Download MEXICO

MEXICO
Economic Freedom Score
25
World Rank:
55
Regional Rank:
3
Least
free 0
exico’s economic freedom score is 66.8, making its econM
omy the 55th freest in the 2014 Index. Its score is slightly
lower than last year, with a notable improvement in trade
50
75
Most
100 free
66.8
Freedom Trend
70
freedom offset by declines in the areas of regulatory efficiency and government size and intrusiveness. Mexico is ranked
3rd out of three countries in the North America region, but its
score is well above the world average.
Over the 20-year history of the Index, Mexico has advanced its
economic freedom score by nearly 4 points. Improvements in
half of the 10 economic freedoms include strong gains in fiscal freedom, business freedom, trade freedom, and financial
freedom. Double-digit declines in property rights and freedom from corruption have limited overall progress. Mexico’s
economy has generally been rated “moderately free” in the
Index, dropping below that level only briefly in the late 1990s.
Despite some progress, Mexico’s overall economic freedom is
still constrained by institutional weaknesses including corruption and labor market rigidity. The government’s reform
agenda has been extensive, but progress has been sluggish.
The judicial system is slow to resolve cases and vulnerable to
corruption.
BACKGROUND: The Institutional Revolutionary Party
(PRI), which ruled Mexico for 71 years before the election of
center-right National Action Party Presidents Vicente Fox
(2000–2006) and Felipe Calderon (2006–2012), returned to
power under President Enrique Peña Nieto, who took office
on December 1, 2012. In his first year, Peña Nieto made commitments to second-generation reforms in education, energy,
telecommunications, and fiscal policy. It is too early to tell
whether his government will go far enough to make the economy truly competitive. Foreign investment rebounded in the
first quarter of 2013, bringing in $4.99 billion, and emigration
to the U.S. has slowed, but Mexico still struggles with formalsector unemployment and poverty. Drug trafficking remains
a serious problem.
How Do We Measure Economic Freedom?
See page 471 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
69
68
67
66
65
64
2010
2011
2012
2013
2014
Country Comparisons
66.8
Country
World
Average
60.3
Regional
Average
74.1
Free
Economies
84.1
0
20
40
60
80
100
Quick Facts
Population: 114.9 million
GDP (PPP): $1.7 trillion
3.9% growth in 2012
5-year compound annual growth 1.6%
$15,312 per capita
Unemployment: 4.8%
Inflation (CPI): 4.1%
FDI Inflow: $12.7 billion
Public Debt: 43.5% of GDP
2012 data unless otherwise noted.
Data compiled as of September 2013.
313
MEXICO (continued)
THE TEN ECONOMIC FREEDOMS
Score
RULE OF
LAW
Country
World Average
Property Rights 50.0
Freedom from Corruption 29.7
0
20
40
60
80
Rank
1–Year
Change
53rd
103rd
0
–0.3
100
Corruption is deeply embedded culturally and remains pervasive at all levels of society, fed by
and entrenching the power of monopolists, party bosses, and other mafias. Billions of narcodollars enter Mexico each year from the U.S., affecting politics particularly at the state and local
levels. Contracts are generally upheld, but courts are inefficient and vulnerable to political
interference.
Fiscal Freedom 80.9
GOVERNMENT
Government Spending 78.9
SIZE
74th
56th
0
20
40
60
80
–0.2
–0.5
100
The top individual income and corporate tax rates are 30 percent. The corporate income tax is
set to decline to 29 percent in 2014 and 28 percent in 2015. Other taxes include a value-added
tax (VAT). The overall tax burden is 10.6 percent of gross domestic income. Government spending equates to 27 percent of GDP, and public debt is equal to 43 percent of domestic output. The
new government has proposed a tax overhaul.
REGULATORY
EFFICIENCY
Business Freedom 76.8
Labor Freedom 58.3
Monetary Freedom 77.4
40th
108th
69th
0
20
40
60
80
–4.6
–1.4
–0.3
100
The overall start-up process has been simplified, and no minimum capital is required. Launching a business takes six procedures and six days on average, but licensing requirements take
over two months to complete. A recent labor reform bill was watered down to protect unions.
The government has announced ambitious energy and fiscal reform plans but has yet to make
many needed changes to reduce subsidies.
OPEN
MARKETS
Trade Freedom 85.6
Investment Freedom 70.0
Financial Freedom 60.0
45th
46th
41st
0
20
40
60
80
+5.0
0
0
100
Mexico has a 2.2 percent average tariff rate, and non-tariff barriers have been reduced unilaterally and through numerous trade agreements. The government restricts foreign investment in several sectors of the economy. Reforms have strengthened the regulatory framework
and increased openness in the financial system, but domestic bank credit to the private sector
equals less than 20 percent of GDP.
Long-Term Score Change (since 1995)
RULE OF LAW
Property Rights
Freedom from
Corruption
314
–20.0
–20.3
GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending
+8.5
–7.9
REGULATORY
EFFICIENCY
OPEN MARKETS
Business Freedom +21.8
Labor Freedom
–3.1
Monetary Freedom +9.7
Trade Freedom
+19.4
Investment Freedom
0
Financial Freedom +30.0
2014 Index of Economic Freedom