Introduction
Bank of America’s latest report, “Mexico’s growth problem – and the path forward,” sheds light on Mexico’s struggle with low economic growth, particularly when comparing the per capita GDP evolution of various countries over the past 20 years.
GDP per Capita Comparison
- Between 2004 and 2024, Mexico’s cumulative GDP per capita growth was only 9.5%.
- During the same period, China’s GDP per capita grew by 319.5%, Vietnam by 165.9%, Poland by 116.5%, Costa Rica by 76%, South Korea by 74.4%, Chile by 51.2%, Brazil by 31.8%, and the US by 29.9%.
Low Productivity: The Core Issue
The report highlights that Mexico’s low-growth economy is largely due to its low factor productivity. Between 1990 and 2024, Mexico’s productivity fell by 22%, while Poland’s increased by 41% and South Korea’s by 37%. Between 2018 and 2024, Mexico’s productivity dropped by 6%, while the US saw a 4% increase, widening the gap.
Addressing Low Productivity
Bank of America’s report suggests that Mexico needs a comprehensive long-term agenda focusing on better skills, more dynamic businesses, improved infrastructure, faster technology adoption, and stronger institutions to reverse this systemic low-productivity issue.
Investing in Human Capital
To tackle low productivity, Mexico must invest in human capital through a better education system that equips students with continuous learning tools and strong analytical skills. This requires a high-quality education system that prioritizes teacher training.
Reversal of 2013 Education Reform
However, the reversal of the 2013 Education Reform by former President López Obrador, which favored political patronage of teachers through SNTE and CNTE, has hampered any government’s efforts to significantly increase human capital in Mexico.
Lessons from Poland’s Success
Until Mexico addresses its education challenge decisively, no plan will effectively boost human capital or position Mexico as the tenth-largest economy by 2030, as President Sheinbaum aims. Moreover, reducing poverty will remain elusive.
Poland’s success in GDP per capita growth, average wage growth, and wealth distribution offers valuable insights. Although Poland’s wealth distribution is unequal, it is less so than Mexico’s.
Key Questions and Answers
- What is the main issue highlighted in the report? The report identifies Mexico’s low economic growth, primarily due to its low factor productivity.
- How does Mexico’s productivity compare to other countries? Between 2004 and 2024, Mexico’s cumulative GDP per capita growth was only 9.5%, while countries like China, Vietnam, Poland, Costa Rica, South Korea, Chile, Brazil, and the US saw significantly higher growth rates.
- What does Bank of America suggest to improve Mexico’s productivity? The report recommends a comprehensive long-term agenda focusing on better skills, dynamic businesses, improved infrastructure, faster technology adoption, and stronger institutions.
- How has the reversal of the 2013 Education Reform affected Mexico? The reversal has hampered efforts to increase human capital significantly, as it favors political patronage of teachers through SNTE and CNTE.
- What can Mexico learn from Poland’s success? Poland’s achievements in GDP per capita growth, average wage growth, and wealth distribution offer valuable lessons for Mexico.
