The United States is Mexico’s most important trading partner, and U.S.-based companies account for more than half of Mexico’s foreign investment. The United States is also the source of between two-fifths and one-half of Mexican imports and the destination for some four-fifths of the country’s exports. In contrast, trade with Mexico represents only about one-tenth of total U.S. trade. Thus, Mexico is far more dependent on the economy of its northern neighbour than the United States is on the Mexican economy. Although both countries were members of NAFTA and belonged to the World Trade Organization (WTO), both of which were founded on pledges of free and open trade, Mexico has protested the deleterious effects of subsidized agricultural exports from the United States, including corn, high-fructose corn syrup, and apples. Under NAFTA there was mounting concern that these and other U.S. exports were forcing millions of Mexican smallholders off their farms and into service-based or industrial jobs in maquiladoras or in the United States. Meanwhile, many U.S. workers were concerned about the loss of their jobs to maquiladoras. In November 2018 Mexico, the United States, and Canada entered into a new trade agreement, the United States–Mexico–Canada Agreement (USMCA), which preserved much of NAFTA while also introducing a number of significant changes.

Among Mexico’s major exports are machinery and transport equipment, steel, electrical equipment, chemicals, food products, and petroleum and petroleum products. About four-fifths of Mexico’s petroleum is exported to the United States, which relies heavily on Mexico as one of its principal sources of oil. Mexico’s major imports include machinery and transport equipment, chemicals, and consumer goods.

The quantity and value of Mexican exports (especially nonpetroleum exports) grew rapidly in the 1990s, largely in response to the government’s neoliberal economic policies and to the creation of NAFTA. Since then, vast amounts of duty-free imports and exports have flowed between the United States and Mexico within a narrow border zone, especially on roads linking Tijuana, Mexicali, Juárez, Hermosillo, Monterrey, and other major cities with the border.

Services

When banking and finance are figured in, the service sector—including commercial activities, tourism and other entertainment, business services, and the various levels of government—accounts for about two-thirds of GDP. Commerce alone accounts for about one-fifth of GDP and government for roughly one-sixth.

Tourism is a major contributor to the economy. Because of its cultural diversity, tropical settings, relatively low prices, and easy accessibility, Mexico exerts a strong attraction on U.S. tourists, who constitute the majority of visitors to the country. Tourists once traveled mainly to Mexico City and the surrounding colonial towns of the Mesa Central, as well as to the monumental ruins of Teotihuacán, just northeast of Mexico City. Although Mexico City is still a major destination for visitors, its reputation has been sullied by social and environmental problems, notably high levels of air pollution and crime. Tourists also still flock to the beaches of the world-famous resorts of Acapulco, Puerto Vallarta, Ixtapa-Zihuatanejo, Mazatlán, and Puerto Escondido. But Cancún and Cozumel (along the eastern shore of the Yucatán Peninsula) and Cabo San Lucas (of southern Baja California Sur) have become even more attractive to international travelers since the 1960s as a result of the construction of new hotels, airports, and other facilities. Cancún now attracts more international visitors per year than Mexico City. Among the more-visited Mayan ruins are Chichén Itzá, Tulum, Uxmal, and the area of ruins and coral reefs called the “Riviera Maya,” to the south of Cancún.

Labour and taxation

About two-thirds of the Mexican labour force is employed in the service sector and about one-sixth in manufacturing. The agricultural sector, which employs less than one-fifth of Mexican workers, is made up largely of subsistence farmers and labourers. About two-fifths of Mexican adults participate in the labour market. Women greatly increased their presence in the workforce from the 1970s to the early 21st century, owing in part to the demand for young women on maquiladora assembly lines as well as the need for supplemental income in many families. However, women’s wages generally lag behind those of men. The average workweek in the manufacturing sector is about 45 hours. The right to engage in strikes (labour stoppages) is guaranteed by law, and a large percentage of Mexican workers are unionized. The largest and most powerful union is the Confederation of Mexican Workers, which has historically had ties with the Institutional Revolutionary Party (PRI).

Minimum-wage laws have been in effect since 1934, but they are difficult, if not impossible, to enforce for workers in the informal (shadow) economy, including many street vendors and day labourers. Official minimum wages are determined by the type of work and the cost of living in specific regions. Urban job classifications pay higher minimum wages than rural categories, and the highest minimum wages are paid in Mexico City and the border cities of Tijuana, Mexicali, and Juárez.

The government collects several forms of revenue, including individual income taxes, corporate income taxes, and sales taxes. Value-added taxes, excise taxes on alcohol and cigarettes, production taxes on mining, and local levies on real estate are also important. Earnings from petroleum exports, via the state-owned company Pemex, have been considerable in times of elevated oil prices.

Transportation and telecommunications

Mexico has had difficulty creating an integrated transportation network because of the country’s diverse landscape and developing economy. As a result, several parts of Mexico lack good rail and road connections, especially from east to west across the northern part of the country. Although Mexico was one of the first countries in Latin America to promote railway development, the extensive formerly state-owned railway system remains inefficient; however, significant improvements were initiated after the government privatized the system. Major rail routes extend outward from Mexico City northwestward along the Pacific coast to Mexicali, northward through the Central Plateau to El Paso and Laredo, Texas, eastward via the Gulf Coastal Plain to the Yucatán Peninsula, and southeastward to Oaxaca.

Most passengers and freight are transported via Mexico’s highway system, notably by interstate buses and cross-country trucking, respectively. Trucks also carry most of the exports from Mexico’s maquiladoras to U.S. markets. As with the railroad, all major highways lead to Mexico City. Several link northern border cities to the capital, and others connect the Yucatán Peninsula and the Guatemalan border with the Mesa Central. The Pan-American Highway runs from Ciudad Cuauhtémoc, on the border with Guatemala, to Nuevo Laredo, on the border with the United States, passing through Mexico City. Although many highways have been improved, Mexico’s roads are barely adequate to serve national needs. In addition to traffic hazards such as potholes and a shortage of guardrails on mountain roads, many roads have a dangerous traffic mix of overladen trucks, cars, pedestrians, bicycles, buses, and, in some areas, grazing animals. Traffic mortality rates are also affected by drunk driving, mechanical problems (notably poor brakes and nonfunctioning headlights), and a disregard for pedestrian safety.

The proliferation of trade and tourism between Mexico and the United States is reflected in the high volume of border crossings. Indeed, at the turn of the 21st century, more than one million people crossed the U.S.-Mexican frontier legally every day, in both directions. Moreover, each year tens of thousands of Mexicans and Central Americans make illegal attempts to enter the United States, largely in search of jobs and better opportunities.

Air travel has become a major mode of transportation for upper- and middle-class Mexicans. Domestic and international airports have been built throughout the country, largely to serve the growing tourist trade. In the 1990s the government began to privatize the airline industry. By the early 21st century the former national airlines, Aeroméxico and Mexicana, had been sold to private investors, and a number of new companies and increased competition resulted. Air service now reaches all tourist locations and most of the country’s small- and medium-sized urban centres.

The vast majority of Mexican households own one or more radios, and about three-fourths own a TV set. Cellular phone use increased rapidly since the mid-1990s. Personal computers and Internet use also rose in popularity and affordability, although not as rapidly as in the wealthier United States. Internet cafes are now found in nearly all major towns and cities.