pestle framework Mexico
Document Sample
PESTLE Framework:
MEXICO
12/12/2011
Daan Heungens
Jelle Grammens
Joke Haeck
Jo Goossens
Michiel Goudeseune
Stefanie Gerardi
Political Analysis
1. Government
The United Mexican States or Mexico: Federal Republic consisting of 31 states
and a federal district.
Current president: Felipe Calderon = head of state and government. He also
functions as the chief of the armed forces.
Through the last century the Mexican government tried to open up the state and the
political system by making improvements:
Concerning human rights fair trials
Concerning the transparency of the country
Concerning drug-related violence
Concerning the illegal immigration from Mexico to the US
Table 1: Political stability & absence of violence
Country Percentile (0-100)
Mexico 22.2 (2009)
Russia 21.7 (2009)
China 33.2 (2007)
Brazil 54.2 (2009)
The high number of drug-related violence is one of the reasons that Mexico and Russia have
a low score in this indicator. Brazil’s ranking on this indicator implies government stability
and peaceful relations with neighboring countries.
2. Conflicts
2.1. Internal conflicts
2.1.1. Human rights
The constitution made in 1917 consisted of political and social rights including:
Freedom of expression
Right to unionize
Right to organize peaceful protests against higher authorities
Human rights
A lot of criticism because the number of violations by military and police forces is
still increasing
Women aren’t treated fairly
They have little access to justice
Pestle Analysis – Mexico 2
Current justice system
A lot of loopholes and because of that there are many innocent people who are
condemned as guilty by false stories and dishonest witnesses.
Other human rights concerns:
Brutality and impunity of the police
Poor prison conditions
Violence towards communities
Hostility towards street children
2.1.2. Corruption and drug-related violence
The US and Mexico work together in the combat against drug smugglers and the use
of drugs in the two countries. Due to the consumption of drugs in the US, brutal drug
wars in Mexico don’t diminish.
As the US sees the drug violence in Mexico as a direct threat to US security, they are
trying to find extra budget to put a stop to the drug traffic.
Criminal drug gangs work together with police officers = inability to punish the drug
traffickers.
Felipe Calderon is determined to fight corruption at all levels of the government.
Table 2: Corruption Perceptions Index
Country Score Place (total of 178 countries)
Mexico 3.1 98th
Russia 2.1 154th
China 3.5 78th
Brazil 3.7 69th
0 (highly corrupt ) – 10 (very clean)
2.2. External conflicts
2.2.1. Illegal immigration
The illegal immigration of Mexicans to the US is a big issue of serious political concern for
both countries. Through the years they tried to find measures to put a stop to the illegal
immigration.
They launched the Immigration Worker Program = immigrants were obliged to find work.
But still a lot of Mexicans, people from the poorer societies, pass illegally across the less
guarded parts of the border to seek employment. Guns and other related equipment
smuggled by these illegal immigrants is another problem that both countries have to deal
with. Both countries need to search for measures to stop the illegal immigration.
Pestle Analysis – Mexico 3
Economic Analysis
1. Analysis of Mexico’s economy
Current strengths Current challenges
Free trade agreements Limitations in certain sectors
Strong automotive industry High unemployment
Future prospects Future risks
Deceasing current account deficit High dependence on the US economy
Investments in infrastructure Failing oil output
Exchange rate:
The Mexican currency appreciated in the second half of the year, reaching its highest
exchange rate since October 2008.
Inflation rate:
Graph 1: Inflation rate
14
12
10
8 2009
6 2010
expected 2011
4
2
0
Mexico Brazil China Russia
Mexican inflation followed a downward trend since the late 1980’s, when it
exceeded 150%.
Mexican inflation drops in 2010, mostly due to increased domestic demand.
Russian inflation was very high during 2002 and 2003 (15% and 13%) but inflation
decreased with the prudent monetary policy measures taken by the CBR.
