1

A STUDY OF DEVELOPMENT INDICATORS IN

MEXICO

CIA - I : A.ECO.5.04

Aishwarya Iyengar
UID- 191159
Roll no. - 110

Sr. no Topic Page no.

1 Introduction : Economic Profile of Mexico 02

2 Development Indicators : Tabulation of Data 04

3 Analysis 04

4 Conclusion 12

5 References 13
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INTRODUCTION

Officially known as the United Mexican States, Mexico is a country located in the southern
part of North America. Being the tenth most populous country with a population of approximately
128.93 million (World Bank, 2020), it is the second-largest economy in Latin America (World
Bank, 2021). Apart from its strong geographical relevance with respect to the US, Mexico also
possesses great economic characteristics like a thriving export market, a manufacturing industry, an
abundance of natural resources and a young and productive workforce.

In the past decade, Mexico has emerged as an upper-middle-income country and it is the 15th
largest economy according to GDP at the current price - 1076.6 billion USD (Statista, 2021). The
economy of Mexico has remained relatively stable in the past few years, the Global Financial Crisis
of 2008 being an exception, with a GDP growth rate of -5.286% in 2009 (World Bank, 2020).
Nevertheless, inflation has been low at a rate of 3.39% and neither the interest rates nor the per
capita income has dwindled too extremely.

Speaking of demographic indices, the birth rate (crude) statistic of Mexico stands at 17 per
1,000 people as of 2019, although the annual population growth rate is showing a declining trend
since the last ten years, 1.058% as of 2020 (World Bank, 2020). Increasing prioritisation of work
over starting a family may be an explanation of these figures. The annual population growth has
also been declining, from what used to be 3% in the 60s and 70s. The birth rate is a principal factor
affecting population growth as immigration from other countries to Mexico is low. The average age
of Mexicans is showing a rising trend, currently 29. The average forecasted for 2050 is 38 and this
will prove detrimental as Mexico is known for its young and robust workforce (“Population growth
slows as young people's priorities change”, 2021) which currently counts for 66.6% of the total
population falling in the 15-64 age bracket. Population density has also been rising steadily, the
current figure standing at 65 people per sq. km of land area.

The country possesses a diverse workforce, from production labour (direct labour) to highly
skilled professionals (indirect labour), leading to a successful manufacturing sector. In fact, the
maquiladora has played a huge role in the training of the workforce throughout the country. A
maquiladora “is a factory or a manufacturing unit in Mexico, run by a foreign company and
exporting its products to the country of said company on a duty-free and tariff-free basis” (North
American Production Sharing, Inc., n.d.). Besides, the low wages offered to the Mexican labour
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force, paired with better opportunities in the US have led to a significant shift of population from
Mexico to the US, with almost 11 million Mexicans living in the States. Given below are the hourly
wages in both countries in U.S. dollars. Even though people living in the United States and sending
money back home would be helpful for the local economy, when skilled workers move abroad,
there is a significant loss of talent to drive the domestic economy. One of the major reasons for
migration is the widening gap between the rich and the poor in Mexico.

Source: Statista.com

Another aspect of the Mexican economy is infrastructure. Mexico is a manufacturing hub

and it offers impressive industrial real estate. In fact, in the year 2019, the country rolled out a new
plan to spend nearly $44M on infrastructure. The aim was to expand expenditure on transportation,
IT, energy projects, and private investment which would boost Mexico’s economy and put forth
Mexico as a valuable competitor globally (NAPS Inc., n.d,). These improvisations have made the
manufacturing sector of Mexico more attractive to potential investors due to its favourable
geographical location and the skilled labour which is available at lower costs along with the
presence of high-speed broadband and qualified IT professionals in major industrial cities virtually
every industrial city. Mexico has also been investing heavily in the construction of new highways,
ports, airports and railroads, transportation routes have shown tremendous improvement.

