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Economy of Mexico

Mexico is classified by the World Bank as an upper-middle-income country. Poverty is widespread (around 44% of the population lives below the poverty line) and high rates of economic growth are needed to create legitimate economic opportunities for new entrants to the work force. The Mexican economy in 2009 experienced its deepest recession since the 1930s. Gross domestic product (GDP) contracted by 6.5%, driven by weaker exports to the United States; lower remittances and investment from abroad; a decline in oil revenues; and the impact of H1N1 influenza on tourism. Mexico's trade regime is built upon free trade agreements with the United States, Canada, the European Union, and many other countries (44 total). Since the 1994 devaluation of the peso, successive Mexican governments have improved the country's macroeconomic fundamentals. Inflation and public sector deficits are under control, while the current account balance and public debt profile have improved. Mexico’s sovereign debt remains investment-grade, with a stable outlook. Mexico is a major recipient of remittances, sent mostly from Mexicans in the United States. Remittances average around U.S. $21 billion per year, and are the country’s second-largest source of foreign currency, after oil. Most remittances are used for immediate consumption--food, housing, health care, education--but some collective remittances, sent from a U.S. community of migrants to their community of origin, are used for shared projects and infrastructure improvements. The Government of Mexico participates through its flagship fund-matching program “3X1 Program for Migrants.” The Mexican Government also has implemented social development programs, like Oportunidades , to address the problems of poverty. Trade Mexico is the United States’ second-largest export market and third-largest trading partner. Top U.S. exports to Mexico include electronic equipment, motor vehicle parts, and chemicals. Trade matters are generally settled through direct negotiations between the two countries or addressed via World Trade Organization (WTO) or North American Free Trade Agreement (NAFTA) formal dispute settlement procedures. The most significant areas of friction involve agricultural products as well as cross-border trucking. Mexico is an active and constructive member of the World Trade Organization, the G-20, and the Organization for Economic Cooperation and Development. The Mexican Government and many businesses support a Free Trade Area of the Americas. Agriculture Only 11% of Mexico's land area is arable, of which less than 3% is irrigated. Top revenue-producing crops include corn, tomatoes, sugar cane, dry beans, and avocados. Mexico also generates significant revenue from the production of beef, poultry, pork, and dairy products. In total, agriculture accounted for 4.3% of GDP in 2009 and 3% of GDP in 2008, and agricultural employment accounted for about 15% of total employment. Implementation of NAFTA has opened Mexico's agricultural sector to the forces of globalization and competition, and some farmers have greatly benefited from greater market access. In particular, fruit and vegetable exports from Mexico have increased dramatically in recent years, exceeding $4.7 billion to the United States alone in 2009. However, structural inefficiencies that have existed for decades continue to limit improvements in productivity and living standards for many in the agricultural sector. These inefficiencies include a prevalence of small-scale producers, a lack of infrastructure, inadequate supplies of credit, a communal land structure for many producers, and a large subsistence rural population that is not part of the formal economy. It is estimated that half of Mexico's producers are subsistence farmers and over 60% produce corn or beans, with the majority of these farmers cultivating five hectares or less, although the number of Mexican farmers is steadily decreasing as they seek greater economic opportunities from off-farm employment. Foreign Investment Foreign direct investment (FDI) in Mexico for 2009 was $14.4 billion, down 51% from the previous year. The U.S. was once again the largest foreign investor in Mexico, accounting for 45% ($6.4 billion FDI from the U.S.) of reported FDI. The economic slowdown in the U.S. in 2008 and 2009 caused a significant decline in this figure. The Mexican Government estimate of FDI for 2010 is $15 billion to $20 billion. Oil and Gas In 2009, Mexico was the world's seventh-largest producer of crude oil, and the second-largest supplier of oil to the U.S. Oil and gas revenues provided more than one-third of all Mexican Government revenues and are the country’s largest source of foreign currency. Mexico's state-owned oil company, Pemex, holds a constitutionally established monopoly for the exploration, production, transportation, and marketing of the nation's oil. With its primary known oil reserves already in serious decline, Mexico still must determine in the near future how it wants to exploit probable deepwater reserves in order to avoid very difficult economic choices. The Mexican Congress passed energy reform legislation in October 2008 that gives Pemex more budgetary autonomy and transparency. This reform allowed some private investment through contracts which permit some risk-sharing, which are still being developed by Pemex. However, the reform did not completely open the petroleum sector to private sector investment as Pemex is not permitted to issue contracts which give foreign companies either a share of total oil production or a percentage of the price received per barrel produced. In addition, Pemex will continue to have the final word in all investment and production decisions. Mexico also imports finished petroleum products such as gasoline, due to a lack of refinery capacity. Although private investment in natural gas transportation, distribution, and storage is permitted, Pemex remains in sole control of natural gas exploration and production. Despite substantial reserves, Mexico is a net natural gas importer. Transportation and Communications Mexico's land transportation network is one of the most extensive in Latin America with 366,341 kilometers (224,749 mi.) of paved roads, including more than 13,035 kilometers of four-lane paved roads. The 26,704 kilometers (16,382 mi.) of government-owned railroads in Mexico have been privatized through the sale of 50-year operating concessions. Mexico's ports have experienced a boom in investment and traffic following a 1993 law that privatized the port system. Mexico's ports moved 3.3 million 20-foot container equivalent units (TEU) in 2008 and 2.9 million TEUs in 2009. Several dozen international airlines serve Mexico, with direct or connecting flights from most major cities in the United States, Canada, Europe, Japan, and Latin America. Most Mexican regional capitals and resorts have direct air services to Mexico City or the United States. In 2005, the Government of Mexico agreed to sell Mexicana, one of the two main national airlines, to a private investor, and did the same with Aeromexico in 2007. After experiencing financial difficulties, Mexicana is in the process of being sold to a new investor, PC Capital. Airports are semi-privatized with the government still the majority shareholder, but with each regional airport group maintaining operational autonomy. The telecommunications sector is dominated by Telmex, the former state-owned monopoly. Several international companies compete in the sector with limited success. The fixed-line teledensity rate in Mexico (18%) is below average in Latin America. Wireless penetration is much higher (77.4%), with 83.5 million wireless subscribers in the fourth quarter of 2009, although 88% of these customers use prepaid cards, and many use their phones to receive calls only. At the close of 2009, 28.5 million Mexicans had some form of Internet access. Mexico's satellite service sector was opened to competition, including limited foreign direct investment, in 2001. GDP (official exchange rate): $1 trillion (2010 est.); $876 billion (2009); $1.088 trillion (2008). GDP (PPP method): $1.459 trillion (2009 est.); $1.550 trillion (2008). Per capita GDP (PPP method): $13,542 (2009 est.); $14,534 (2008). Annual real GDP growth: 4.5% (2010 est.); -6.5% (2009); 1.3% (2008); 3.3% (2007); 5.1% (2006); 3.2% (2005). Inflation rate: 4.6% (2010 est.); 3.57% (2009); 6.5% (2008); 3.8% (2007); 3.4% (2006); 3.3% (2005). Natural resources: Petroleum, silver, copper, gold, lead, zinc, natural gas, timber. Agriculture (4% of GDP): Products --corn, wheat, soybeans, rice, beans, cotton, coffee, fruit, tomatoes, beef, poultry, dairy products, wood products. Industry (31% of GDP): Types --food and beverages, tobacco, chemicals, iron and steel, petroleum, mining, textiles, clothing, motor vehicles, consumer durables. Services (64% of GDP): Types --commerce and tourism, financial services, transportation and communications. Trade (goods): Exports (2009)--$230 billion f.o.b. Imports (2009)--$234 billion f.o.b. Exports to U.S. (2009)--$185 billion (80% of total). Imports from U.S. (2009)--$112 billion (48% of total). Major markets --U.S., EU (5% of total), Canada (3.6% of total).

