Then vs. Now: Mexico
Mexico has long benefited from its close economic ties to the US, gaining from trade, investment and remittances. When I traveled across Mexico in 2008, a journey I later wrote about for Tatler Magazine, I saw how those ties had fueled the country’s growth. Today, however, that same dependence has put Mexico in a precarious position.
President Trump’s threat to impose a 25% tariff on all Mexican imports has cast a shadow over Mexico’s economic future. With 80% of its exports going to the US, Mexico remains highly vulnerable to shifts in American trade policy. While the proposal has been put on hold, failure to reach an agreement could potentially shrink Mexico’s GDP by 2%-4% and push it into recession.
During my 2008 trip, I visited Comercial Mexicana, one of Mexico’s largest supermarket chains at the time, and was struck by how deeply the economy was tied to the US. I was told that 28% of their customers relied on money sent from family members working in the US, a clear indicator of how American wealth flowed directly into Mexican households. That year, Mexican workers in the US sent home $20 billion in remittances.
By 2024, that number had surged to $64 billion, highlighting not only Mexico’s continued reliance on these funds but also the changing dynamics behind them. The number of undocumented Mexican immigrants in the US had actually dropped from 7 million in 2007 to 5.1 million in 2023, suggesting that rising wages and economic necessity -- not just the sheer number of workers — were driving remittance growth.
But this lifeline isn’t guaranteed. Tougher immigration policies could gradually slow the flow of remittances. While mass deportations aren’t likely to happen overnight, increased enforcement could steadily reduce the number of undocumented workers. Any significant decline in remittances would leave Mexico facing tough adjustments, whether it’s ready or not.
Meanwhile, the broader economy is struggling. Mexico’s GDP contracted by 0.6% in the last quarter of 2024, the first decline in years. The impact of a US slowdown and looming tariffs is already being felt, particularly in sectors most reliant on American demand. Key pillars of Mexico’s economy — automobile manufacturing, electronics and agriculture — are at risk of disruption.
On top of these economic challenges, political tensions between Mexico and the US are heating up. The Trump administration has accused Mexican drug cartels of having an “intolerable alliance” with the government, an allegation that President Claudia Sheinbaum has strongly denied. In response to Washington labeling cartels as terrorist organizations, Sheinbaum pushed back and warned that Mexico would never tolerate an “invasion” of its sovereignty and announced plans for legal action against US gunmakers. While this standoff is largely political, it carries real economic risks. If diplomatic ties continue to fray, negotiations on critical agreement, such as the United States-Mexico-Canada Agreement (USMCA) review next year, could become even more contentious. For an economy already facing trade threats and slowing growth, further deterioration in US-Mexico relations could make recovery even harder.
In 2008, Mexico was expanding outward, strengthening its role in global markets. Today, it’s in a defensive position, trying to protect the trade advantages it has built over decades. The coming months will be critical. If Mexico can satisfy US demands on immigration and drug enforcement, the worst of the trade tensions may be avoided. If not, the economy faces a more prolonged downturn.
In my view, Mexico can no longer afford to depend so heavily on the US. While America will remain a key partner, the global trend toward diversifying trade highlights the risks of over-reliance on a single market. Countries across Europe and Asia are already expanding their trade ties, and Mexico must follow suit.
Mexico needs to broaden its trade ties with Europe, Latin America, and Asia to build a stronger, more resilient economy. But that won’t happen overnight, and its relationship with the US has to be handled carefully. The real challenge isn’t just getting through the current uncertainty, it’s making sure Mexico’s economy can stand on its own in the long run.
Here is the original Tatler article:
Mexican Wave
Mark Mobius checks out the tourist hot spots and investment opportunities in Mexico, one of the most exotic locales in the world.
After leaving Lima, Peru we flew to Mexico. Before embarking on a hectic round of company visits, and, since it was the weekend, we headed to the white sands, clear skies and blue waters of Cancun, the exciting playground on Mexico’s Caribbean coast in the Yucatan Peninsula. Cancun was its party-time self with lots of American and Mexican tourists basking on the beaches during the day and partying in the bars and discos at night. In flying time, Cancun is closer to Havana, Cuba and Miami, Florida than it is to Mexico City so it’s no surprise that is has splashes of Miami style and Cuban music. It’s located on Yucatan peninsula in the state of Quintana Roo with a fascinating ancient Mayan history.
In the hinterland there are abandoned mansions of former plantation owners who, between 1880 and 1940, became wealthy because of henequen, a strong fibre used to make such items as rope and burlap bags. The collapse of that market resulted in the mansions and plantations being abandoned but now many have been restored and turned into elite hotels. Another produce, chicle, from the sapodilla tree and used for chewing gum, was harvested in the area at the beginning of the 1900s but subsequently the industry went into decline. By the 1950s the area was an impoverished backwater but became famous in 1961 after Jacques Cousteau reported on the area’s stunning coral reefs and aquatic seascape.