The most striking part of the country’s profile is its association with drug cartels and high
crime rates which has significantly impacted the economy. As strong as Mexico’s legitimate
economy and exports are, a major criticism would be the prevalence of the ‘other export’ market,
indulging in illegal smuggling activities. The facts stated above – labour force, export market,
relations between the US and Mexico are certain factors that played a major role in the selection of
this topic as a subject of study.
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ANALYSIS OF DEVELOPMENT INDICATORS

Time period HDI IHDI GDI GII MPI1

2015 0.766 0.590 0.960 0.347

2016 0.768 0.601 0.962 0.341 0.026

2017 0.771 0.607 0.961 0.336 (2018-2019)

2018 0.776 0.601 0.962 0.324

2019 0.779 0.613 0.960 0.322

Source: http://hdr.undp.org/

In order to study the status of development in Mexico, data pertaining to certain

development indicators for the time period of five years from 2015 to 2019 have been taken into
account. These key indices include – Human Development Index (HDI), Inequality-adjusted
Human Development Index (IHDI), Gender Development Index (GDI), Gender Inequality Index
(GII) and Multidimensional Poverty Index (MPI).

Human Development Index

The Human Development Index (HDI) measures average achievement in health measure,
education and living standards. Mexico’s HDI value since 2015 has been rising steadily and in
2019, the HDI stood at 0.779, which would make Mexico fall in the high human development
category. Its current rank is 74 out of 189 countries and territories (United Nations Development
Programme [UNDP], 2020, p. 2). The figure below shows the contribution of each component of
the different dimensions of Mexico’s HDI from 1990 – 2019.

1
MPI data unavailable for individual years from 2008 - 2019. Data given on the UNDP website is an overall
estimate.
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Source: http://hdr.undp.org/

Life expectancy in Mexico is 75 years as of 2019. However, the living conditions which
may help to ameliorate this number are sharply lacking as the country is ridden with extreme
income disparity and violence, especially among indigenous communities. The life expectancy in
Mexico is highly impacted by the murder rates caused by drug wars and other incidences of crimes
and violence. Mexico’s public secretariat released figures that show that around 28,816 homicide
case files were opened in the year 2018, a solid 15% increase over the previous year (Agren, 2019).
In 2018, the US offered almost 236 million dollars as foreign aid to Mexico, 132 million dollars of
which were sent to the International Narcotics & Law Enforcement (United States Agency for
International Development [USAID], n.d.). However, the funds used for improving the living
conditions in Mexico lags behind as only 500 million USD were given for public health that year.

The figure also shows how the knowledge component of the HDI has risen. The expected
years of schooling has increased from 13.9 in 2015 to 14.8 in 2019 (UNDP, 2020, p. 3), and the
mean years of schooling have remained steady from 8.6 in 2015 to 8.8 in 2019. As per an OECD
Report, Mexico’s public expenditure education as a share of total government expenditure ranks
second in the list of OECD countries, however, the expenditure per student remains the lowest
(OECD, 2019) and this can perhaps be attributed to the population. The country seems to have
made progress in raising the level of tertiary education attainment. The share of the young adult
population (25–34-year-olds) has risen from 16% to 23% in 2018. Although, there remains room for
improvement as it is much lower than the OECD average of 44%.

The last element under HDI is the GNI per capita (2017 PPP$) which has shown an upward
trend – the figure was $18,817 in the year 2015 and kept rising until $19,476 in 2018, followed by a
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fall to $19,160 in 2019 (UNDP, 2020, p. 3). The year 2020 witnessed a further decline to $17,253
(World Bank, 2020), a reason attributed to this fall could be the onset of the COVID-19 pandemic.
Further points pertaining to income inequality will be discussed in the analysis of the MPI.

Inequality-Adjusted Human Development Index (IHDI)

The 2010 Human Development Report introduced the IHDI which considers the inequality
in all three dimensions of the HDI by ‘discounting’ each dimension’s mean value according to its
level of inequality (UNDP, 2019, p. 4). It takes into account the same dimensions as the HDI. The
year 2017 observed an HDI of 0.771 and an IHDI of 0.607, causing a loss of 21.27% due to
inequality in the distribution of the HDI indices. During the five-year period, the loss caused by the
inequality has remained in the range of 21% - 23%. The inequality in education was estimated to be
18.4% in 2019. The inequality in life expectancy was 10.5% in 2019.

