Mexico has been one of the most severely affected countries by the COVID-19 pandemic. It has the third-highest death toll in the world, and the economy went under a severe recession in 2020. With the struggles and the various ways, the pandemic has handicapped the key economic players in Mexico, we will not likely see Mexico recover fully until 2025 and regain its pre-pandemic economic status.
Mexico hugely relies on revenue from the manufacturing sector, agriculture sector and tourism. It is also diverse in its many industries like oil and mineral. Over the many years, it has seen a great dependence on America, and it essentially partakes in America’s economic health. In this article, we will talk about how the economic situation in Mexico currently is and how industries are attempting to respond and recover from the dire effects of a pandemic.
Recovery efforts in Mexico
As aforementioned, there has been a huge reliance on America. In fact, the very public policy of Mexico has evolved and shaped itself due to its unequal partnership with America. This long-standing partnership has been referred to as unequal because America has been a dominant player in the world market, with many countries ready to export to it.
But every time America experiences a positive movement in its economy, it is safe to say that Mexico inevitably benefits from this because of the demand from America for Mexican exports. Many immigrants work in America who send money to their families in Mexico to support themselves financially, whether for personal or business purposes.
Hence, it is important for the solutions to now be more local. The good news is that Mexican Agriculture has not taken a hit in the pandemic. Hence, it can be a great boon for slowly and gradually reviving the economy and GDP of Mexico.
Mexico has so far refused to think about stimulus packages or act on the emergency by providing aid. The government is leftist and believes in austerity. Hence, the policy has been seen as the instrument for recovering the economy. The Austerity law has managed to reduce the many expenses involved. Salaries have been reduced. In fact, the President Andrés Manuel López Obrador has himself reduced his salary. Hence, the focus is mainly on recovering the economy.
Mexico has also suffered because of its lack of investor friendliness. There has been a great amount of uncertainty looming over Mexico’s government policies, which can make for an unfavorable business environment and thereby affect investment. For instance, the IT industry in Mexico is in dire need of investment. Also, we see many of Mexico’s projects such as airports, gas pipeline contracts and breweries were not completed, which has immensely affected the economy.
Many of these projects had a lack of manpower because of the COVID-19 restrictions. The demand for natural gas and electricity fell considerably in the pandemic. Mexico also faces a considerable public debt, and it has focused its efforts on paying this debt. Most of its resources have gone to paying off the debt.
Because of the slow action of the government and the poor health services, the spread of the virus has severely affected the economic movement. Many small and medium-sized enterprises have suffered greatly. Mexico witnessed millions of its businesses struggling to survive.
Many of these businesses have managed to stay afloat because of e-commerce platforms, diversification of the supply chains, and innovative and new products and services to cater to the market. People are also working from home more.
In fact, finance technology or fintech has been beneficial for many of these businesses. The development of fintech in Mexico has been promising. These financial service solutions benefit banks with atm services and cash flow management. Digitalization has helped Mexico in these difficult times. With the rise in the many shopping applications, there are positive signs of gradual revival.
The tourism industry is also slowly picking itself up again. Mexico is slowly enjoying a reasonable influx of tourists. The approach to tourism has been changed as per the needs of the pandemic. It is important not to let tourism go stagnant as tourism is one of Mexico’s most significant areas of revenue. Resorts and hotels are thinking in unique and creative ways to provide a safe and enjoyable experience.
It is important to make sure that vaccinations are distributed properly as the recovery of Mexico from the spread of the virus is concomitantly the recovery of its economy. It is also important to put efforts into ensuring that there is no corruption and that resources are allocated efficiently and sincerely.
While Mexico has suffered deeply across many industries, it has shown a great amount of resilience in agriculture, education, and professional services. With tourism also making a slow return, there are many positive signs that Mexico is on its road to recovery.