WORLD RANK:

66
REGIONAL RANK:

12
MEXICO
ECONOMIC FREEDOM STATUS:
MODERATELY FREE
M exico’s economic freedom score is 64.7, making its economy the
66th freest in the 2019 Index. Its overall score has decreased by 0.1
point, with declines in judicial effectiveness, trade freedom, monetary
freedom, and labor freedom overwhelming a significantly higher score
for fiscal health. Mexico is ranked 12th among 32 countries in the Ameri-
cas region, and its overall score is above the regional and world averages.

Mexico’s $2 trillion GDP reflects the benefits of regional trade, so the

U.S.–Mexico–Canada Agreement signed in 2018 is vital. The new gov-
ernment is likely to continue reforms in the energy, financial, fiscal, and
telecommunications sectors with the long-term aim of improving com-
petitiveness and economic growth across the economy. Growth in 2019
should be aided by higher oil prices, but the economy is still constrained
by low productivity, a still-large informal sector that employs over half of
the workforce, weak rule of law, and corruption.

ECONOMIC FREEDOM SCORE

64.7 ( DOWN 0.1 POINT )

0 50 60 70 80 100

REGIONAL AVERAGE
(AMERICAS REGION) 59.6 60.8 WORLD
AVERAGE

RELATIVE STRENGTHS: HISTORICAL INDEX SCORE CONCERNS:

Fiscal Health and Trade Freedom CHANGE (SINCE 1995): Government Integrity and
+1.6 Judicial Effectiveness

FREEDOM TREND QUICK FACTS

80

POPULATION: UNEMPLOYMENT:
123.5 million 3.4%
70
66.4 GDP (PPP): INFLATION (CPI):
65.2 64.8 64.7
63.6 $2.5 trillion 6.0%
2.0% growth in 2017
FDI INFLOW:
60
5-year compound
$29.7 billion
annual growth 2.5%
$19,903 per capita PUBLIC DEBT:
54.2% of GDP
50

2015 2016 2017 2018 2019 2017 data unless otherwise noted. Data compiled as of September 2018

BACKGROUND: The Institutional Revolutionary Party (PRI) ruled Mexico for 70 years until its defeat by the
center-right National Action Party in 2000. Although the PRI regained the presidency in 2012 under former
President Enrique Peña Nieto, it was greatly weakened in the July 2018 landslide victory of populist Andrés
Manuel López Obrador, whose MORENA party also won a substantial majority in Congress. López Obra-
dor has promised to fight corruption. His post-election support of a renewed North American Free Trade
Agreement signaled a more pragmatic approach to governance and a welcoming attitude toward badly
needed foreign investment, but López Obrador must prevail over Mexico’s powerful drug cartels to reverse
surging homicide rates.

300 2019 Index of Economic Freedom

 WORLD AVERAGE | ONE-YEAR SCORE CHANGE IN PARENTHESES

12 ECONOMIC FREEDOMS | MEXICO

RULE OF LAW GOVERNMENT SIZE
(+0.5) (–4.1) (–0.6) (+0.1) (+0.1) (+13.4)

100 100

80 80

70 70

60 60

50 50

59.1 34.9 26.3 75.8 78.2 83.2

0 0
Property Judicial Government Tax Government Fiscal
Rights Effectiveness Integrity Burden Spending Health

Property rights are protected, but the government
has made the property registration process more
expensive. The judicial system is weak. Frequent
solicitation of bribes by bureaucrats and officials,
widespread impunity, and the high incidence of
criminal extortion undermine the rule of law. Corrup-
tion is pervasive and fed by billions of narco-dollars.
More than 100 politicians were murdered in 2018.
The top individual income tax rate is 35 percent, and
the corporate tax rate is 30 percent. Other taxes
include a value-added tax. The overall tax burden
equals 17.2 percent of total domestic income. Over
the past three years, government spending has
amounted to 26.9 percent of the country’s output
(GDP), and budget deficits have averaged 2.6
percent of GDP. Public debt is equivalent to 54.2
percent of GDP.

REGULATORY EFFICIENCY OPEN MARKETS

(+0.3) (–1.2) (–3.3) (–6.6) (No change) (No change)

100 100

80 80

70 70

60 60

50 50

67.8 58.6 75.9 81.4 75.0 60.0

0 0
Business Labor Monetary Trade Investment Financial
Freedom Freedom Freedom Freedom Freedom Freedom

There is no minimum capital requirement for launch-
ing a business, but completing necessary licensing
requirements remains costly. Rigid labor laws that
make the hiring and dismissing of employees costly
provide an incentive for small companies to operate
outside of the formal sector. The government began
the liberalization of its energy market by deregulat-
ing gasoline prices in 2017.
The combined value of exports and imports is equal
to 77.6 percent of GDP. The average applied tariff
rate is 4.3 percent. As of June 30, 2018, according
to the WTO, Mexico had 236 nontariff measures in
force. The banking system remains relatively well
capitalized, and foreign participation has grown.
About 38 percent of adult Mexicans have access to
an account with a formal banking institution.

The Heritage Foundation | heritage.org/Index 301