Russian inflation shot up again in 2008 but dropped in 2009 and 2010
China: very low inflation rate (an average rate of 1.4% per annum in 1997-2002)
Chinese inflation has grown substantially in recent times driven by higher food prices.
Pestle Analysis – Mexico 4
Rising inflation and economic disparity could negatively affect Brazil’s growth. The
country’s economy is very susceptible to price rises on food and fuel. With increasing
domestic consumption and high oil prices, inflation is likely to remain a challenge.
Fast growing economies tend to have higher inflation. Mexican inflation drops due to
increasing domestic demand.
Interest rates:
Graph 2: Interest rate in 2010
14
12
10
8
6 Interest rate
4
2
0
Mexico Brazil China Russia
In attempt to revive the Mexican economic fortunes, the Mexican central bank
slashed its interbank lending rate in June 2009.
China cuts interest rates five times in the latter part of 2008 to counter the impact of
the global financial crisis, but it had not taken any further measures in this regard
Brazil: In an aggressive move, the BCB raised interest rates by 25 basis points to 12%
in April 2011 to curb inflation amid fears that Latin America's biggest economy was
overheating. It was the third increase in 2011.
Brazil has the highest interest rate and Mexico the lowest. The Mexican central bank
reduced greatly its interbank lending rate in June 2009.
GDP growth rate:
Graph 3: growth rate
10
5
0
Mexico Brazil China Russia
-5
-10
2009 2010 expected 2011
Pestle Analysis – Mexico 5
In 2010 services accounted for 64.2% of Mexico’s GDP
Industry accounted for 32,2%
Agriculture accounted for the remaining 3.6%
The global economic slowdown gripped the Russian economy, which has been on a
downward trend ever since.
The economic crisis has exposed the vulnerability of the Russian system, which is
dependent on oil exports, with inadequate development of the industrial sector.
China is suffering from deflation, as consumer prices fell by 1.7%
Declining prices hit businesses, which in turn could discourage investment and
consumption.
The slowdown in the Chinese real-estate sector has reduced demand for heavy-
industrial goods such as steel and cement.
Brazil’s economy grew by 7.5% in 2010, buoyed by growth in gross fixed capital
formation, higher domestic consumption, and stable inflation.
China keeps growing. Mexico, Brazil and Russia all had a negative growth in 2009.
2. The ease of doing business
Starting a business
Table 1
Indicators/countries Mexico Russia Brazil China
Procedures 6 9 13 14
Days required 9 30 119 38
Costs of income per 11,2% 2,0% 5,4% 3,5%
capita
Paid-in minimum 8,4% 1,6% 0,0% 100,4%
Capital (%) of
income per capita
In Mexico registration is more easy. More entrepreneurs will start a business in the formal
sector; it creates more good jobs and generates more revenue for the government.
Dealing with construction permits:
Table 2
Indicators/countries Mexico Russia Brazil China
Procedures 10 51 17 33
Days 81 423 469 311
Costs (%)of income 331,1% 138,8% 40,2% 444,1%
per capita
Pestle Analysis – Mexico 6
Regulation for construction is critical to protect the public. When dealing with construction
permits is efficient as in Mexico, straightforward and inexpensive, everyone is better off.
Where complying with building regulations is excessively costly in time and money, many
builders step back.
Registering property:
Table 3
Indicators/countries Mexico Russia Brazil China
Procedures 7 5 13 7
Days 74 43 39 29
Costs (%) of the 5,3% 0,2% 2,3% 3,6%
property value
If formal property transfer is too costly or complicated, formal titles might go informal again.
Where property is informal or poorly administered, it has little chance of being accepted as
collateral for loans—limiting access to finance.
Getting credit:
Table 4
Index/countries Mexico Russia Brazil China
Depth of credit 6 5 3 4
Information
Strength of legal 6 5 3 6
Rights
Credit information systems enable lenders to view a potential borrower’s financial history
(positive or negative) - valuable information to consider when assessing risk.
Protection of rights of borrowers and lenders through collateral and bankruptcy laws is the
best at a high level.
