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Ten reasons why Mexico is the next big thing

Mexican flag

Mexico continues to emerge as an exciting investment option

By some estimates Mexico will become the seventh-largest economy in the world by 2050. Mexico currently has the third largest economy in the Americas behind the United States and Canada. Since the Covid-19 pandemic, Mexico has maintained annual economic growth of between 3% - 4% and the outlook remains positive for the future for a number of reasons. In this article we example ten reasons to be optimistic about Mexico - and why it may just be 'the next big thing'...

1 - US trade competition with China

Mexico stands to benefit from the ongoing trade tensions between the US and China. With its geographical proximity to the US, Mexico serves as an attractive alternative manufacturing hub for US companies looking to diversify their supply chains, 'near-shore', and mitigate risks associated with tariffs and geopolitical tensions. Mexico was the United States largest (no 1) goods export market in 2023 with $798.83 billion in trade with exports, with expectations that this will continue to grow in coming years.

See our July 2023 post about ongoing tension and strategic rivalry between China and the United States here: The challenges noted in this report have continued through 2024 and there are currently few indications that the underlying conditions will change in the short to medium terms.

2 - Strategically advantageous location

Mexico is in a geographically advantageous position. This includes being neighbour to the largest economy in the world - the United States, and the gateway to central and South America. Mexico has access to the Pacific Ocean on its West Coast and the Gulf of Mexico and Caribbean Sea on its East coast.

There are significant transport connections between Mexico and its region. The Texas-Mexico border is North America’s busiest gateway with 28 vehicle border crossings as well as seaports, rail lines, airports, pipelines and other crossings. As of 2019, more than $24 million in trade crosses the Texas-Mexico border each hour, and the number continues to grow.

Mexico - Unified Transportation Program (UTP) funding for US-Mexico border

US based Unified Transportation Program (UTP) funding for US-Mexico border investment - showing ongoing growth.

Increased U.S.‑Mexico trade has resulted in increased commercial motor vehicle (CMV) crossings along the Texas-Mexico border. In 2022, an estimated 5.1 million CMVs crossed from Mexico into Texas (approx 13,800 CMVs a day) which was an increase of 45 percent (1.6 million CMVs) from 2012. The five active rail border crossings on the Texas-Mexico border handled more than a million incoming rail cars from Mexico in 2022 which was a 35.3 percent increase (266,747 rail cars) since 2012.

The Mexican National Development Plan, initiated the Isthmus of Tehuantepec Development Plan which includes the Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT) rail link train and the opening of ten industrial parks and a gas pipeline. Modernisation of the Isthmus of Tehuantepec railway, expanded cargo and storage capacity in the ports of Coatzacoalcos, Veracruz and Salina Cruz, Oaxaca. Other plans include the extension of the highway to four lanes, expanding the airports at the Minatitlán and Ixtepec, improving connectivity (fibre optic and cellular), connectivity; and building a gas pipeline. An additional ten development centres will be created to support nearshoring investment by the private sector.

As part of a national port integration strategy, the Mexican government is implementing a port development plan, with an estimated US$1.24 billion investment. This includes investing and restructuring ports and integrating the governance arrangements.

US Mexico border

3 - United States-Mexico-Canada Agreement (USMCA) agreement

The US-Mexican relationship has been historically underpinned by the North American Free Trade Agreement (NAFTA). This was replaced in 2020 by the United States-Mexico-Canada Agreement (USMCA) agreement which further strengthened trade ties between the US and Mexico, making it easier for US companies to do business in Mexico.

The USMCA has been good for Mexico, with around 83.5% of its exports sold to the U.S. market in 2019. The volume and diversity of exports into the U.S. rose following COVID-19. From the US perspective total U.S. trade with Canada and Mexico hit a record $1.78 trillion in 2022.

The Canadian Government also reported the growth of Canada-Mexico trade following USMCA with over $49.7 billion in two-way trade in 2022. Mexico is Canada's third largest single-country merchandise trading partner and Canadian Direct Investment in Mexico was $33B in 2022.

4 - Access to skilled low cost labour

Mexico offers a competitive advantage with its relatively low-cost labor compared to the US and other developed countries. This factor continues to attract foreign investment, particularly in industries such as manufacturing, where labor-intensive processes can significantly impact production costs. The average hourly manufacturing wage in Mexico was $2.70 in 2021, significantly lower than the average manufacturing wage in the US, which was $24.91 the same year, according to data from Trading Economics.

Mexico also boasts a young and growing population, with a median age of around 29 years old. This demographic could help can drive economic growth through increased productivity, consumption, and labour force participation.

