Mexico is federal republic operating under centralized government. Operational risk in Mexico is moderate. Broad consensus on the largely pro-market thrust of economic policy and Mexico's participation in NAFTA help underpin legal guarantees for investors, although deficiencies in the courts weaken enforcement. The tax regime will need to undergo reform in the medium term in order to raise the acutely low tax take, but political sensitivities will impede progress. Low standards of health and education are reflected in skills shortages. Violent crime is a problem for business but rebel movements are unlikely to impinge on the private sector or undermine political stability. The physical infrastructure, especially the electricity sector, is in need of fresh investment.
Mexico's political environment will become increasingly hostile in the approach to the July 2006 presidential election and the momentum of policymaking will be weak. There has been an escalation of political tensions surrounding a decision on April 7th by the legislature to strip the popular mayor of Mexico City, Andrea Manuel, Lopez Obrador, of his immunity from prosecution. Legislative output has remained at a virtual standstill. Full-year figures for 2004 show that higher than expected oil earnings offset below-budget non-oil earnings, preventing a deterioration in the fiscal results. The latest data confirm that real GDP expanded by 4.9% year on year in October-December and 4.4% in 2004 as a whole. Although export earnings growth has remained strong, it has been outweighed by growth of import spending, leading to a progressive widening of the merchandise trade deficit.
Mexico: Country outlook
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(2005, 10). Mexico Economic Overview. StudyMode.com. Retrieved 10, 2005, from http://www.studymode.com/essays/Mexico-Economic-Overview-68608.html
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"Mexico Economic Overview." StudyMode.com. 10, 2005. Accessed 10, 2005. http://www.studymode.com/essays/Mexico-Economic-Overview-68608.html.