The most prominent element of Mexico’s economy is the staggering income inequality
which has been prominent for almost a century. The wealthiest 10% in the country are in control of
almost 43% of the total income in Mexico while the poorest 10% hold a meagre 2% (Rubio, 2020).
The income inequality is also related to the NAFTA signed between the US, Canada and Mexico in
1994. The share of exports in the Mexican GDP went from 13.3% in 1994 to 40% in 2020 (World
Bank, 2020). NAFTA has created many jobs as promised, but the low-wage manufacturing sector
bore the brunt. Hence, even though big manufacturing entities found the agreement to be in their
favour, the low-skilled workers have been facing wage stagnation problems.

Even before NAFTA, the recession period of the 1980s in Mexico had caused the wages to
fall. This decline was not remedied post-NAFTA, as a restricted minimum wage policy was
necessary for the process of economic integration. Today, Mexico is highly dependent on the US in
terms of trade and as a consequence, Mexico was highly affected by the Financial Crisis in the US
in 2008. During this period, the income of the workers fell and the returns to low-skilled workers
fell further. The 2019 data for Real minimum wages proves that Mexico has the lowest minimum
wages in the list of OECD countries, an hourly rate of 1.4 USD (OECD, 2019). There is also a lack
of a progressive tax policy that could help to reduce income inequality.

In Mexico, access to facilities like education, health services and even the most basic civil
rights and justice is not based on the mere fact of being a citizen of the country, but on the basis of
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connections and wealth. Income disparity can cause frictions in social cohesion and political unrest,
and consequently, crimes and violence.

Gender Development Index (GDI)

The GDI is a measure of the gaps in human development achievements by taking into
account the disparity between women and men in the same three dimensions used in HDI (UNDP,
2020, p. 5). The GDI values have remained steady in the past few years, fluctuating in the range of
0.960 to 0.962. The Female HDI values have been rising in the last five years and the value was
0.760 in 2019. Meanwhile, Male HDI values for 2019 was calculated to be 0.792.

Mortality rates in Mexico have declined since the 1950s and life expectancy has been
increasing due to consistent efforts in improving health care facilities. The life expectancy at birth
for women is higher than for men in Mexico, the 2019 value for women and men being 77.9 and
72.2 respectively. The difference in the life expectancy values between men and women has
remained 5.7 from 2015 to 2019.

Source: https://documents.worldbank.org/

The figure above shows that the increase in life expectancy in both males and females have
been slowing down in recent years. As mentioned before, the homicide rates have been rising,
which has impacted male life expectancy, along with the rising prevalence of other health
conditions like heart diseases. One of the leading causes of death of women in Mexico is diabetes.

With respect to education, the expected years of schooling in females is higher than in
males. In 2019, the value for females was 15, while for males it was 14.6. The mean years of
schooling for females and males were 8.6 and 8.9 years respectively. Girls’ education is a complex
matter in the country due to socioeconomic ideology. Girls are expected to tend to domestic duties,
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leading to higher drop-out rates in females than in males. The tertiary education attainment in 25-64
year-old men is higher in Mexico than in 25-64 year-old women (OECD, 2019). According to a
2017 statistic, the percentage of 15-29 year-old women in the ‘not in education, not employed’
category was around 31% compared to 10% in men (International Community Foundation, 2017).

Considering the dropout rates and the relatively less presence of women in labour, the GNI
per capita shows the staggering gap in the values for males and females. The year 2019 recorded a
GNI per capita of 12,765 USD in females compared to a much higher 25,838 USD in males. Thus,
the gender gap in the labour market causes a loss of about 22-25 per cent of the income per capita
(World Bank, 2019).

Gender Inequality Index

The Gender Inequality Index or the GII was built to expose the disparities in the distribution
of achievements between males and females. It considers reproductive health, empowerment and
labour market participation. The GII value for 2019 was 0.322.

