Mexico's economy: a vast export base with thin returns

What Mexico actually makes and ships

Services accounted for 70.5% of GDP, industry for 25.7% and agriculture for 3.9% on 2006 estimates, and the manufactured value-added sector on its own came to 18% of GDP. Those proportions are unremarkable. The volume is the unusual part: goods exports were 651 billion dollars in 2024, up from 481 billion dollars in 2019.

What leaves the country is concentrated in a short list of manufactured products.

Vehicles in their three forms came to 147.3 billion dollars of the 2024 total. Crude petroleum, which was 61.6% of all Mexican exports in 1980 and 7.3% by 2000, came to 26.6 billion dollars.

The automotive sector accounts for 17.6% of Mexican manufacturing. General Motors, Ford and Chrysler have assembled in the country since the 1930s, Volkswagen and Nissan built plants in the 1960s, and Toyota, Honda, BMW and Mercedes-Benz followed. Nine manufacturers now run twenty plants between them, many of them around Puebla, where seventy component makers cluster on the Volkswagen works alone. Kia opened a billion-dollar factory in Nuevo León in 2016 and Audi an assembly plant in Puebla in the same year. The industry does design work as well as assembly: up to 70% of the parts in one Volkswagen Jetta model were designed in Mexico.

How the electronics plants moved beyond assembly

Electronics account for 30% of Mexican exports. Flat-panel television design and manufacture is the largest single part of that, at 25% of electronics export revenue, and Sony, Toshiba, Samsung, Sharp, LG, Panasonic, Vizio and Lanix have all built sets in the country. Mexico shipped 71 billion dollars of electronics to the United States in 2011, and electronics exports grew 73% between 2002 and 2012.

From the late 1990s the work shifted away from line assembly toward LCD panels, semiconductors, printed circuit boards, microprocessors and heavy industrial equipment. Around 451,000 students were enrolled in electronics engineering programmes and 580,000 certified electronics engineering professionals were employed in 2007, with about 114,000 more entering the workforce each year. Several foreign firms hold their Mexican operations as Mexican-registered joint ventures with partial control only: Semex with Sharp, Toshiba de México, and Sony de México, which runs research facilities in Monterrey and Mexico City and designs many of the products it builds.

Which Mexican firms sell abroad

Thirteen Mexican companies appeared in the Forbes Global 2000 in 2023, three of them also in the Fortune Global 500. Cemex sells cement. FEMSA bottles Coca-Cola and runs the Oxxo convenience chain. Gruma makes corn flour and tortillas, Grupo Bimbo bakes, and Lanix, which builds computers, phones and displays, employs more than 11,000 people across Mexico and Chile. DINA has built buses and trucks since 1962. Aerospace assembly is the newest of these lines: Bombardier, Bell, Cessna and MD Helicopters build fuselages in Mexico, Frisa Aerospace machines jet engine casings, and Kuo Aerospace makes landing gear parts.

How the border programme became an economy

The maquiladora system predates every free trade agreement Mexico has signed. It began in 1965, after the United States ended the bracero farm labour agreement and sent large numbers of Mexican farm workers back to the northern border with no income. The two governments agreed the Border Industrialization Program, which let United States companies assemble goods in Mexico from United States materials and components at a reduced rate of duty.

A maquiladora imports raw materials on a temporary basis, for eighteen months, and exports the finished product. Before NAFTA, Mexico granted preferential tariff rates on materials imported from anywhere in the world so long as the output was exported, and the United States taxed only the non-United States content of what came back across the line. NAFTA removed tariffs between the two countries altogether and raised the rates on inputs sourced outside North America.

The plants changed as the terms changed. Simple assembly turned into complex manufacturing: televisions, cars, industrial and personal products. Commodity manufacturing left for China, and what stayed is higher-value work that United States buyers want built nearby and delivered just in time. Real income in the maquiladora sector rose 15.5% after 1994, the non-maquiladora industry grew faster still, and the share of exports coming from non-border states has been climbing while the border states' share has fallen.

What the trade agreements actually did

Mexico joined the General Agreement on Tariffs and Trade in 1986 and has since signed twelve free trade agreements covering forty-four countries: NAFTA in 1992, Chile in 1998, the European Union and Israel in 2000, the European Free Trade Association in 2001, Uruguay in 2003, Japan in 2004, Peru and an integrated Central American agreement in 2011, Panama in 2014, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in 2018. The United States, Mexico and Canada Agreement, signed in 2018, replaced NAFTA in 2020. More than 90% of Mexican trade moves under one of these agreements, and imports and exports together came to 78% of GDP in 2019.