Protecting investors:
Table 5
Index/countries Mexico Russia Brazil China
Strength of 6 4,7 5,3 5
investor
protection
Pestle Analysis – Mexico 7
Investor protections matter for the ability of companies to raise the capital they need to
grow, innovate, diversify and compete.
If the laws do not provide such protections, investors may be reluctant to invest unless they
become the controlling shareholders.
Paying taxes:
Table 6
Indicators/countries Mexico Russia Brazil China
Tax payments a year 6 9 9 7
Hours a year filling, 347 290 2600 398
preparing and
paying taxes
Total taxes payed 24,5% 8,9% 22,4% 5,9%
amounting to (%) of
profit
In economies where it is more difficult and costly to pay taxes, larger shares of economic
activity end up in the informal sector - where businesses pay no taxes at all. This is not the
problem for Mexico.
Trading across borders:
Export
Table 7
Indicators/countries Mexico Russia Brazil China
Documents 5 8 7 8
Days 12 36 13 21
Costs $1452 $1850 $2215 $500
Import
Table 8
Indicators/countries Mexico Russia Brazil China
Documents 4 10 8 5
Days 12 36 17 24
Costs $1780 $1800 $2275 $545
Excessive document requirements, difficult customs procedures, inefficient port operations
and inadequate infrastructure all lead to extra costs and delays for exporters and importers,
stifling trade potential.
Pestle Analysis – Mexico 8
Enforcing contracts:
Table 9
Indicators/countries Mexico Russia Brazil China
Procedures 38 36 45 34
Days 415 281 731 406
Costs of the value of 32% 13,4% 16,5% 11,1%
the claim
Without effective contract enforcement, people might well do business only with family,
friends and others with whom they have established relationships.
Where contract enforcement is efficient, firms are more likely to engage with new
borrowers or customers, and they have greater access to credit.
Closing a business:
Table 10
Indicators/countries Mexico Russia Brazil China
Resolving insolvency 1,8 2 4 1,7
(years)
Costs of the debtor’s 18% 9% 12% 22%
estate
Recovery rate (cents 67,1 41,5 17,9 36,1
on the dollar)
Fast and cheap insolvency proceedings result in the speedy return of businesses to normal
operation and increase returns to creditors.
Social-cultural Analysis
Culture Analysis (Hofstede)
Graph 1
Pestle Analysis – Mexico 9
Power Distance (PDI)
Mexico has a high PDI ranking of 81. This is an indicator for a high level of inequality of
power and wealth within the society. This means that people accept a hierarchical order in
which everybody has a place and which needs no further justification. This is not necessarily
undermined upon the population, but rather accepted by the culture as a whole.
China has the same situation with only 1 point less on the ranking compared to Mexico.
Collectivism / Individualism (IDV):
Mexico, with a score of 30 is considered a collectivistic (“we”) society. It fosters strong
relationships where everyone takes responsibility for fellow members of their group.
Mexicans see work as a way to enjoy from the most important things in life: family and
friends. That is also why most MSE’s in Mexico are family businesses. Politeness is of the
upmost importance and loyalty towards your superiors is required and understood.
Competition in the same company is out of the question.
China is a communist country. This means that the ranking on this dimension is even less
(20) than Mexico cause of the high level of emphasis on a collectivist society by the
Communist rule.
Masculinity / Femininity (MAS):
Mexico scores 69 on this dimension and is thus a masculine society.
In Mexico people “live in order to work”, managers are expected to be decisive and
assertive, the emphasis is on equity, competition and performance and conflicts are resolved
by fighting them out. But as Mexico is a collectivistic country, this means that competition is
directed towards members of other groups, not towards those who are members of your
own in-group. In China this ranking is around the same level (66).
