Exporting More, Growing Less: Mexico's Uncomfortable Arithmetic

Let me start with a confession. I came to this subject in 1986, when a book landed on my desk: Dorothy Riddle's "Service-Led Growth." Against the orthodoxy of her time — which treated services as a residual sector, almost a parasite on industry — Riddle argued, with World Bank data in hand, that services do not merely create jobs and income; they lubricate and accelerate every other sector of the economy. Forty years later, the evidence has proved her right almost everywhere. Mexico, meanwhile, keeps debating as if the book had never been written.

And what 40 years it has been. NAFTA entered into force in January 1994; that same year we joined the OECD; then came the longest manufacturing boom in our history, the USMCA, and the nearshoring wave. Mexico did nearly everything the openness manual prescribed. Exports went from roughly 15% of GDP in 1994 to more than 40% today, and in 2025 we shipped a record US$664.8 billion abroad, 91.6% of it manufactured goods. We are the United States' top supplier, ahead of Canada and China.

Now the uncomfortable part: over that same stretch, GDP growth averaged about 2% a year, and income per person crawled at roughly 1%. Korea, which started poorer than us, lapped us several times. That is the pace of a country that preserves itself, not one that converges. Exporting more, it turns out, is not the same as growing more — and if the export model does not pull the rest of the economy along, the problem is not the export model. It is the disconnection.

Where the Leak Is

Follow the money inside our own statistics. According to INEGI, of everything that Mexico's global manufacturing plants produced for export in 2024, only 44.2% of the value was actually added in Mexico. The rest are imported inputs that enter, get transformed at the margin, and leave. Even the export industry's own council, Index, concedes that strengthening domestic supply is its unfinished homework. Our export sector operates, in practice, as an enclave: world-class, plugged into North America, and weakly connected backward to the domestic economy. We are two Mexicos that barely touch — the plant that competes with Stuttgart, and the workshop next door stuck in low productivity. Average them, and you get 2%.

The Parable of the Screw

If the aggregate feels abstract, look at the humblest industrial object. Mexico is the world's third-largest importer of screws, bolts, nuts, and washers — behind only the United States and Germany — buying around US$3.3 billion a year in the full category, nearly US$1.8 billion in threaded fasteners alone, mostly from the United States, China, Taiwan, Japan, and Germany. Policy has already reacted the old way: a 35% tariff since April 2024 and an antidumping case against China opened in October 2025. But a tariff without supplier development just makes inputs for every industry more expensive.

Here is what the tariff debate misses. In a real sourcing exercise our firm ran for a global buyer, we identified 217 Mexican fastener manufacturers. Two hundred and seventeen — the producers exist. After the buyer's technical and commercial audit, eight made the final list. The Mexican problem is not existence; it is certification, scale, and documented quality. And the demand is not hypothetical either: a Korean appliance maker operating in Mexico asked us to build local redundancy for 30% of its basic inputs — fasteners included — while accepting prices up to 50% above its Asian sources, because after the pandemic, supply security is worth more than the penny per piece. When a buyer offers a premium and still cannot find a supplier, the problem is not demand. It is supply. And supply can be built.

How We Actually Grow

The arithmetic of export-led growth has three multipliers, and they are really one argument seen from three angles. First, more value per exported dollar: raising domestic content by competitively substituting imported inputs — physical and intangible. Every additional percentage point of national content is billions of dollars that stop leaking and start irrigating the domestic economy. Second, supply chains that are both deeper and wider: supplier development is the highest-return industrial policy there is, because it attracts nothing new — it connects what is already here. Third, and least seen: the service sector as the transmission belt. An assembly plant will buy few bolts from the corner workshop, but it can buy engineering, software, training, logistics, and compliance from local firms — if they exist and are ready. That third multiplier is where this series is headed.

Success stories? Queretaro's aerospace cluster, the Bajío's automotive density, Guadalajara's digital ecosystem — all real, and mostly all inertia: the late fruit of decisions taken thirty years ago. Inertia keeps you moving; only force accelerates. Mistaking one for the other is the costliest diagnostic error we can make while the nearshoring window is still open. The answer to "how do we grow" is not at the customs booth. It is in the linkages — and building them is the subject of the next five pieces.