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12 Sep 2023

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Mexico Faces Digital Challenges Even as Trade Grows

“The new Cold War is a business opportunity, and Mexico looks better placed than almost any other country to seize it,” according to a new Bloomberg report. The report notes that Mexico has just passed China as the US's largest trading partner, given recent tension between the world's two largest economies. Mexico now comprises 15% of total US trade activity, just edging past China and a couple of percentage points ahead of Canada.

Yet the report also notes that Mexico has averaged a disappointing 2% annual GDP growth over the past 30 years, letting similarly developed nations Turkey, Poland, and Malaysia all catch and surpass it in per-person income. Indeed, according to IDC Research, Poland and Malaysia have developed at a pace that now puts them in the category of Edge Countries, a term IDCA Research uses to define nations that are on the edge of being fully develop

Mexico remains in the third income tier, Emerging Nations, as does Turkey. But the latter nation scores slightly above the world average in IDCA Research's Digital Readiness of Nations Index, while Mexico sits below the world average. The country also trails its sibling “Big Three LatAm” economies, Brazil and Colombia, in the index.

Mexico's index score is dampened mostly by high greenhouse-gas (GHG) emissions levels, driven by loose emissions standards for its vehicles and the emissions produced by its relatively large oil production (it's the world's 12-largest producer).

A relative lack of sustainable energy (about 15% of the grid, compared to 19% in the US and 24% worldwide) also hurts Mexico's score. Relatively undeveloped Digital Infrastructure and continued high levels of perceived corruption also have negative impacts on Mexico's index score.

Mitigating the country's current weaknesses are Mexico's proximity to and trade agreements with the US, as the Bloomberg report notes. A former central bank head is quoted as saying, “The reason (investors) turn and look at Mexico, and that Mexico is attractive, is that it’s already integrated into the United States.”

Graphic from data by U.S. Census Bureau

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