PESTEL analysis of Mexico

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PESTEL analysis of Mexico

This detailed PESTEL analysis of Mexico aims to explore some of the political, economic, social, technological, environmental, and legal factors affecting Mexico today. Mexico is officially known as the United Mexican States and its capital is Mexico City. It is one of the most naturally beautiful countries in the world.

Political factors affecting Mexico

Mexico is a presidential democracy with the President being both the Head of State and Head of Government. The President is also the Supreme Commander of the Mexican Armed Forces who is elected for a six-year term by popular vote. Anyone who has held the post before is not allowed to serve again (Santander, 2019).

Mexico is the second largest country in Latin America by population. Mexico City, the capital of the country, is one of the biggest cities in the world. The country has good trading relations with the USA and Canada as evidenced by NAFTA Agreement. However, the announcement from the American administration of building a wall in the US-Mexican border has strained the country’s relations with the USA. Likewise, many analysts observe that Mexico has growing concerns over Brazil’s assertion of leadership in the region.

Mexico is a regional power and has a significant global presence. It is also on its way to be a global power by 2050. It maintains diplomatic relations with most of the countries in the world. It is also a founding member of the United Nations and participates as an active member in a very good number of international forums. Its historical position in international conflicts is neutral, and therefore relatively safe from the consequences of the international conflicts.

However, corruption is a massive problem in Mexico. The judiciary, police, politicians, and many governmental and non-governmental institutions have been accused of bribery and corruption. Many politicians have also been accused of misusing the government programs to assist poor people to gain political advantages. In fact, corruption poses a significant risk for both local and international companies operating in the country.

Economic factors affecting Mexico

Mexico is a member of the G20 and is the 15th biggest economy in the world. Its GDP in 2018 was 1,223.36 billion US dollars and 1,158.23 billion US dollars in 2017. The GDP has been growing at an average annual rate of 4.25 % for quite some time (Knoema, 2019).  It represents 1.97% of the world economy.

Cars, vehicle parts, delivery trucks, computers, and crude petroleum are the top exports of Mexico. Most of the exports of the country go to the USA, Canada, China, Germany, and Japan. The top imports are vehicle parts, refined petroleum, cars, computers, and petroleum gas which Mexico imports mostly from the USA, China, Germany, Japan, and South Korea (OEC, 2019)

Mexico is a key part of the MINT group (Mexico, Indonesia, Nigeria, and Turkey). MINT countries are considered to be the next emerging economic giants after BRICS (Brazil, Russia, India, China, and South Africa). Mexico is very open to foreign direct investment (FDI) and its FDI inflow was 31.6 billion US dollars in 2018.

The corporation tax in Mexico is 30% as of October 2019 while the individual income tax rate varies greatly and ranges from 1.92% to 35%. A Value-Added Tax is applied to the sale of most of the retail goods and services. The VAT rate is 16% in most parts of the country, while 11% in border areas.

Social factors affecting Mexico

Mexico is a country where affluence, poverty, natural beauty, and urban blight go side by side. As of December 2018, it has a total population of approximately 125.3 million. However, it is worth noting that different sources have come up with different figures concerning the country’s total population.

The life expectancy for men is 75 years and 80 years for women in Mexico. Spanish is the major language, while Christianity is the major religion in the country (BBC, 2018). Mexico is one of the most affordable countries in Latin America. Compared to many other cities in the continent, the rent and food prices in Mexico City are indeed lower.

However, there are some social challenges facing Mexico today. For instance, economic affluence is a dream for most Mexicans and the gap between poverty and richness is very wide. According to a number of sources, 53% of the country’s population is considered poor. Corruption is widespread, and thousands of people have been killed in violence in the past decade. Due to poverty and other social problems, many Mexicans risk their lives to go across the border to the USA to search for better life.

Putting social challenges aside, many socio-cultural aspects of Mexico have drawn worldwide attention and respect. For instance, family is seen the most-important element of the Mexican society. Mexican cuisine has created fans worldwide, notably in great cities such as Barcelona, London, Melbourne, Chicago, Los Angeles, and New York. Likewise, the Mexican football team has fans around the world as it is one of the best in the world.

Technological factors affecting Mexico

Technological environment is the next element to discuss in the PESTEL analysis of Mexico. As the as the second largest country in Latin America, Mexico has been a key target market of big tech giants such as Amazon, Facebook, Uber, Google, and many others. In fact, Brazil’s IT and communications sector is expected to represent 10.7 percent of the country’s GDP by 2022.

Guadalajara, the second-largest city in the country, has recently turned itself into a global centre for research and development, programming, and design (Lunchway Media, 2019). A bill passed by the Mexico Congress in March 2018 shows that country is eager to remove barriers and uncertainties about cryptocurrencies and crowdfunding technologies. It also shows that Mexico is ready to revolutionize its economy with technology.

Environmental factors affecting Mexico

Mexico is one of the most beautiful countries in the world. Its stunning beaches, desserts, landscapes, ancient historical landmarks, and weather make it one of the most visited countries in the world. It is also one of the top five countries in the world in terms of biodiversity. Copper Canyon, Sumidero Canyon, Mesoamerican Barrier Reef, Monarch Butterfly Reserves, Whale Sharks, Cenotes and underground rivers, the Sea of Cortez, and Pico de Orizaba are some of the top attractions that catch the attention of millions of tourists every year.

However, Mexico faces some serious environmental challenges. For instance, air pollution was so challenging and reached levels potentially dangerous to human health in May 2019 that Mexico City declared an environmental emergency and urged residents to stay indoors (BBC, 2019). Likewise, water pollution, toxic waste, and loss of essential water resources along Mexican-US border are some other environmental challenges facing Mexico today.

Legal factors affecting Mexico

Legal environment is the last element to discuss in the PESTEL analysis of Mexico. A detailed discussion on the Mexico’s legal environment is beyond the scope of this article; hence this minimal discussion. Mexican judiciary is free and independent. People, whether nationals or foreigners, are entitled to impartial justice. However, the image of this institution has been put in question because of corruption.

Employment rights are protected by the Mexican labour laws. Employers must provide their workers with a written contract. Workers are entitled to annual holidays and maternity leave. Discrimination against any worker on the basis of gender, age, disability, race, nationality, religion, social and marital status, and sexual preferences is prohibited in Mexico (Invemsa, 2019).

We hope the article ‘PESTEL analysis of Mexico’ has been useful. You may also like reading PESTEL analysis of Brazil and PESTEL analysis of the USA. Other relevant articles for you are:

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Last update: 11 October 2019

References:  

BBC (2018) Mexico country profile, available at: https://www.bbc.co.uk/news/world-latin-america-18095241 (accessed 10 October 2019)

Invemsa (2019) What to Know About Workers’ Rights in Mexico, available at: https://www.ivemsa.com/workers-rights-mexico/ (accessed 11 October 2019)

Knoema (2019) Mexico – Gross domestic product in current prices, available at: https://knoema.com/atlas/Mexico/GDP  (accessed 11 October 2019)

Launchway media (2019) 13 Facts about Mexico’s Growing Technology Scene, available at: https://www.launchwaymedia.com/blog/2018/5/29/10-facts-about-mexicos-growing-technology-scene (accessed 11 October 2019)

OEC (2019) Mexico, available at: https://oec.world/en/profile/country/mex/ (accessed 10 October 2019)

Santander (2019) Mexico: Economic and political outline, available at: https://en.portal.santandertrade.com/analyse-markets/mexico/economic-political-outline (accessed 09 October 2019)

Photo credit: Pixabay

Author: M Rahman

M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He is a graduate of Leeds Metropolitan University and London South Bank University.