Mexico Sees Unequal Economic Recovery

After the economic recovery seen in 1Q2021, Mexico’s economy is beginning to stagnate. Similarly to the recovery in employment, many areas are being left behind. 

After a steep 18.7 percent drop in GDP during 2Q2020, Mexico’s economy is showing a gradual recovery and grew by 0.8 percent rise during the first three months of 2021, according to recent data from INEGI. However, economic activity is beginning to slow down, according to INEGI's most recent estimate, which registered a 0.2 percent drop in April. 

INEGI’s data shows that the recovery looks very different for some states than for others. An analysis by UNAM's Laboratory of Commerce, Economics and Business (LACEN) shows that the country's north accounted for 28 percent of the jobs registered with IMSS in March. While the northern region accounts for 5.5 million jobs, the southern region only accounts for 12 percent, only 2.1 million jobs.

As the report mentions, this inequality has been persistent over time and the observed disparity in employment is evident. A critical component of the economy's uneven recovery is related to the concentration of manufacturing businesses within the Manufacturing, Maquiladora, and Export Services Industry (IMMEX) program in the country's northern region.

Post-pandemic wages are also divided geographically, according to LACEN. In the north and center of the country, the average registered wage for January 2021 was MX$428.76 (US$21.64), while in the southern region it was MX$379.45 (US$19.15). During the months of confinement, unemployment insurance would have allowed millions of Mexicans to survive. However, the government of President Andrés Manuel López Obrador was among the ones offering the least economic support to counteract the pandemic. 

The case of Mexico City is particularly harsh. Compared to other states, the capital's economic performance began to deteriorate in 2019. In 2020, it suffered the worst slump after Baja California Sur and Quintana Roo, states highly dependent on tourism. According to INEGI, the City's economic activity fell 9 percent in the first quarter of the year.

The current administration has placed great expectations on the entry into force of USMCA to boost the Mexican economy. As a result, those with jobs linked to foreign trade, such as manufacturers, have regained the income they had before the pandemic. Meanwhile, millions more depend on tourism or offer other services that are not linked to foreign trade and live a very different reality.

And the lack of support is not the only policy that interferes with the country's economic growth, specialists agree. The cancellation of infrastructure projects, renegotiation of contracts signed during the previous administration, and the government's insistence on reversing laws in the energy sector do not encourage private investment.