The agreements multiplied the paperwork faster than the traffic. Trade with the United States rose 183% between 1993 and 2002 and trade with Canada 165%, while trade with Chile rose 285%, with Honduras 420% and with Costa Rica 528% from very much smaller starting values. The destinations in 2024 state the outcome plainly: the United States took 494 billion dollars of Mexican exports, Canada 32.6 billion dollars, China 15.1 billion dollars, Germany 9.9 billion dollars and South Korea 7.46 billion dollars. About 80% of exports and 50% of imports were traded with the United States and Canada as of 2019.

Economists reviewing NAFTA for the World Bank and for the Institute for International Economics found that Mexican poverty rates fell and real wages rose even after the 1994 and 1995 crisis is accounted for, and that the effect was too small and too slow to converge with the other two members or to lift the growth rate. Cotton and apparel exports to the United States grew from 3 billion dollars in 1995 to 8.4 billion dollars in 2002, with a peak of 9.4 billion dollars in 2000. A 2008 World Bank study estimated that reform of port efficiency, customs administration and regulation could add 31.8 billion dollars of exports, equal to 22.4% of Mexican manufacturing exports over 2000 to 2003.

Why remittances overtook oil exports

Oil paid for the Mexican state's ambitions in the 1970s. New fields were found during a period of high prices and low international interest rates, the government borrowed abroad to invest in Pemex, and President José López Portillo announced that the time had come to manage prosperity. In 1981 and 1982 prices fell and rates rose. In 1982, days before leaving office, he suspended payments on foreign debt, devalued the peso and nationalised the banking system.

Remittances replaced that income. Money sent home by Mexicans abroad, most of it from the United States, passed oil in 2015 to become the largest single source of foreign income, and came to 28.5 billion dollars in 2017. Recorded remittance transactions exceeded 41 million in 2003, of which 86% were electronic transfers. Michoacán, Guanajuato, Jalisco, the State of Mexico and Puebla together captured 45% of the total in 2014. Under a programme called Dos por Uno, state and federal governments put two pesos into local infrastructure for every peso a migrant sends. The consular identity card issued for the same population, the Matrícula Consular de Alta Seguridad, is accepted as identification in 32 United States states and by banks there.

Pemex, created out of the oil expropriation of 1938, is still the government's other dependable source of cash, and it is taxed at almost 62% of the company's sales. It is constitutionally protected from private and foreign investment and has been short of capital for exploration and for upgrading its infrastructure, a combination that some observers have said points toward institutional collapse.

Who works outside the formal economy

The labour force was 52.8 million people in 2015 and runs at roughly 60.9 million now, with participation between 58 and 59%. Unemployment was 2.8% of the economically active population in June 2026. Underemployment has been estimated at 25%, and between 51 and 56% of workers nationally were in informal employment as of 2019, without contracts and outside social protection.

Informality is a structural feature of the Mexican labour market. Street vendors and home-based workers make up much of it, and it remains a primary income source for millions of households where its measured productivity is low. A study of Veracruz using night-light and electricity data against gross county product found that the working assumption of a constant informal share of about 30% of activity does not hold at municipal level, that informality there grew again by 2006 after appearing to shrink in 2000, and that rural municipios did not differ from urban ones in how much of their economy was informal. Improved literacy raised output in both the formal and the informal economy, and programmes designed to move activity from one to the other have not succeeded.

What a day of work pays

Employee compensation came to 30.8% of GDP in the first quarter of 2026 on INEGI's income-method accounts, and non-financial corporations and households together generated 78.5% of GDP in the same quarter. Annual hours worked per worker in Mexico sit alongside those in Colombia and Costa Rica in the OECD's series, and pay per hour worked is low.

The wage floor has moved quickly. The daily minimum wage was 88 pesos in 2018 and 315.04 pesos in 2026, with a separate northern border rate of 440.87 pesos, which was about 17.20 United States dollars a day at the 2026 exchange rate. Over broadly the same period INEGI reported in 2025 that the national poverty rate fell from 41.9% in 2018 to 29.6% in 2024, or from 51.9 million people to 38.5 million, and that extreme poverty fell from 7% to 5.3%. The same report recorded the share of the population lacking access to healthcare climbing from 16.2% to 34.2%, or 44.5 million people, and some specialists have questioned the accuracy of the series.

The distribution stayed wide through all of it. The Gini coefficient stood at 45.4 in 2020. The bottom tenth of the income distribution held 1.4% of the country's resources and the top tenth about 36%, and 0.2% of the population owned 60% of national wealth as of 2024. A 2008 report put average income in one urban area at 27,000 dollars a year against 8,000 dollars in rural districts a few miles away.

How much credit the banks extend

Bank credit accounted for 22% of GDP, against 70% in Chile, and lending to agriculture fell 45.5% between 2001 and 2007 to about 1% of all bank loans. Foreign institutions hold most of the sector after a wave of acquisitions: Citigroup bought Banamex for 12.5 billion dollars, BBVA holds Bancomer and HSBC entered by the same route, with Banorte the domestically held exception. Tax revenues were 19.6% of GDP in 2013, and budgeted spending on poverty alleviation and social development runs at about a third of the OECD average. Petty corruption in zoning and business permits adds roughly 10% to the cost of consumer goods and services, and a 2012 report on bribes paid for construction permits and information prompted investigations in both Mexico and the United States.

