Mexico Pest Analysis

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Mexico PEST Analysis

Executive Summary
Mexico has resulted in recent years as one of the most promising emerging economics nevertheless the downturn occurred in 2009 under the influence of the crisis in the United States. In 2010 the economy has restarted its growth trend, which according to the forecast will bring the Country among the elites of world economy. This short paper explains the fundamental factors determining Mexico economic growth using the PEST Analysis Framework. In particular it focus on how International Business activities has contributed to economic development of the Country, offering also an once-over on the main industry involved in this process.

Mexico PEST Analysis
Approaching the research for this paper I went through an article that caught my attention and made me consider how important could be to understand the growth of Mexico in recent years. The first lines of this article tell “Mexico will overtake Italy to become the world's 10th largest economy (in terms of GDP at purchasing power parity) by 2020.” (Euromonitor International, July 2010) This means that in less than a decade Mexico could abandon the Next Eight group of G20 taking place of Italy, my “decayed” home-country, among the ten most developed economies of the world.

Going beyond the disappointment for the bad performance of Italian economy, it’s remarkable that for the first time a country from Latin America is going to enter the elite of world economies. For this reason it was really interesting to deepen the factors that are leading Mexico growth and PEST Analysis resulted the perfect instrument for this investigation. P – Political Environment

Mexico has been a Federal Republic since 1917, year in which the Mexican Constitution was issued. After a period of instability that followed the revolution, the Government was controlled for 71 years by the Institutional Revolutionary Party (PRI) formed in 1929 (Bureau of Western Hemisphere Affairs, December 2010). Only in July 2000, after a period of economic recession in the mid-1990’s, President Vicente Fox Quesada from National Action Party (PAN) was elected in what were considered the firs democratic and fair elections in Mexican history (Bureau of Western Hemisphere Affairs, December 2010). Since then an important period of reforms took place in order to respond to the demand for greater accountability and transparency of public institutions and to fight corruption, drug violence and crime in the Country. The following President Felipe Calderón Hinojosa, elected in 2006 from PAN, continued the reform agenda implemented by Fox, improving public safety, fighting drug cartels, promoting greater foreign investment and enhancing Mexico’s economy competitiveness through structural reforms of the pension and labor laws (Library of Congress, July 2008). This period of reform has improved the political environment in Mexico, nevertheless several problems remain especially considering corruption and crime. As shown in Exhibit 1 Mexico ranked 89th out of 180 countries in Transparency International's 2009 corruption perceptions index. To respond to this problem the government in 2010 fired almost 10% of federal police force (Euromonitor International, September 2011). Crime and in particular drug and people traffic across the borders with the U.S. are the main pains for Mexican political situation. The Country also shows one of the highest murder rates of Latin America (Exhibit 2). These problems also affect business security in fact, according to Euromonitor, in 2008 the Mexican Government spent around 8% of its GDP facing the expenses generated by crime and insecurity in the Country. Mexico has benefited for several years from foreign direct investments (FDI) from the U.S. that drove the GDP growth since 2008, when the economic downturn in North America affected also Mexican economy, leading in the Government to hold public debt for Mx$5,608,941 million,...
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