Uncertainty Avoidance (UAI):
Mexico's highest Hofstede Dimension is Uncertainty Avoidance (82), indicating the society’s
low level of tolerance for uncertainty. In an effort to minimize or reduce this level of
uncertainty, strict rules, laws, policies, and regulations are adopted and implemented. The
ultimate goal of this population is to control everything in order to eliminate or avoid the
unexpected. As a result of this high uncertainty avoidance characteristic, the society does
not readily accept change and is very risk adverse. Chinese people have a lower need for
uncertainty avoidance (ranking 60) and rather avoid too many rules and formalities.
Long Term / Short Term (LTO):
There was no information available on this dimension for Mexico.
Pestle Analysis – Mexico 10
Social Analysis
Health and Welfare:
Table 1
Type of country Example of countries Average healthcare
/7
Factor driven countries Zimbabwe, Pakistan 4,5
Efficiency driven countries Mexico, China, Brazil, Russia 5,7
Innovation driven countries Belgium, France, Germany 6,2
Looking at the table, healthcare in the efficiency driven countries (5,7) is not that amazing
compared to the innovation driven countries (6,2), but is however better than the factor
driven ones (4,5).
Graph 2
78 6.4
76
6.2
74
6
72
70 5.8 Life expectancy
68 5.6 Healtcare rating
66 on 7
5.4
64
5.2
62
60 5
Russia Brazil China Mexico
In all the countries we are comparing with Mexico.
Mexico seems to have the second lowest healthcare rating with 5, 7 points on 7.
Mexico scores the best in life expectancy, regarding Mexicans live on average 76, 5
years, which is more than the other countries.
Russia has a remarkable low life expectancy of 66, 3 years while their healthcare is
considered to be better than Mexico with 5, 9 points. This difference may be due low
birth rates, poor medical care, and the rising AIDS problem in Russia.
Table 2
Pestle Analysis – Mexico 11
Mexico Brazil China Russia
Unemployment rate 5,4 7,2 4,5 7,5
(%)
Poverty (%) 15 47 10 14
Gini-index (%) 51,6 55 NA 42
Comparing with these countries, Mexico is mostly between the lines.
However, Mexico does suffer from a potential future risk for more uneven
distribution of wealth; this can be explained cause of new employment opportunities
that have diminished in the south, where agriculture is still the dominant sector.
Education:
Mexico has an impressive education system, with both the private and public sectors
playing an instrumental part in making university and vocational training in the
country globally recognized.
Education up to and including the university level is provided by the state and is
mostly free.
Graph 3
4.8 8
4.6
7
4.4
4.2 6
4 Education rating on 7
5
3.8
% of GDP spent on
3.6 4 education
3.4
3
3.2
3 2
Mexico Russia Brazil China
During 1997–2009, spending on educational institutions in Mexico increased from
4% to 7% of the GDP.
Mexico is one of the three countries with the largest increases in educational
expenditure as a percentage of GDP over this 12-year period.
Pestle Analysis – Mexico 12
In 2009, the share of public budget on education was 22%! In the other countries
spending on education is less
Mexico might spend a lot more than Russia (7% compared to 5% for its GDP), but
you can see that in the difference in quality too.
According to a Paris-based program for international student assessment, more than
half of Mexico’s 15-year-old children lack proper math and science skills. Four out of
every 10 children drop out, and thousands of rural children are left with a primitive
mode of education, relying on volunteer teachers with meager professional training.
One of the strongest facets of the Russian education system is that a majority of the
schools are in rural areas rather than urban areas, making education accessible to all
areas of the country.
Labor Market:
Table 3
Services sector Industrial sector Agricultural sector
Mexico labor 63% 24% 13%
workforce (%) 2010
Mexico GDP (%) 64,6% 31,5% 3,9%
2010
In 2010, the Mexican economy had almost 46.4 million employed individuals.
As you can see in the table, almost 2/3rd of the workforce is active in the services
sector, thanks to the big oil stash, tourism and transport such as Mexican airlines &
harbors.
A big part of 1/4th of the workforce is comprised to car assembly. General Motors,
Ford, Nissan, Toyota and Volkswagen invest a lot of money in Mexico’s car factories.
Agricultural doesn’t play a big part in the Mexican workforce area and even less GDP
wise.