Which states hold the industrial economy

Every Mexican state records a Human Development Index above 0.70, and the national figure was 0.758 in 2021. The spread inside that average is the point. Nuevo León, Jalisco and Mexico City sit at levels comparable to European countries, while Oaxaca and Chiapas sit at levels comparable to China or Vietnam. At municipal level the range is wider still: the Benito Juárez borough of Mexico City compares with Germany or New Zealand, and Metlatónoc in Guerrero with Malawi.

Production follows the same map. In 2004 the Federal District contributed 15.8% of industrial output, the State of México 11.8% and Nuevo León 7.9%, while the largest agricultural contributions came from Jalisco at 9.7%, Sinaloa at 7.7% and Veracruz at 7.6%. Exports in 2025 came mainly out of Chihuahua at 99.3 billion dollars, Mexico City at 75.7 billion dollars, Jalisco at 58 billion dollars, Nuevo León at 52.9 billion dollars and Baja California at 49.5 billion dollars.

Concentration at the top has loosened a little. The Federal District's GDP grew 0.2% from 2003 to 2004, with sharp declines in its agriculture and its industry, while Quintana Roo grew 9.0%, Baja California 8.9% and San Luis Potosí 8.2%. Mexico City still accounted for 21.8% of national GDP.

How free trade rewired Mexican farming

Agriculture was 25% of GDP in 1970, 7% in 1990 and 3.9% in 2006, and it still employed 18% of the workforce in 2003, against 2 to 5% in fully mechanised economies. That gap is the legacy of the ejido, the communal land grant written into Article 27 of the 1917 constitution and extended heavily under President Lázaro Cárdenas in the 1930s. Ejido land guaranteed subsistence and could not be pledged as collateral, which fragmented holdings and kept capital out. The article was amended in 1992 to let farmers take transferable title to the land they worked. Large mechanised farms now operate in the northwest, mainly in Sinaloa, and privatisation has moved slowly through the centre and the south, where most producers still grow for their own consumption.

Until the 1980s the state bought and priced basic crops through CONASUPO. Trade liberalisation dismantled it and put two mechanisms in its place: Alianza, which pays for mechanisation and irrigation, and Procampo, a fixed income transfer per unit of cropland reaching 3.5 million farmers, about 64% of all of them. Subsidy to white corn growers rose sharply in the early 2000s, and by 2004 only about 15% of corn imports were the white corn people eat, the rest being yellow and crushed corn for livestock.

The NAFTA negotiators expected two thirds of Mexican corn growers to move into fruit, nuts, vegetables, coffee and sugar cane. Horticultural trade grew sharply. The roughly 600,000 workers displaced from corn production went elsewhere, and corn output held at about 20 million tonnes, sustained by income support and by the fact that maize originated in Mexico and has been grown there for millennia.

Where the country has volume, it has it in named crops. The avocado harvest was 2.03 million tonnes in 2017, from 188,723 hectares planted in 2013, and Michoacán grows nearly 75% of it. About 160,000 farmers grow sugar cane across fifteen states, and 54 mills produced 4.96 million tonnes of sugar from the 2010 crop, against 5.8 million tonnes in 2001. Potato production reached 1.7 million tonnes in 2003, and consumption runs at about 17 kilograms a head a year against 400 kilograms of maize.

What the central bank now watches

Banco de México became independent in 1994, in the same months the peso collapsed. Its objectives are set out in Article 28 of the constitution: price stability, and lender of last resort. The floating exchange rate dates from the reforms that followed the December 1994 crash, when the country abandoned a narrow band it could no longer defend. The Exchange Rate Commission that sets policy has six members, three from the finance secretariat and three from the bank, and the secretariat holds the deciding vote.

Until 2008 the bank ran a mechanism called the corto, leaving the banking system short of its daily demand for money by a set amount when it wanted market rates higher and shrinking that shortfall when it wanted them lower. It began setting an overnight reference rate in April 2004. Inflation reached an annual 139.7% in 1987, was 4.1% in 2006 and 3% at the end of 2007.

Nominal GDP was 1.41 trillion dollars in 2022. GDP contracted by more than 6% in the 2008 recession, and the peso fell from 10.96 to the dollar on 1 October 2008 to 15.42 on 9 March 2009 before recovering. The bank began buying foreign reserves when the peso was strong in August 1996, and added a monthly dollar auction in May 2003 to hold the stock steady. Reserves stood at 75.8 billion United States dollars in 2007. They were accumulated mostly out of petroleum revenue, they improved the terms on which the country borrows abroad, and the bank has recorded a concern that the reserve base leans too heavily on oil income.