María Elena Sierra Díaz, CEO, AS Consultores, Mexico
In 2024, Mexico faces significant economic, political, and security challenges that have affected its stability and growth. Disregard for judicial mandates, recurring logistics crises at ports, and increasing insecurity from drug cartels have placed the country in a delicate situation. Additionally, regulatory uncertainty and dependence on foreign trade exacerbate economic difficulties. Despite these challenges, viable solutions can restore confidence, improve competitiveness, and ensure sustained economic growth.
Economic Overview: Gross Domestic Product and Trade Balance
Mexico’s economic growth has been moderate, with Gross Domestic Product (GDP) growth estimated at 2.5% in 2023. However, projections for 2024 are more conservative, with potential growth of just 1.8% due to political uncertainty and declining foreign investment. Mexico’s economy is highly dependent on foreign trade, with exports and imports representing 80% of GDP. However, the country’s trade balance has historically been in deficit, reaching over $20 billion in 2023.
This deficit arises from Mexico’s need to import machinery, inputs, and capital goods for industrial production, placing the country in a vulnerable position to global trade fluctuations. Logistics crises, insecurity at ports and borders, and a lack of infrastructure investment limit Mexico’s ability to fully leverage its strategic position in international trade.
Key Challenges for Economic Growth
- Legal certainty and security: Disregard for judicial independence and rising insecurity from drug cartels have eroded investor and business confidence. Mexico must ensure a predictable and secure legal framework to attract foreign and domestic investment once again.
- Infrastructure logistics crises: Ports, airports, and borders are critical points for foreign trade. A lack of strategic infrastructure investments has created bottlenecks and delays in the flow of goods, undermining Mexico’s competitiveness in global supply chains.
- Dependence on foreign trade: Mexico heavily relies on exports of automotive manufacturing, electronics, and oil, as well as imports of intermediate and capital goods. This imbalance in the trade balance makes the country vulnerable to global shifts in demand and input prices.
- Insecurity as a barrier to development: Violence from drug cartels affects not only public safety but also business operations in key regions. A lack of effective government response has created an insecure environment, discouraging investment and raising logistics costs.
Solutions to Address These Challenges
To overcome these obstacles and achieve sustained economic growth, the following solutions must be implemented:
- Open dialogue between business leaders and the federal government
Ongoing dialogue between the private sector and the government is essential to create a stable economic environment. Businesses need clear rules and regulatory stability to plan long-term. The government should consult business leaders before implementing significant changes to economic and tax policies. This would help build trust, improve competitiveness, and design incentives that promote investment.
- Restore legal certainty and strengthen security
Strengthening the rule of law is key to restoring confidence in Mexico. Respect for judicial independence is essential to ensure that businesses operate in a secure legal environment. The government must commit to protecting judicial institutions and ensuring public safety, particularly in industrial and logistical areas. Investing in modernizing security forces and coordinating between different levels of government will help combat drug cartels and reduce insecurity.
- Invest in logistics infrastructure
To improve competitiveness and take advantage of Mexico’s strategic position in international trade, investment in modernizing ports and airports is necessary. This includes enhancing the operational capacity of major ports like Manzanillo and Lázaro Cárdenas and making the Felipe Ángeles International Airport (Santa Lucía) an efficient logistics hub. Additionally, strengthening land logistics corridors and ensuring security on key trade routes will enable greater efficiency in the movement of goods.
- Support for logistics digitization and modernization
Digitization is essential to improve efficiency in international trade. Mexico should implement advanced technologies to monitor cargo in real-time, streamline customs processes, and enhance connectivity between different logistics nodes. Adopting digital solutions will not only reduce delivery times but also increase transparency and lower operating costs.
Conclusion
Mexico faces major challenges in 2024, but also has the opportunity to implement solutions that ensure sustained economic growth and enhance its competitiveness in international trade. Open dialogue between the government and business leaders, strengthening the rule of law, investing in logistics infrastructure, and adopting advanced technologies are crucial steps for the country to regain economic stability and competitiveness. Through these measures, Mexico can restore confidence in its economy and attract the investment it needs to thrive.