There is a large amount of surplus labor in the informal sector (which isn’t included in
the GDP), mainly comprising unskilled and semi-skilled workers.
Table 4 Mexico Brazil China Russia
Labor market 3,8 4,1 4,7 4,5
efficiency /7
If it comes to labor market efficiency, China is significantly the most efficient with a
score of 4, 7.
The reason behind the low score of Mexico compared to the other countries can be
found in the inefficient government bureaucracy, corruption and the drug
violence/war.
Pestle Analysis – Mexico 13
Demographic (July 2010):
Population
111, 2 million
♂ 48.7%
♀ 51.3%
Age Structure
0 – 14y: 30.65 %
15 – 64y: 61.09 %
+65y: 8.26 %
This means that Mexico has a large working population, with a low median age of around 26
years.
Ethnic groups
Mestizo (Indian-Spanish): 60%
Indians: 30%
white: 9%
Religions
Catholic: 88.0%
Protestant and Evangelical: 5.2%
Not Biblical Evangelical: 2.1%
None: 3.5%
Living
22% of the Mexican population lives in rural areas, while the remaining 78% lived in urban
settlements.
Languages
Spanish
Technological Analysis
1. Global
Mexico has traditionally been unable to attract firms to build major research and
development (R&D) facilities in the country but in April 2011, the government announced
that it will revive its tax exemption scheme to encourage R&D expenditure in the private
sector.
In recent times the information and communication technology sector has benefited to
some extent. By
Pestle Analysis – Mexico 14
measures taken by the government in terms of offering tax incentives
exemptions to prospective investors in this field
The Mexican IT market recorded sound growth in 2009, largely triggered by
high sales of PCs
maintaining a lot of broadband facilities.
In concurrence with the IT sector, the country's telecommunications sector has undergone a
radical transition: the most notable development has been the privatization of national
telecommunications service provider Telmex.
According to the Mexican Academy of Sciences, the country buys 94% of its technology from
outside sources. This is because of
the lack of innovation
a low R&D spending in the country
2. Research & Development
Traditionally, Mexico has not been a lucrative destination for R&D activities.
However, the country possesses
good infrastructure for the development of advanced research centers
excellent scientists and engineers BUT due a lack of research funding they are often
prevented from fulfilling their potential.
Mexico’s geographical location is great for doing face-to-face networking with the US.
80% of R&D funding still comes from the government.
Most of the country's research projects focus on basic or applied sciences, which do
not generate patents.
3. Biotechnology
Mexico has contributed substantially to the development of modern biotechnology since
1970.
The Mexican scientist Francisco Bolivar
part of a team of scientists from the University of California
developed the world’s first genetically engineered protein.
The Mexican scientist Luis Herrera Estrella
participated with Marc Von Montagu’s research team
developed the world’s first gene transfer technique for plants.
Pestle Analysis – Mexico 15
They founded and directed the biotechnology institute of UNAM in Cuernavaca and the
Center for Research and Advanced Studies at the National Polytechnic Institute in Irapuato.
Since the inception of these institutes the government and research-oriented universities
have strengthened efforts to develop human resources for scientific research centers and
institutes inclined towards biotechnological research.
At present, there are
98 Mexican institutions engaged in fully clever research in various aspects of
biotechnology
750 professors and investigators who are officially registered with the National System
of Investigators.
Figure 1
Biotechnology is very important in agriculture.
Figure 2
The several institutions dedicated to biotechnological research.
Especially the low-level development centers are representing biotechnological research.
Pestle Analysis – Mexico 16
Low-level development centers install where there are only one or two research groups
indulging in an equal number of research projects.
There is a promising future in certain areas of biotechnological research
Government’s initiative to create the National Institute for Genomic Medicine
The introduction of new college curriculums in genomic medicine sciences.
Shared interest and attempts with the US will lead to the beginning of a
biotechnology institute like Nitrogen Fixation Research Center at the UNAM
Cuernavaca campus.
