Advances in development | Tackling Global Financial Crisis|  Mexico's War on Crime |  Cooperation between Mexico and the World Bank |  The Projects' Acchievements |        Tendencies and challenges in combating poverty | Contact

Mexico is the second-largest economy in Latin America.  GDP growth averaged 3.8 percent annually between 2004 and 2007. Nevertheless, economic growth decelerated in the first three quarters of 2008 and turned negative during the last quarter, thereby bringing GDP growth for the year at a modest 1.3 percent. At the moment, economic activity continues to contract as external demand drops and domestic and external credit conditions remain tight. The March consensus forecast project a contraction of GDP for 2009 by 2.8 percent

According to last official estimates (CONEVAL,2006) around 42.6 percent of the population is poor and 13.8 percent is considered to live in extreme poverty.

To view more details on this information and on poverty trends in the country, please read    Nutrition and Poverty in Mexico Book (Spanish) and the  Income Generation and Social Protection for the Poor Report, created by the World Bank and the new  Country Partnership Strategy.

The following data regarding Mexico stands out in the World Bank's   World Development Indicators 2008 (up to September 2008).

 Per capita income is US $10,108  (est. WB, 2008) with information from INEGI and Banxico
The Gross national Product is US$1086 billion (INEGI, 2008)
The total population is 107.4 million (est. World Bank's Development Prospects Group   DECPG, 2008)
Population below US$1 a day is 4.5 percent (WDI, 2007)
Population below US$2 a day is 20.4 percent (WDI, 2007)

In order to see other key indicators of Mexico's economy and population please click   here

  Tackling the Global Financial Crisis

Banco de Mexico cut short-term interest rates and continues with foreign exchange interventions.  To support other efforts to mitigate the downturn in economic activity, in March Banco de Mexico cut its monetary policy interest rate by 75 basis points to 6.75 percent, after two earlier cuts in January and February by 25 basis points.  After peaking in December at 6.5 percent, annual consumer price inflation is on a downward path and printed a 6.20 percent mark last February.  The central bank intervened on foreign exchange markets addressing market conditions of high volatility and lack of liquidity. The Mexican currency depreciated 34 percent between the end of August 2008 and early March 2009, although over the past few week the peso has strengthened by approximately 11 percent.  The monetary authorities announced the intention to sell the net foreign exchange receipts of the public sector this year, an estimated US$19 billion, through several intervention mechanisms including a daily sale of US$100 million.

Declining workers’ remittances and lower oil prices: The flow of workers’ remittances over the first two months of the year fell by 7.4 percent compared to same period of the previous year. Remittances amounted to US$25.1 billion in 2008, 3.6 percent below the level observed a year earlier. Mexico received a record-high US$50.6 billion of revenue from oil exports in 2008 as a result of a historically high average oil price for the Mexican crude oil mix at US$86 per barrel. However, the dramatic drop of international oil prices to approximately US$38 per barrel for the Mexican mix over the first few months of 2009 has significantly affected the country’s public finances as oil accounts for more than a third of total public sector revenues. The impact of lower oil prices on the budget for 2009 will be limited by a price hedge purchased on oil future markets that covers estimated net oil exports.

Mexico’s War on Crime
Violence has taken a high toll on Mexico, mainly because of the government’s drug war with narcotic cartels (more than 6,000 people killed in 2008).  The country has been declared in phase 2 (alert) within the UN national security system.

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For more than fifty years the World Bank has cooperated with Mexico by providing technical assistance and financial resources for development. Currently, the Bank is financing  23 projects in the country for a total of US$3.4 billion. The project portfolio includes loans, technical assistance and donations.

To provide continuity to cooperation between Mexico and the World Bank, a  Country Partnership Strategy (CPS 2008-2013) was signed in April, 2008, which reflects Mexico’s need for more flexible consultancy services and technical assistance, as well as a rationalized credit program.

The Country Partnership Strategy is based on five principles of engagement:

 Approximately US$800 million in borrowing per year;
 Lending flexibility for greater efficiency and to leverage global and sub national resources;
 Selective support within the framework of the country’s own National Development Plan to provide added value;
 Meeting demands for technical assistance with a broad range of instruments, and,
 Coordination between the World Bank Group and other donors to support Mexico’s National Development Plan

The Bank has changed its relationship with Mexico characterized by emphasizing flexibility, on-demand services, advisory services and technical assistance.  This new framework takes into consideration Mexico’s changing needs in the midst of the deteriorating international environment, with Mexico increasing its FY09 program with the Bank to US$3.4 billion.  Bank support is focused on mitigating the social impact of the economic downturn, and supporting clean technology investments to stimulate the economy.

