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Mexico: Country Report

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Mexico has unequivocally become integral to the United State's (US) economy.

It ranks as one of the US's most important trading partners. Through foreign direct investment from the north, the development of a skilled workforce, and a free market economy, Mexico has developed into an economic power. Despite a shaky history riddled with debt, the country as a whole has recovered. To compare elements of cultures across nations, we try to formulate similarities in beliefs, practices, and situations. Mexico, while distinctly different from the US, holds many cultural similarities that translate well into other countries.

Mexico sits south of the US on 1,972,550 sq km of total area. As of 2006, 107.5 million people inhabited the 1,923,039 sq km of land area in the country. (CIA Factbook, 2006) Due to the high birthrate in the country, the population has grown an average of 2% annually since 1975. This continues despite the large amount of Mexican expatriates that migrate illegally to the US. It had been estimated in the nineties that over 4 million Mexicans resided abroad, the large majority of them living just north of the border. Add on the latest estimate that there were 94 million US-Mexico border crossings last year, and it's quite clear that it has been difficult to set a hard number on that particular population. (Watts, 2005)

The population is distributed fairly evenly among both sexes, with females holding a slight majority at around 51%. The majority of the population is concentrated between the ages of 16 and 64, holding 64% of the total. The 0-14 age demographic is surprisingly strong with 30% of the total population, leaving 6% for the 65+ population. The vast majority of the inhabitants of the country reside in urban areas, dispersed at 75% of the total population, which can be quantified even further when evaluating the following statistics. While the country is divided up into 31 individual states and a Federal District, 22% of the country's population resides in the State of Mexico and the bordering Federal District. With an overall population density of only 56 persons per square km, that rate jumps to 5,500 persons per square km in Mexico City, the third most populous city in the world. (CIA Factbook, 2006)

Mexico's free market economy has grown in leaps and bounds over the last few decades. As of 2005, Mexico's Gross Domestic Product (GDP) (PPP) was $1.068 trillion $US. This combined with a GDP per capita (PPP) of $10,100, close to one quarter that of the US, helps to bolster Mexico as the third largest economy in NAFTA. (CIA Factbook, 2006) The economy is fed primarily by the service, industry, and agriculture sectors which are controlled largely by the private sector. When evaluated at the micro level, we find that income distribution among Mexicans is fairly uneven. With a GINI Index of 54.6, Mexico ranks towards the failing end of the index. (Human Development Report, 2003) The top 10% of population accounted for nearly 40% of the overall income, with the middle sector close to 40% as well. This leaves 60% of the population living on only 20% of the total income. Of this lower-class, individuals employed in the industry sector have it the best, with assured wages and membership in Mexico's public health care system. However, there is still close to 10% of the population that is living below $1 a day, and over one quarter of the population living below $2 a day. (Human Development Report, 2005) Those living in rural or less developed areas often place among the 3.6% of the population that is unemployed, or the 25% that is considered underemployed. (Merrill & Miro, 1997)

As one changes focus from the less developed rural areas to the more developed infrastructures of the larger cities, the commerce and industry sector begins to take root. In the early 1950's the manufacturing sector overtook agriculture as the largest contributor to the nation's GDP. In recent years, much of this industry was concentrated in "maquiladora zones" located near the US border. These maquiladora plants take advantage of foreign direct investment from US companies, and would often assemble products manufactured in the US for later sale in the US. Lately, the manufacturing sector has been led by the food processing, beverages and tobacco products sector while followed closely by metal product, machinery, and transportation equipment sector.

Mexico has long been a key asset to US MNCs. With an immediate proximity to the US via rail, air, and shipping routes, transportation of products between the two countries is mostly hassle-free. Combined with the elimination of tariffs and trade taxes from the integration of the North American Free Trade Agreement (NAFTA), they no longer pose an economic price on outsourcing assembly or manufacturing to Mexico. Consequently, trade with the US and Canada has tripled since NAFTA's implementation in 1994. MNCs in multiple industries have latched on to this.

Among the industries at the forefront is the automotive sector. With a skilled workforce and lower wages, producing automotive part and assembling quality cars can be done at a significantly lower cost than in the US while still maintaining the quality that consumer's demand. Ranking among the top sixty companies operating in all of Latin America (in terms of net sales in $US billions) as of December 31, 2004 are General Motors ($10.5 billion), Daimler Chrysler ($9.2 billion), Delphi Corporation ($5.1 billion), and Ford Motor Company ($3.9 billion). (Brown, 2005) Of those companies, all except for General Motors (GM) have seen net growth of 9% or more over the last year (with GM at a loss of .6%). In addition to these American based companies, Mexico is home to factories for Nissan and Volkswagen among others. Often, cars bound for showrooms in the US are assembled in Mexico plants, such as Nissan's plant in Aguascalientes that, combined with two other plants, puts out 300,000 cars annually. (Jackson, 2005)

Multiple US MNCs in the consumer goods and retail industry have enjoyed success in the Mexican market. In particular, Wal-Mart de Mexico ranks as having the 8th largest net sales of all Latin American companies, with $14 US billions in sales. Proctor and Gamble of Mexico also ranks in the top 130 companies in Latin America with $2 US billions in sales. Other manufacturers/distributors such as FEMSA (makers of Dos Equis beer, Cerveza Sol, and Tecate), Nestle, Coca-Cola FEMSA, and PepsiCo Mexicana have sales between $2-4 US billions each. (Brown, 2005) In addition, the market for technological goods in Mexico is rapidly increasing. Hewlett-Packard Mexico sported over $5 US billions in sales in 2004, a 26.9% increase from 2003. Both General Electric Mexico and IBM posted sales of over $4 US billions, though



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