BUT in recent years no new research institutes have been created, with the exception of a
few centers created during the last decade.
This has led to a scary situation where there are fewer job opportunities for young graduates
in this field.
Mexico’s technology space boasts significant opportunities for growth.
With growth in foreign investments in
almost all economic sectors
nationwide construction of new economic zones
4. Information technology
The area for development in the IT sector has increased more than ever before.
In recent years, indicators such as the number of internet users, PCs per capita, and mobile
density have shown significant progress.
The Mexican IT
business process outsourcing (BPO)
knowledge process outsourcing markets
the second largest in Latin America, preceded only by Chile.
In fact, two Mexican companies top the list of key Latin American IT firms.
The Ministry of Economy estimates that the number of IT companies in Mexico is 2,134.
Demand for software has been growing in all segments, especially among small- and
medium-sized enterprises, which once again will benefit from government funding and
initiatives in the future.
Significant funding has also been announced for education and for regional IT expansion.
The PC market in particular has shown remarkable growth.
Current growth has been driven by the growing popularity of broadband, high demand
for PCs, and the burgeoning availability of credit.
Pestle Analysis – Mexico 17
Legal Analysis
1. Legal structure
Measures taken by the government:
Shorten the business registration system
Offering larger incentives to foreign investors
Lowered the corporate tax rate to encourage the creation of more companies
BUT they have still problems concerning International Property Rights (IPR) in the
entertainment, pharmaceutical, software and publishing industries.
2. Business Registration System & business incentives
Bureaucracy is still a problem in Mexico
Founded the COMEFER to increase the transparency of the country
COMEFER (Comision Federal de Mejora Regulatoria) initiated Sistema de
Apertura Rapida de Empresas (SARE): that is a fast way to start a business.
SARE reduced the time to a start a business from 58 days (2006) to 27 days
(2008).
Obtaining a business license requires 105 days, while the OECD average is 166
days.
Table 1: The World Bank's 2011 Doing Business report
Ranking: starting a business
Country Place Procedures Days
th
Mexico 67 6 9
th
Russia 106 9 30
China 150th 14 38
Brazil 125th 13 199
OECD average 5 13
Foreign investment is very important for Mexico
Low taxes are set to attract investors
Higher incentives for companies that invest in rural areas (South of Mexico)
Mexico needs to continue with the process of reducing bureaucracy and promoting
business-friendly practices.
Pestle Analysis – Mexico 18
3. International Property Rights
Piracy is a big problem in Mexico
Internet piracy continues to grow
Piracy of CDs and DVDs generates around $ 2 million in cash every day
The office of the US Trade Representative has included Mexico in its 2011
Watch List because Mexico do not conform to global standards.
The fight against piracy is a big challenge for the country.
.
4. Lower corporate tax rate
Resident company: taxed on the basis of its worldwide income
Company is not domiciled in Mexico: taxed on the Mexican-sourced income.
Mexico is making efforts to lower the rate of the corporate income tax. That way
they want to create incentives for investors to increase their investment in the
country.
Now Mexico has a tax rate of 30%, they want to lower that rate with one percent a year
until 2014.
Environmental Analysis
1. Global
Mexico’s diverse biodiversity is a major benefice for the country
The country is one of the world’s five high biodiversity countries
Mexico is also one of the few nations in the world where most of the forests are
owned by indigenous (people who live and originate naturally in an area or
environment) and local communities.
Tropical forests have traditionally been a source of home for rural citizens while
keeping a wide range of mammalian and aquatic species in existance.
Very common and uncontrolled deforestation poses a major threat
Air and water pollution (same in China) are major areas of concern.
Pestle Analysis – Mexico 19
Mexico City is considered to be one of the most polluted cities in the world.
In an attempt to speed up environmental contamination, the government has
started an Environmental Service Payment Program.
Mexico took also note of deforestation: in total, during 1990–2005 Mexico lost
nearly 7% of its forest cover, or around 4.78 million hectares.