Reproductive health is measured with the help of adolescent birth rate and maternal
mortality ratio. In 2019, the former was calculated to be 60.4, dropping every year, but still high.
This poses a challenge to the empowerment of women as it leads to negative effects on the
opportunities of the mother.

Source: https://documents.worldbank.org/

According to the figure above, the early childbearing in Mexico is quite high compared to
other OECD nations, almost four times the OECD average, beaten only by Colombia, another
Latin-American nation. The use of contraception is low, particularly among indigenous women and
in the southern regions of Mexico (Inchauste et al., 2019).
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The maternal mortality rate in Mexico was recorded at 33 in 2019, declining with each year,
However, due to the lack of said health services in areas where indigenous women reside, the
maternal mortality rate is higher in those areas. A rise in the maternal mortality rate is a reflection
of the less-than-satisfactory healthcare conditions. Availability of medical resources and
well-trained medical personnel will help in the detection and prevention of pregnancy
complications. During the Coronavirus pandemic, the maternal mortality ratio went up by 60% in
one year and around 25% of the maternal deaths were linked to COVID-19. Conditions like
pneumonia, diabetes and obesity and the subsequent threats to immunity increased the odds of
lethality (Mendez-Dominguez, N. et al, 2021). Clearly, refinement in the access to better healthcare
is of paramount importance.

Source : https://bmcpublichealth.biomedcentral.com/

Empowerment is characterised by education attainment at secondary and tertiary levels as

well as the share of parliamentary seats. The female population with at least some secondary
education is 62.2% while in males it is 64.2%, as of 2019 (UNDP, 2020, p. 6). The disparity in
educational attainment at primary levels has been reduced, however, at secondary and tertiary
levels, women’s attainment is lower. As mentioned before, teenage pregnancy is a common
phenomenon in Mexico, which also has its effects on this index.

Women’s political participation is defined by the share of women in parliament. As of 2019,

around 48.4% of seats are held by women, which makes Mexico the fourth country with the largest
share of women in parliament. This value could be a result of the 50% quota condition placed by
the 2014 General Law on Institutions and Electoral Procedures (Inchauste et al., 2019). However,
many female candidates are elected on the basis of connections and not through fair and
competitive processes which renders women as figureheads in politics, thus not serving the real
purpose.
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The labour market observes high inequality between women and men. The labour force
participation among ages 15 and older in females and males is 44.2% and 78.5% respectively. Even
though the value has risen over the years, women’s participation is not at par with men’s, women’s
share in the total labour force being a meagre 38.8% in 2019. Low participation could be attributed
to the fact that a large proportion of the female population has informal jobs which do not provide
sufficient social protection nor high pay. There is also the matter of unpaid work, childcare and the
existing maternity policy does not encourage companies to hire women in their workforce (Bolio et
al., 2019).

Multidimensional Poverty Index (MPI)

Mexico was the first country to come up with a way to measure multidimensional poverty,
which laid the foundation for future studies. The MPI measures the deprivations suffered by
individuals in three dimensions - health, education and standard of living (UNDP, 2020). The MPI
of Mexico in the year 2016 was recorded to be 0.026. Around 6.6% of the Mexican population is
living in multidimensional poverty and 1.7% is living below the income poverty line, PPP $1.90 a
day (UNDP, 2020). Around 4.7% of the total population is vulnerable to multidimensional poverty
while 1% is in severe multidimensional poverty. The contribution to overall poverty of deprivations
are as follows - Health (68.1%), Education, (13,7) and Standard of Living (18.2%).

The indicators used to measure health are nutrition and child mortality. The problems of
food insecurity (FI) are linked to a lot of public health issues in Mexico. FI causes an increase in the
malnutrition risk in children and also health problems such as diabetes, obesity and overweight in
adults. Malnutrition in Mexico has been declining, however, it still poses a threat as 10% of children
aged under five years suffer from malnutrition and stunting. The mortality rate of children under
five is 14.2 per 1000 while the infant mortality rate is 12.2 in the year 2019 (World Bank, 2019).
Almost 80% of the adult population fall in the overweight or obese category. The indigenous
population of Mexico are at a higher risk due to extreme income disparity, lack of health facilities
and infrastructure. However, the biggest problem in Mexico does not appear to be food availability,
but food accessibility (Juarez & Gonzalez, 2010).

