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The Mexican economy is the 15th most sizeable economy in the world when ranked by nominal gross domestic product. Meanwhile, Mexico is ranked the 11th largest economy by purchasing power parity, as cited by the International Monetary Fund (IMF).
After an economic crisis in the mid 1990’s, Mexican authorities have sought to improve the country’s macroeconomic fundamentals by maintaining low but steady growth rates over the last few decades. Fortunately, Mexico was unaffected by the economic crisis of South America in the early 2000’s, however it did not escape the global recession of 2008. The Mexican economy experienced prolonged stagnation followed by the contraction of its gross domestic product by more than 5%. Among Latin American nations, the nation was one of the hardest-hit, making their recovery slow but somewhat predictable. This article will cover the financial system of Mexico, as well as a range of market information covering currency, futures, and stocks.
show moreFollowing the global financial crisis, Mexican officials stabilized their economy by reducing inflation and reducing interest rates to almost unprecedented lows. This move led to widespread income growth among employed citizens, however the disparity between employed urban populations and the rural agrarian workers also gradually increased. Mexico also started to see differences in prosperity between its northern and southern states which created division and a somewhat hostile environment between the two states. Additionally, the country’s infrastructure suffered as political scandals abounded and the income inequality scale was further tipped by the lack of labor law modernization and the manipulation of tax revenues in favor of the wealthy. The Organization for Economic Co-Operation and Development (OECD) note that Mexico’s tax revenues accounted for less of its gross domestic product than any other nation monitored by the regulatory agency.
Mexico boasts one of the hardest working labor forces among developed nations, according to the World Trade Organization as well as the OECD. This workforce is largely responsible for the rapid development of their service and industrial sectors, although private ownership also increased proving the country’s politicians and wealthy citizens were contributing as well. Post financial crisis, Mexico has sought to increase its infrastructure by expanding competition in telecommunications, natural gas, air-travel services, railroads, and electrical stability for the nation’s outlying, agrarian regions. These upgrades have strengthened the export-oriented economy and Mexican trade partnerships have increased to more than 30 countries, including Israel, Japan, and the European Union. Free trade agreements, tariff-free and tariff reduced trading has greatly helped to build a strong economic bond between Mexico and the aforementioned 30 countries. Known as the North American Free Trade Agency (NAFTA), the most impactful of these trade agreements was made with the neighboring nations of America and Canada. Originally put into place in the mid 1990’s and enacted in the mid 2000’s, this trade agreement resulted in some 90% of Mexico’s exports being traded with Canada and the United States alone. Additionally, these two neighboring nations contribute approximately 50% of Mexico’s imports. Of course, America’s current administration has sought to restructure this agreement, claiming it was made disproportionately, and the impact of that restructuring has been felt not only in the Mexican economy, but the world over.
Mexico’s primary stock exchange, known locally as Bolsa Mexicana de Valores (BMV), is one of two stock exchanges that operate in Mexico. The other, known as Bolsa Institucional de Valores (BIVA), boasts significantly less market capitalization. The main exchange is the second largest stock exchange in Latin America following the B3 market based in Sao Paulo, Brazil. The exchange also ranks as the 5th largest amongst the American continents. The BMV is owned by the BMV Group, which also owns the local derivatives market.
Mexico’s own currency, the Mexican peso ($), is the 8th most traded currency in the world. While it has reasonable growth value, the political instability of the state is responsible for volatile fluctuations in the currency’s value. When volatility is low and value has not been manipulated, the peso has seen gradual but steady growth indicating the economic support of the currency is favorable, if not strong. However geopolitical sentiment dictates that the emerging market will continue to remain volatile, and therefore, unpredictable.
Mexico’s monetary policy has been as accommodative as it can be; however, political instability within its own borders and also that of President Trump’s political stance within America, has given the peso a large drop in value. The renegotiation of NAFTA specifically was responsible for almost a 20% drop in the peso’s value as trade central to the local economy.
The Peso is most actively traded against the American Dollar (USD/MXN) and is also popular when traded against its other trade partners including oil-driven Canada and safe-haven Japan.
The peso has a short and straightforward history when compared to other global currencies. It was originally circulated by the Spanish when they first colonized the region in the late 18thcentury. The peso can be divided into 100 centavos, or cents, and is symbolized as $ or Mex$. The name peso comes from the Mexican word “pesos,” which means “weights,” and refers to gold or silver weights.
The Mexican stock exchange (BMV) is known primarily for its service-based companies listed on the stock exchange. In total, the market has approximately 140 companies listed with a comprehensive market capitalization of around $500 billion (US). The most liquid and largest of these companies are listed on the exchange’s number one index, the S&P/BMV IPC. The most profitable of these companies traffic in construction materials, commodity staples, telecommunication services, and utilities, which accurately reflect the workhorses of the Mexican economy. The following companies are verified to be some of the most profitable and prominent companies listed on the Mexican exchange.