2. Analysis of Mexico’s environment
Current strengths Current challenges
Rich in biodiversity Air pollution = more harmful to
50% of the world’s pine species, 135 children than cigarette smoke. It
species of oak, home to 26 000 causes damages or diseases
species of plants, …
A lot of deforestation rate of
deforestation was on average (1990-
2010) of 0.39% a year.
Future prospects Future risks
Environmental Service Payment Adverse impact of economic growth
Program ( = financial motivation for It is expected that carbon dioxide
the owners of forest land) combined emissions will continue to rise in the
with water services, carbon near future as a result of growing
capture,… industrialization and transportation.
The government aims to incorporate The same for CO2.
2.61 million hectares of An emerging country Mexico needs
environmental payment schemes by to balance its ambitions with
2012 maintaining environmental actions.
Sustainable Electricity Program = all
electricity consumers that do not use
more than 250 kilowatts every two
months will be suitable to exchange
four old incandescent light bulbs for
four power-saving light bulbs.
Goal: to lead a reduction of 2.8
million metric tonnes of carbon
dioxide CO2 emissions every year.
3. Conclusion
Despite an increasing number of active economic development programs, the government
has failed to reduce air and water pollution. International environmental activist groups have
criticized the government for failing to protect the country's forests which are becoming
gradually les. The government needs to speed up policies that will control pollution in major
cities.
Pestle Analysis – Mexico 20
Global Summary
P
Mexico has become more active in terms of multilateral affairs, climate change, human
rights, and regional issues.
However, an unexpected increase in drug-related violence threatens both the country and
the government. Criminal drug gangs work together with police officer which means there is
no ability to punish the drug traffickers. Felipe Calderon is determined to fight corruption at
all levels of the government.
Also the issue of illegal immigration from Mexico to the US has been a topic of debate in
both countries; the two nations still looking for some solutions. They already launched the
Immigration Worker Program which includes that immigrants are obliged to find work.
Furthermore loopholes in the current justice system have been exploited to unfair treating
of innocent people.
E
The decreasing current account deficit and investments in infrastructure predict well for the
economy. Also more than 90% of Mexico’s trade comes under free trade agreements.
However, increasing unemployment and strong dependency on the US economy (more than
80% of its exports and around 50% of its imports were from the US in 2010) are major
threats.
The Mexican economy contracted by 6% in 2009, due to the effects of recession but Brazil’s
economy grew by 7.5% in 2010, motivated by growth in gross fixed capital formation, higher
domestic consumption, stable inflation and largely driven by strong external demand.
Mexican inflation drops due to increasing domestic demand. In attempt to revive the
Mexican economy, the Mexican central bank reduced its interbank lending rate in June 2009.
In Mexico registration is easier. More entrepreneurs will start a business in the formal sector
because it creates more good jobs and generates more revenue for the government.
S
There has been a remarkable increase in educational investment in Mexico. During 1997–
2009, spending on educational institution increased from 4% to 7% of GDP. Mexico is one of
the three countries with the largest increases in educational expenditure as a percentage of
GDP over this 12-year period.
In 2009, Mexico spent 22% on education, which was the highest among Organisation for
Economic Co-operation and Development (OECD) countries.
Compared to the other economies Mexico has the second lowest healthcare rating (5, 7/7).
Too bad because Mexico is looking for some solutions (formulation and implementation of
several social programs, funds for healthcare services)
Pestle Analysis – Mexico 21
Mexico has a high life expectancy rate; regarding Mexicans live on average 76, 5 years, which
is more than the other countries.
Also a boast of young workers will revive economic productivity.
T
According to the Mexican Academy of Sciences, the country buys 94% of its technology from
outside sources, which reflects both a lack of innovation and low research and development
(R&D) spending. The private sector needs to increase and improve its R&D expenditure. The
government’s revival of the tax exemption scheme is expected to drive R&D expenditure in
the country.