Geography of Mexico

Location: Middle America, bordering the Caribbean Sea and the Gulf of Mexico, between Belize and the US and bordering the North Pacific Ocean, between Guatamala and the US Map references: North America Area: total area: 1,972,550 sq km land area: 1,923,040 sq km comparative area: slightly less than three times the size of Texas Land boundaries: total 4,538 km, Belize 250 km, Guatemala 962 km, US 3,326 km Coastline: 9,330 km Maritime claims: contiguous zone: 24 nm continental shelf: 200 nm or to the edge of the continental margin exclusive economic zone: 200 nm territorial sea: 12 nm
International disputes:
claims Clipperton Island (French possession) Climate: varies from tropical to desert Terrain: high, rugged mountains, low coastal plains, high plateaus, and desert Natural resources: petroleum, silver, copper, gold, lead, zinc, natural gas, timber Land use: arable land: 12% permanent crops: 1% meadows and pastures: 39% forest and woodland: 24% other: 24% Irrigated land: 51,500 sq km (1989 est.) Environment: current issues: natural fresh water resources scarce and polluted in north, inaccessible and poor quality in center and extreme southeast; raw sewage and industrial effluents polluting rivers in urban areas; deforestation; widespread erosion; desertification; serious air pollution in the national capital and urban centers along US-Mexico border natural hazards: tsunamis along the Pacific coast, destructive earthquakes in the center and south, and hurricanes on the Gulf and Caribbean coasts international agreements: party to - Biodiversity, Climate Change, Endangered Species, Hazardous Wastes, Law of the Sea, Marine Dumping, Marine Life Conservation, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, Wetlands, Whaling; signed, but not ratified - Desertification Note: strategic location on southern border of US

