

A.C. Galina

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