Mexico has played a part in the development of modern biotechnology since 1970. It
becomes very important in Mexico. At present there are 98 Mexican institutions engaged in
fully clever research in various aspects of biotechnology
Also the area for development in the IT sector has increased. Indicators such as the number
of internet users, PCs per capita, and mobile density have shown significant progress.
Furthermore, Mexico is becoming a favored destination for business process outsourcing
services in Latin America.
L
After years of maintaining a slow registration process for private entities, Mexico’s legal
structure included a business registration system that is shortened. Also the country has
lowered its corporate tax rate to encourage the creation of more companies.
However, judicial delays and a large number of not decided cases continue to fade away
Mexico’s legal structure, and Mexico also still has problems with the intellectual property
rights (IPR) in the entertainment, pharmaceutical, software, and publishing industries.
Starting a business takes an average of 6 procedures and 9 days compared to the OECD
average of 5 procedures and 13 days, which is very good. Also compared to the other
countries (China, Russia and Brazil) Mexico is doing great.
Obtaining a business license requires (Mexico 105 days) less than the OECD average of 166
days.
E
Mexico is considered to be one of the top five countries in terms of biodiversity. The area is
really noteworthy. Mexico gives home to no less than 26,000 species of vascular plants and
to nearly 2,800 known species of amphibians, birds, mammals, and reptiles.
BUT Mexico City is considered to be one of the most polluted cities in the world. Especially
air and water pollution are major menaces.
Mexico also lost nearly 7% of its forests, or around 4.78 million hectares. International
environmental activist groups have criticized the Mexican government for failing to protect
the country's dwindling forests.
Pestle Analysis – Mexico 22
In an attempt to reduce environmental pollution the government has started an
Environmental Service Payment Program and a Sustainable Electricity Program to reduce
CO2 emissions and expedite afforestation programs in the country.
Webb diagram
Institutions
6
Innovation Infrastructure
5
Business 4 Macroeconomic
sophistication 3 environment
2 Mexico
1 Health and
Market size 0
primary… Average (China, Brazil &
Russia)
Technological Higher
readiness education and…
Financial Goods market
market… efficiency
Labor market
efficiency
The analogue points of Mexico and the average (China, Brazil and Russia) is remarkable.
Sources
Corruption perceptions index 2010 results.
Retrieved from https://transparency.org/policy_research/surveys_indices/cpi/2010/results
The world factbook
Retrieved from https:// www.cia.gov/library/publications/the-world-factbook/geos/mx.html
DATAMONITOR: Mexico. Retrieved August, 2011, from
http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=c1852f3e-43b9-4f4e-811a-
bd0ad96e32b8%40sessionmgr11&vid=11&hid=25
DATAMONITOR: Russia. Retrieved June, 2011, from
http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=c1852f3e-43b9-4f4e-811a-
bd0ad96e32b8%40sessionmgr11&vid=39&hid=25
DATAMONITOR: Brazil. Retrieved July, 2011, from
http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=c1852f3e-43b9-4f4e-811a-
bd0ad96e32b8%40sessionmgr11&vid=37&hid=25
Pestle Analysis – Mexico 23
DATAMONITOR: China. Retrieved April, 2011, from
http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=c1852f3e-43b9-4f4e-811a-
bd0ad96e32b8%40sessionmgr11&vid=35&hid=25
Doing business in a more transparent world: Mexico.
Retrieved from
http://doingbusiness.org/~/media/FPDKM/Doing%20Business/Documents/Profiles/Country/
MEX.pdf
Doing business in a more transparent world: Brazil.
Retrieved from
http://doingbusiness.org/~/media/FPDKM/Doing%20Business/Documents/Profiles/Country/
BRA.pdf
Doing business in a more transparent world: Russian Federation.
Retrieved from
http://doingbusiness.org/~/media/FPDKM/Doing%20Business/Documents/Profiles/Country/
RUS.pdf
Doing business in a more transparent world: China.
Retrieved from
http://doingbusiness.org/~/media/FPDKM/Doing%20Business/Documents/Profiles/Country/
CHN.pdf
.
Pestle Analysis – Mexico 24