The Bank supports Mexico’s efforts to reduce poverty and boost economic growth. An additional US$1.5 billion has just been approved to support the Oportunidades Conditional Cash Transfer (CCT)Program, in part to compensate for higher food prices as of May 2008. It also includes a fiscal stimulus program for 2009 for additional infrastructure investments, temporary work programs, extended health insurance for unemployed, and a freeze on domestic energy prices. Despite steady progress over the past 20 years, Mexico still faces significant poverty and needs to improve competitiveness to accelerate economic growth.

Mexico has been one of the principal consumers of the Bank’s recently generated financial products and services. It became the first country to use products valued in local currency, which eliminated the risks in currency exchange in financial operations with Sovereign States.

Government officials are working jointly with the World Bank staff to gradually introduce and institutionalize the Bank’s social, environmental and fiduciary safeguards.  Mexico also leads in implementing donations from the Global Environment Fund (GEF) and the carbon funds administered by the World Bank, generating additional income by utilizing clean energy technology. Mexico would like to play an important in the fight against climate change and the implementation of Climate Investment Funds (CIF).  The Bank is enthusiastic about partnering with Mexico on global efforts and supporting its national climate change agenda. A Bank team and government counterparts are preparing an Urban Transport program to create or expand rapid mass transit systems, such as Mexico City’s Metrobus, that could be financed through a combination of loans and grants, including CIF grants.

For more details on the World Bank/Mexico Country Partnership Strategy (CPS 2008-2013), please click    here. 

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The following is a selection of project that the World Bank is currently financing in Mexico. For a full complete list of projects in the country, click  here.

Poverty reduction
The World Bank approved a US$ 1.5 billion loan to the government of Mexico to support Oportunidades, Mexico’s CCT program to assist poor families. Oportunidades has been a model program for other Latin American countries and has improved health, education and nutrition for the poorest and most vulnerable families in the country.

The program provides cash benefits to families in exchange for regular medical check ups and school enrollment and attendance for children and participation in workshops on education and health related issues. The new funding seeks to create a synergy between Oportunidades and other social programs. By providing mothers and young children with essential health and education services, it is a social protection network vital to people most affected by the financial crisis.

Health
World Bank will support Mexico’s efforts to fight the spread of the Swine Flu virus with more than $205 million in fast disbursing funds. US$25 million will be re-directed to this purpose from the ongoing Mexico health project (PROCEDES) to meet urgent needs such as the purchase of drugs and related supplies.

In addition the World Bank has started the preparation of a US$180 million project under a Global Facility for Avian Influenza to help the Government of Mexico finance the full range of strategic, epidemiologic, regulatory, institutional, and operational activities needed for an effective response and allow for retroactive financing which would allow financing expenditures being made currently.

SHF financing is equivalent to approximately 40,000 average housing loans, approximately eight percent of the general annual demand for housing, and covers nearly four percent of the annual objective proposed by the government. The loan is approximately 1.5 percent of the total annual investment in housing in the country.

Agriculture
The main beneficiaries of the Land Fund Program and the Young Rural Entrepreneur Program are young low income farmers, which are given the opportunity to acquire or rent productive land, as well as elderly farmers which are given the option of transferring their lands. The program is set within an integral strategy of rural development that promotes the improvement and dynamism of the land market by giving non-agricultural economic opportunities, such as ecotourism, to young farmers.

Education
The Oportunidades program has helped lower dropout rates between sixth and seventh grade by nine percentage points and increased the use of preventive health services.

The World Bank loan to support Oportunidades is expected to:

 Increase the number of families that receive medical check ups.
 Increase the number of children that continue from elementary to secondary school and from secondary school to high school.
 Increase the number of Oportunidades schools in the Quality School Programs-PEC.
 Increase the number of higher education scholarships for young people in the Oportunidades program.

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Though recent poverty reduction trends are encouraging --especially for rural poverty--according to the Income Generation and Social Protection for the Poor Report made by the World Bank, Mexico faces challenges such as reducing urban poverty, which remains stagnant, and providing better coverage for poor people through its social security system.

Moreover, in Decentralization and Providing Services to the Poor, , the third study on the subject, the Bank concluded that while Mexico has over last twelve years decentralized and reorganized some of its government programs that benefit this segment of the population, the quality of services and accountability need improvement, as Mexico’s indicators remain low compared to those in OECD countries and the rest of Latin America.

Finally, the food price crisis has been eclipsed by the global financial crisis, but remains a challenge for Mexico, according to the World Bank book “Nutrición y Pobreza en México: Política Basada en la Evidencia.”

Rapid economic growth is now essential in order for Mexico to make greater progress in poverty reduction. In the near future, a series of macroeconomic reforms are still necessary for Mexico to reduce poverty through economic growth.

Updated April 2009

Fernada Zavaleta,
Communications Officer
Phone : 5255 - 54804200
E-mail :    fzavaleta@worldbank.org