Government of Mexico

The 1917 constitution provides for a federal republic with powers separated into independent executive, legislative, and judicial branches. Historically, the executive has been the dominant branch, with power vested in the president, who promulgates and executes the laws of the Congress. The Congress has played an increasingly important role since 1997, when opposition parties first made major gains. The president also legislates by executive decree in certain economic and financial fields, using powers delegated by the Congress. The president is elected by universal adult suffrage for a 6-year term and may not hold office a second time. There is no vice president; in the event of the removal or death of the president, a provisional president is elected by the Congress. The Congress is comprised of a Senate and a Chamber of Deputies. Consecutive re-election is prohibited. Senators are elected to 6-year terms, and deputies serve 3-year terms. The Senate's 128 seats are filled by a mixture of direct-election and proportional representation. In the lower chamber, 300 deputies are directly elected to represent single-member districts, and 200 are selected by a modified form of proportional representation from five electoral regions. The 200 proportional representation seats were created to help smaller parties gain access to the Chamber. The judiciary is divided into federal and state court systems, with federal courts having jurisdiction over most civil cases and some major felonies. Under the constitution, trial and sentencing must be completed within 12 months of arrest for crimes that would carry at least a 2-year sentence. In practice, the judicial system often does not meet this requirement. Trial is by judge, not jury. Defendants have a right to counsel, and public defenders are available. Other rights include defense against self-incrimination, the right to confront one's accusers, and the right to a public trial. Supreme Court justices are appointed by the president and approved by the Senate. (See "Reforms" below for comments on judicial reform currently underway.) POLITICAL CONDITIONS President Felipe Calderon of the PAN was elected in 2006 in an extremely tight race, with a margin of less than 1% separating his vote total from that of Andres Manuel Lopez Obrador ("AMLO") of the left-of-center Democratic Revolution Party (PRD). AMLO contested the results of the election, alleging that it was marred by widespread fraud. Mexico's Federal Electoral Tribunal, while acknowledging the presence of randomly-distributed irregularities, rejected AMLO's accusation of widespread fraud and upheld Calderon's victory on September 5, 2006. President Calderon’s National Action Party currently is the largest party in the Senate but lost its majority in the Chamber of Deputies in the July 2009 elections. The PRI gained a de facto majority (through its alliance with another party) in those elections in which every Chamber of Deputies seat was up for vote. Although the PRI does not control the presidency or a majority in the Senate, it remains a significant force in Mexican politics, holding or having recently been elected to 19 of 31 governorships and often playing a pivotal role in forming coalitions in Congress. The next national elections--for the president, all 128 seats in the Senate, and all 500 seats in the Chamber of Deputies--will take place in July 2012. In 2010, elections were held in 14 of Mexico’s 31 states. The PRI won nine of the 12 governorships up for election, while an alliance of convenience between the PAN, PRD, and smaller parties in three states demonstrated that the PRI could be defeated. Reforms One of President Fox's (2000-2006) most important reforms was the passage and implementation of freedom of information (FOIA) laws. President Fox also highlighted the need for modernization of Mexico's criminal justice system, including the introduction of oral trials. Judicial reforms stalled at the federal level during the Fox years, but President Calderon succeeded in passing legislation to reform the federal judicial system in 2008. The reform legislation set a timetable of 8 years for full implementation. In addition to judicial reform, President Calderon has also succeeded in negotiating with Congress to pass fiscal, electoral, energy, and pension reforms. The administration is grappling with many economic challenges, including a severe GDP contraction in 2009 and the need to upgrade infrastructure, modernize labor laws, and make the energy sector more competitive. Calderon has stated that his top economic priorities remain reducing poverty and creating jobs. In the face of the serious threat posed by organized crime, the Mexican Congress passed legislation in 2009 expanding the investigative and intelligence capabilities of the country’s Federal Police. It also set a 4-year deadline for vetting all of the country’s 2,500 federal, state, and municipal police forces. Principal Government Officials President--Felipe CALDERON Hinojosa Foreign Secretary--Patricia ESPINOSA Cantellano Ambassador to the U.S.--Arturo SARUKHAN Casamitjana Ambassador to the United Nations--Claude HELLER Rouassant Ambassador to the OAS--Gustavo ALBIN Mexico maintains an embassy in the United States at 1911 Pennsylvania Ave. NW, Washington, DC 20006 (tel. 202-728-1600). Consular offices are located at 2827 - 16th St. NW, 20009 (tel. 202-736-1012), and the trade office is co-located at the embassy (tel. 202-728-1686). Besides its embassy, Mexico maintains 52 diplomatic offices in the U.S. Consulates general are located in Chicago, Dallas, Denver, El Paso, Houston, Los Angeles, Miami, New Orleans, New York, San Antonio, San Diego, and San Francisco; consulates are (partial listing) in Atlanta, Boston, Detroit, Philadelphia, Seattle, St. Louis, and Tucson.

