PEST Analysis of Mexico

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In this paper, I will analyze the political, economic, socio-cultural, and technological aspects of Mexico. The start-up of a company or a new business unit requires a detailed knowledge of the context in which it is going to unfold. There are numerous external factors that will condition its operation, hence the analysis of the environment is the key to know future trends and define in advance the business strategy to follow.

Political

From December 1st, 2018 the presidency of Andrés Manuel Lopez Obrador began, which achieved a clear electoral success with more than 53% also thanks to the National Regeneration Movement, also known by its acronym MORENA. The new administration has indicated as a priority the end of corruption and violence in the country and a new model of more equitable and inclusive development that gives priority to the poorest sectors. The government has announced a series of priority initiatives in the social field, and infrastructural projects aimed mainly at the South East of the country. The resources should come largely from the savings resulting from a line of austerity imposed on the public administration. Infrastructure projects should be integrated into a development plan for Southern Mexico and the countries of the Northern Triangle with the aim of creating an alternative to emigration.

Economic

The growth of the Mexican economy remained constant, having closed 2018 with a GDP growth of around + 1.9%, while growth is expected to be around 2.1% for the period 2019-23. Inflation, which at the end of 2017 was around 6%, returned to the norm at the end of 2018, managing to reach the 3% target, thus satisfying the target levels set by the Central Bank and the IMF (2-4%). Foreign direct investment (FDI) grew by 9% in 2017, and these investments are concentrated in areas bordering the United States. The Yucatan Peninsula receives important FDIs in the tourism sector.

Socio-Cultural

Over the past decade, Mexico has significantly improved the quality of life of its citizens, particularly in the fields of education, health and employment. However, Mexico only obtains good results in some assessments on the welfare of the Better Life Index. Mexico is above the OECD average in terms of civil commitment and subjective well-being, but below average in terms of employment and earnings.

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In Mexico, the adjusted average disposable income per capita is USD 13 891 per year, significantly lower than the OECD average of USD 30 563 per year. There is a considerable gap between the richest sections of the population and the poorest. In terms of employment, in Mexico about 61% of people aged 15 to 64 have paid employment, below the OECD average employment rate of 67%.

Good education and valuable skills are important requirements for finding a job. In Mexico, 37% of adults between the ages of 25 and 64 completed the upper secondary education cycle, which is considerably lower than the OECD average of 74% and the lowest position among OECD countries. As for health, in Mexico life expectancy at birth is 75 years, five years less than the OECD average of 80 years

Technological

Over time, Guadalajara received a nickname that conveys innovation and modernity: ‘Mexican Silicon Valley’. The reason is clear: the state of Jalisco is very focused on technology. Every year exports the equivalent of 21 billion dollars in services and technological devices, and from 2014 to 2016 hundreds of startups in Guadalajara have received investments - mostly of US origin - amounting to about 120 million. At the moment Jalisco mainly exports mobile phones and similar devices, but the goal of the state government is to turn Guadalajara into a 'city of digital creatives'. The plan, in other words, involves the transformation of the region from a specialized pole in the technological manufacturing to a digital innovation hub. Jalisco and its capital have the potential to grow. First of all, there are many universities, including the prestigious Monterrey Institute of Technology, which produce specialized graduates who know English. There are already large computer companies working on its territory, and about four hundred startups.

Conclusion

Investing in this country could be a good idea. Mexico can become a new China for everyone, not just for those who aim at the US market: Mexico is the new emerging destination of delocalization. There is a real trend of companies that previously produced in China and that now transfer production to Latin America because here wages are competitive and grow less than in Beijing.

References

  1. Amadeo, K. (n.d.). More Americans Immigrate to Mexico Than Vice Versa. Retrieved from https://www.thebalance.com/mexico-s-economy-facts-opportunites-challenges-3306351
  2. Mexico - OECD Data. (n.d.). Retrieved from https://data.oecd.org/mexico.htm
  3. Popescu, A. (2016, May 14). Is Mexico the Next Silicon Valley? Tech Boom Takes Root in Guadalajara. Retrieved from https://www.washingtonpost.com/business/is-mexico-the-next-silicon-valley-tech-boom-takes-root-in-guadalajara/2016/05/13/61249f36-072e-11e6-bdcb-0133da18418d_story.html?noredirect=on&utm_term=.a2e02e20cbbc
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PEST Analysis of Mexico. (2022, October 28). Edubirdie. Retrieved May 21, 2024, from https://edubirdie.com/examples/pest-analysis-of-mexico/
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