The country ranks last in education among the 40 OECD countries with educational
attainment of 37.7% (OECD, n.d.). Lack of food at home is one of the major reasons why parents
send their children to schools where midday meals will be provided. Another reason is to escape
from the domestic violence that they may otherwise have to endure at home. However, when the
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schools fail to meet the bare minimum nutritional needs that a child may need, the attendance
declines as food is the only incentive to attend school.

Mexico is largely underbanked and lack of trust in financial institutions have led to
mismanagement of money and consequently, insufficient funds to afford basic amenities, problems
of quality and inequality in education, underemployment, age discrimination in employment, severe
lack of infrastructural facilities like proper roads, potable water, electricity and sanitation. Trade
agreements like NAFTA have led to lower wages being offered to the labour force while the
corporations procure high returns, causing the inequality to worsen.
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CONCLUSION

Mexico is the 15th largest economy in the world with a GDP of 1.076 trillion USD as of
2020. However, a deeper study of the development indicators has highlighted the socioeconomic
conditions of the country in a true light. Even with its abundance of natural resources and a strong
export market, Mexico has performed in a less than satisfactory fashion in many areas like growth,
gender and income inequality. Economic growth has contracted to a negative 0.055% in 2019 after
many years of 2% growth.

Even if Mexico holds the advantage of having a young workforce, there are several
underlying developmental issues that prevent Mexico from benefitting from its true potential. The
analysis of the development indicators like the HDI, IHDI, GDI, GII and MPI has provided insight
into the true status of the individuals living in the country. Broadly speaking, most of the economic
and social problems prevalent in Mexico can be narrowed down to the mere existence of inequality
and extreme income disparity. The HDI for 2019 was 0.779 but when inequality was accounted for,
the IHDI value came to be 0.613.

The COVID-19 pandemic caused a contraction of more than 8% and exacerbated the
weakness of the Mexican economy by affecting the workers’ income in both formal and informal
sectors, private consumption expenditure, exports, oil prices etc. Women, who are mostly employed
in the retail sector, were also impacted by the onset of the pandemic.

There is a desperate need for investments in improvisations of healthcare facilities to bring

down the child and maternal mortality rate. Food security has to be amped up to get rid of
malnutrition in children and to bring down the incidences of health conditions like diabetes and
other heart conditions in women. Education in Mexico is another concern, considering that the
system works on connections and corruption rather than merit.

Labour force participation is an area that needs the most effort since there is a wide GNI
per capita gap between men and women (12,765 USD in females compared to 25,838 USD in
males). Women have to be encouraged to pursue STEM careers that will enable them to secure
high-income paying jobs rather than ones in the informal sector. When it comes to the labour
income inequality between the wealthy and the downtrodden, two important policy changes have to
be considered - improving the quality of education and increasing access to higher secondary and
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tertiary education. The second is that minimum wages should be increased, which is being
implemented as in January 2020, the Mexican President raised the minimum age by 20%, i.e 123.22
pesos or $6.53 a day. However, almost 60% of the Mexican workforce is informal (OECD, 2019)
and there are hardly any benefits such as healthcare or social security for these workers.

For any society, the presence of widespread inequality is bound to cause friction among the
needy and the desperate. Inability to access resources like healthcare and education and basic
human needs can psychologically affect the population and lead to the high prevalence of crime and
violence. The corruption, lack of transparency, inaction of the government towards the drugs cartel
issue, wealth disparity has led to dissatisfaction in human lives, further leading to domestic violence
and abuse towards women and children, murders, assault and gang crimes. It is of paramount
importance to note that the problem in Mexico is not the lack of availability, but the lack of
accessibility.

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