5 - Rise of Manufacturing Capability

Mexico has a well established manufacturing base that includes the likes of electronics and automobiles.  General Motors, Ford and Chrysler have been in Mexico since the 1930s, Volkswagen and Nissan since the 1960s, and Kia, Audi, BMW, and Mercedes-Benz over subsequent decades. Mexican manufacturing capabilities has since diversified to the likes of aerospace, electronics, and medical devices.

U.S. foreign direct investment (FDI) in Mexico (stock) was $130.3 billion in 2022, a 7.6 percent increase from 2021. U.S. direct investment in Mexico is led by manufacturing, non-bank holding companies, insurance, and finance. This investment fueled the expansion of production capacities, technological advancement, and skill development, and built Mexico into a global manufacturing powerhouse.

Mexican manufacturing

6 - Mexican government policies

The policies of the Mexican government in recent years has given rise to optimism around the stability and growth opportunities of the country. These policies include labour reforms, financial management, and an investment ready environment. The government has sought to pursue a fiscal strategy that keeps the country’s debt-to-GDP ratio low while managing social spending and reducing inequality and poverty levels. Mexico has the lowest levels of unemployment in its history.

Further, current policy settings have driven stronger domestic consumption, supported the stability of country’s economic growth, and reduced dependency upon currency devaluation. Foreign investments in Mexico have also become a key factor in economic growth with public investment rising to 21.0% and private investment by 19.7% in 2023 with much directed to infrastructure, connectivity, transportation, substantially boosting manufacturing capacity.  

Government investment has included an estimated $44bn in infrastructure investment covering transportation (highways, rail, ports and airports), as well as tourism, and telecommunications.

7 - Cultural connections to the US

Mexico's cultural and linguistic affinity with the United States provides a conducive environment for business and trade relations. Spanish is the national language of Mexico and is the second most common language in the United States with 41.3 million people or13.2% of the population speaking Spanish.

The Pew Institute estimated that the U.S. Hispanic population hit 62.1 million in 2020, making up 19% of the U.S. population and making it the second largest ethnic group. It was also one of the fastest growing groups with the Hispanic population growing 23% and representing around half of U.S. population growth. Within the Hispanic population, around 61.5% are estimated to be of Mexican origin (either born in Mexico or could trace their ancestry to Mexico).

This cultural understanding enables easier connections between people and businesses in both countries, underpinning economic ties.

8 - Gateway to the American continent

Mexico's strategic location provides access to a vast network of markets in Central and South America. Through regional trade agreements such as the United States-Mexico-Canada Agreement (USMCA) and its participation in organizations like the Pacific Alliance, Mexico can leverage its position to enhance trade and investment flows with neighboring countries, thereby expanding its economic reach beyond North America.

Mexico has also signed Free Trade Agreements with 46 different countries, and consequently expanded the number of logistics hubs in many states. Specific states benefiting from this growth include Tijuana, Baja California, Ciudad Juárez and Chihuahua, Guanajuato, and Monterrey.

Mexican airline

9 - Tourism

Mexico's rich cultural heritage, temperate climate, and diverse landscapes make it a top tourist destination. Mexico has it all - from UNESCO World Heritage Sites, ancient ruins, architecture, colonial cities, natural reserves, cultural festivals, and beach resorts. The nations unique culture and diversity makes it one of the most popular global tourist locations.

In 2019, Mexico welcomed over 45 million international tourists, generating approximately $24 billion in revenue from foreign visitors, according to the World Bank. The tourism sector plays a vital role in Mexico's economy, providing employment opportunities and driving growth in related industries such as hospitality, transportation, and entertainment.

Tulum beach Mexico

Medical tourism is another aspect of Mexico's broader tourism market. Mexico's growing healthcare industry, coupled with its proximity to the US, has positioned it as a prominent destination for medical tourism. With affordable healthcare services, excellent facilities, and skilled medical professionals, Mexico attracts patients seeking high-quality treatment at lower costs. The medical tourism market in Mexico was valued at $5.8 billion in 2019 and is expected to significantly growth in the coming years, further contributing to the country's economy.

10 - The Mexican lifestyle

The rising number of expatriates, particularly Americans and other Westerners, relocating to Mexico and contributing to its economic growth and the societal connections. Mexico's favorable climate, affordable cost of living, and vibrant culture attract retirees, digital nomads, and remote workers seeking a better quality of life. According to the Mexican government, there were over 1.5 million Americans living in Mexico as of 2020, forming thriving communities that stimulate local economies through consumption, entrepreneurship, and real estate investment. This number is expected to grow in coming years as trade and business opportunities in Mexico increase.

Mexican town


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Last updated: May 2023

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