Mexico City’s Economic Recovery

Mexico City is succeeding economically. Despite the COVID-19 pandemic and the war in Europe, including the disruptive effects on energy and food prices, global supply chains and inflation rates, this year’s economic perspective for the Mexican capital looks promising in terms of jobs and business creation, foreign direct investment, and exports. After two years since the first COVID-19 wave arrived in Mexico City in March 2020, causing a substantial lockdown, economic recovery is on its course to completion.

Before describing the city’s economic outlook, it is important to highlight that Mexico City has a unique advantage: it is the most competitive city in the country. According to the Mexican Institute for Competitiveness (IMCO), the city ranks once again in first place in the State Competitiveness Index 2022 edition and is the only one with a very high level of competitiveness. The city has a sustainable management of the environment; an inclusive, prepared, and healthy society; and world-class pioneering sectors. Among its strengths, Mexico City is No. 1 in the following indicators:

• Economically active women: 45 percent of the female population.
• Population with higher education: 39 percent of the population older than 25 years.
• Life expectancy: 76.7 years on average.
• Medical and nursing staff: 5.4 for every 1,000 people.
• Research centers: 2.4 for every 100,000 economically active people.
• GDP per capita: US$20,292.
• Economic efficiency of water and agriculture: US$11,606 for every cubic hectometer.
• Energy intensity of the economy: 164kw hours for each US$1 million of GDP.
• Economic diversification: 941 economic sectors in the economy.
• Interaction with the government by electronic means: 42 percent of the population has had at least one interaction.
• Internet access: 76 percent of the population.
• Air cargo: 63,060kg for every 1,000 people.

Such indicators draw attention from companies and investors from around the world. In fact, Mexico City is the country’s Foreign Direct Investment (FDI) epicenter. Each year, even during the pandemic, the city received more FDI than any other state. For the first quarter of 2022, Mexico City captured a record-breaking US$7.9 billion. This represents 41 percent of all investment received nationwide and more than the states of Jalisco, Nuevo Leon, Tamaulipas, Baja California, State of Mexico, Chihuahua, Guanajuato, Veracruz and Queretaro combined. Between January-March 2019, the city got US$3.3 billion of FDI, in 2020 it was US$4.7 billion, and for 2021 it was US$3.1 billion. The FDI captured in 2022 is 2.5 times that of the first quarter of last year. The closest amount dates to the third quarter of 2001 with US$7.3 billion.

The FDI received so far this year went to 1) Information in Mass Media, 2) Financial and Insurance Services, 3) Transportation, Post Office and Storage, and the 4) Chemical Industry, in order of importance. Meanwhile, the top investor countries were the United States (US$2.1 billion), Spain (US$556.8 million), France (US$398 million) and Canada (US$350.1 million).

These investments demonstrate the work of the government of Mexico City in providing certainty to investors. In Vallejo, for example, we are simplifying construction procedures and permits, while reducing resolution times to attract more companies like Netflix, Amazon, Mercado Libre, O'Donnell, Fedex, and Doppelmayr, which are already investing in the city. The economic structure of the capital city is stronger than ever and its value chains are strategic for international trade in Mexico.

Despite the complexity and uncertainty of the present global context, Mexico City has significant foreign trade that drives economic recovery. In terms of international sales, which is the amount of foreign sales by companies with a tax address in Mexico City, these rose to US$11.7 billion in February 2022. Compared to the same month of 2019, before the pandemic, international sales increased 13 percent. It is the same case for international purchases, which increased by 16 percent between February 2019 (U$10.7 billion) and February 2022 (US$12.8 billion). Regarding merchandise exports, Mexico’s capital exported goods totaled US$727.2 million in the last quarter of 2021, exceeding 2019’s results for the same period. It is noteworthy that 50.2 percent of Mexico City's exports are concentrated in the chemical and electrical industries.

In terms of employment, the results are also satisfactory. The employed population stands at 4,385,718 in 2022, representing an increase of 13.15 percent compared to the 3,870,454 people employed in 2021. Also, the rate of employment increased from 92.6 percent to 94.2 percent in the first quarter of 2022. By contrast, the unemployment rate fell from 7.4 percent to 5.8 percent in the same period. Another relevant fact has been the creation of 22,355 formal jobs in just the first three months of the current year. It is worth mentioning that this growth has continued with the same upward trend since 2021. Indeed, according to the Mexican Social Security Institute (IMSS), 110,000 new formal jobs have been registered since March of last year.

A key part of the economic recovery plan for Mexico City has been the financial support to small and medium size businesses. The government of Claudia Sheinbaum has allocated more economic resources for productive sectors than ever before. From December 2018 to May 2022, the Social Development Fund (FONDESO) provided 141,909 credits to micro and small businesses worth US$70.3 million. That is almost three times more funding than in the entire previous administration. In addition, the Ministry of Economic Development (SEDECO) worked with the development bank National Financial (NAFIN) to provide 161,000 credits for projects in the automotive industry, industrial real estate, and small businesses for a total of US$31.3 billion through the Impulso NAFIN+CDMX program, designed specifically for the economic recovery plan. These credits have allowed the creation of 132,261 jobs and preserved 46,156 jobs in the city. Moreover, in the period from January to May 2022, SEDECO and FONDESO have given a total of 185 courses, providing training to over 81,000 people to promote the development of business skills, employment, and economic inclusion.

Finally, the economic recovery of Mexico City is even more evident when we look at the number of businesses in the city. According to the Electronic System of Commercial Notices and Permits (SIAPEM), a single window created to open a low impact business like cafeterias, shops, offices, pharmacies, or beauty salons in less than 10 minutes, registered 7,901 new economic units and 68,352 new jobs in the first three months of 2022, the highest number on record since 2011. Similarly, the National Statistical Directory of Economic Units (DENUE) reports an increase from 470,367 economic units in April 2020 to 482,233 by the end of May 2022. That is a positive balance of 11,866 new businesses in spite of the businesses that closed down.

The government of Mexico City continues to work for a full economic recovery. Employment and investment are growing, especially in economic sectors closely related to the global economy. Most businesses have been notably resilient to external shocks and that is in part due to the very high level of competitiveness of Mexico City.