Then, in 1967, the Banco de Mexico, Mexico’s central bank, hit on the idea to promote tourism in the underdeveloped areas of the country. After an intensive study they picked Cancun as an ideal tourism spot. The reason: it had a long island bordered on one side by a spectacular white sand beach and on the other by a large lake, ideal for all kinds of water sports. The bank received a US$27 million loan from the Inter-American Development Bank to build the first infrastructure and development began in 1970. Everyone thought it was folly to attempt such a project and the Mexican government had to finance the first nine hotels and a causeway linking the island to the mainland. The city has grown rapidly over the past 30 years and currently has 600,000 residents. Now, 140 hotels line the beach with over 24,000 rooms and 380 restaurants. Each year, four million visitors arrive on 190 daily flights from the US, Europe, Latin America and elsewhere.
Not only does Cancun have great beaches, restaurants and hotels but nearby Mayan ruins, such as Chichen Itza, are a fascinating example of the Mayan culture. Although the Spanish conquistadors managed to kill half a million Mayans while enslaving and Christianising the rest, the Mayans continued to fight the central government even after Mexico gained independence from Spain in 1821. Today, the Mayans are clearly evident all over Cancun serving the tourist industry and about 800,000 Mexicans still speak the Mayan language.
After the weekend we took off for Puebla, a two and a half hour flight. This city is south of Mexico City and not too far from Cuernavaca, a wonderful “city of eternal spring” known for its great weather. The one-hour drive to the Kimberly Clark tissue plant took us over a modern six-lane highway. Puebla is in Puebla State and we were headed for Tlaxcala State to Apisaco City. The Tlaxcaltekas Indians lived here and built the interesting religious sites. They allied themselves with the Spanish and fought against the Aztecs. The more you learn about Mexico, the more you find out how complex their history and culture is with a number of major civilisations, not only the Aztecs and Maya.
On both sides of the road were corn fields and factories interspersed with simple houses made out of cement blocks with flat roofs usually of corrugated iron sheets. Seeing Kimberly’s expansion plans indicated that any slowdown in the US was not hitting this company, particularly for the disposable diapers and increasingly popular wet wipes the company produces. The investment for the new facility in Tlaxcala will be US$48 million and they expect to realise US$8 to 10 million annual savings from this investment. Revenues from wet wipes were US$40 million in the financial year 2007 and are expected to reach US$45 million in the financial year 2008.
After Puebla we flew to Mexico City, the capital and major financial centre of the country. We stayed at the W Hotel which is located in the heart of town and not far from one of my favourite places, the National Museum of Anthropology. We also took time to see the incredible Teotihuacan pyramids 50 kilometres outside of the city. In addition to a number of ruined palaces, plazas and altars dominating the entire scene is the Pyramid of the Moon and the immense stone mass of the Pyramid of the Sun, one of the world’s largest pyramids. Climbing up to the top is quite a chore. Our company visits took a glimpse at the retail sector. A major department store chain, Comcerci, has six million customers served by 214 retail units. One interesting statistic was that 28 per cent of the firm’s customers received remittances from the US, a reflection of the benefits Mexico gets from its close ties to the US.
Mexico has a number of global companies such as Cemex with cement plants all over the world. In addition to dominating the Mexican market it has operations in the US, Spain, China and many other countries. It recently purchased the Rinker Group in Australia for US$15.3 billion. In Mexico, the demand for housing continues unabated. The use of a cheap and fast building system where moulds are filled with concrete means that cement is replacing bricks. With this system, a team of eight people can construct four houses in a day. Alternative energy sources are becoming important. Cemex is building a slew of windmills in Mexico to generate electricity. In Germany, however, the firm has negative energy costs, due to the strong use of alternative energies, which receive incentives from the government.
Another great Mexican company is America Movil controlled by one of the world’s wealthiest men, Carlos Slim. I met him at his modest home near the centre of the city. He is congenial, down to earth and with a clear long-term vision. America Movil has mobile phone operations all over Latin America. Mobile penetration in Latin America has surpassed even the most optimistic projections. In Mexico, current penetration is 64 per cent and the company expects to reach 90 per cent by 2010 while in all of Latin America the average penetration is slightly above 60 per cent and is expected to also reach 90 per cent by 2010. Slim also controls Telmex, the fixed line telephone system that is practically a monopoly in Mexico and is expanding into the rest of Latin America. The company will soon spin off its Latin American operations from its Mexican domestic business and will list it as a separate entity. Since fixed line telephones are not a growth area, the firm has expanded into broadband communications and cable television in Argentina, Brazil, Colombia and other countries. Its television operations in Brazil cover 10 million homes in 120 cities. In Colombia, Telmex controls five catv companies with five million homes. In Mexico there are currently 4.2 million broadband connections with Telmex holding three million. However, there are only 4.9 million homes with personal computers in the country. This means the company needs to foster the sales of personal computers to continue expanding its broadband connections.
With so much to see and do, I hated to leave Mexico but my next stop, South Africa, beckons.