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History of Mexico

Highly developed cultures, including those of the Olmecs, Mayas, Toltecs, and Aztecs, existed long before the Spanish conquest. Hernando Cortes conquered Mexico during the period 1519-21 and founded a Spanish colony that lasted nearly 300 years. Independence from Spain was proclaimed by Father Miguel Hidalgo on September 16, 1810. Father Hidalgo’s declaration of national independence, known in Mexico as the "Grito de Dolores", launched a decade long struggle for independence from Spain. Prominent figures in Mexico’s war for independence were Father Jose Maria Morelos; Gen. Augustin de Iturbide, who defeated the Spaniards and ruled as Mexican emperor from 1822-23; and Gen. Antonio Lopez de Santa Ana, who went on to dominate Mexican politics from 1833 to 1855. An 1821 treaty recognized Mexican independence from Spain and called for a constitutional monarchy. The planned monarchy failed; a republic was proclaimed in December 1822 and established in 1824. Throughout the rest of the 19th century, Mexico’s government and economy were shaped by contentious debates among liberals and conservatives, republicans and monarchists, federalists and those who favored centralized government. During the two presidential terms of Benito Juarez (1858-71), Mexico experimented with modern democratic and economic reforms. President Juarez’ terms of office, and Mexico’s early experience with democracy, were interrupted by the Habsburg monarchy’s rule of Mexico (1864-67), and was followed by the authoritarian government of Gen. Porfirio Diaz, who was president during most of the period between 1877 and 1911. Mexico's severe social and economic problems erupted in a revolution that lasted from 1910-20 and gave rise to the 1917 constitution. Prominent leaders in this period--some of whom were rivals for power--were Francisco Madero, Venustiano Carranza, Pancho Villa, Alvaro Obregon, Victoriano Huerta, and Emiliano Zapata. The Institutional Revolutionary Party (PRI), formed in 1929 under a different name, emerged from the chaos of revolution as a vehicle for keeping political competition among a coalition of interests in peaceful channels. For 71 years, Mexico's national government was controlled by the PRI, which won every presidential race and most gubernatorial races until the July 2000 presidential election of Vicente Fox Quesada of the National Action Party (PAN), in what were widely considered at the time the freest and fairest elections in Mexico's history. President Fox completed his term on December 1, 2006, when Felipe Calderon assumed the presidency.

People of Mexico

Mexico is the most populous Spanish-speaking country in the world and the second most-populous country in Latin America after Portuguese-speaking Brazil. About 76% of the people live in urban areas. Many Mexicans emigrate from rural areas that lack job opportunities--such as the underdeveloped southern states and the crowded central plateau--to the industrialized urban centers and the developing areas along the U.S.-Mexico border. According to some estimates, the population of the area around Mexico City is nearly 22 million, which would make it the largest concentration of population in the Western Hemisphere. Cities bordering on the United States--such as Tijuana and Ciudad Juarez--and cities in the interior--such as Guadalajara, Monterrey, and Puebla--have undergone sharp rises in population in recent years. Mexico has made great strides in improving access to education and literacy rates over the past few decades. According to a 2006 World Bank report, enrollment at the primary level is nearly universal, and more children are completing primary education. The average number of years of schooling for the population 15 years old and over was around 8 years during the 2004-2005 school year, a marked improvement on a decade earlier--when it was 6.8 years--but low compared with other Organization for Economic Cooperation and Development (OECD) countries. Nationality: Noun and adjective --Mexican(s). Population (July 2010 est.): 112,468,855. Annual population growth rate (2010 est.): 1.118%. Ethnic groups: Indian-Spanish (mestizo) 60%, Indian 30%, Caucasian 9%, other 1%. Religions (2000 census): Roman Catholic 76.5%, Protestant 6.3%, other 0.3%, unspecified 13.8%, none 3.1%. Language: Spanish. Education: Years compulsory --11 (note: preschool education was made mandatory in Dec. 2001). Literacy --91.4%. Health (2010): Infant mortality rate --17.84/1,000. Life expectancy --male 73.5 years; female 79.22 years. Work force (2009 est., 44.5 million): Agriculture --13.7%, industry --23.4%, services --62.2%.
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