Mexico is a Middle Income Country. Its positive and stable economic performance together with the official decision to combat poverty has permitted a rise in per capita income levels, though poverty and inequality indices are still very high.

According to official estimates, around 40% of the population is poor and 18% is considered to live in extreme poverty.

To view more details on this information and on poverty trends in the country, please read the Income Generation and Social Protection for the Poor Report, created by the World Bank and the Report of Advances in the Strategic Alliance with the Country .

The following data regarding Mexico stands out in the World Bank's World Development Indicators 2007 :

• Per capita income is $7,870, Latin America’s highest
• Life expectancy at birth is 75 years
• The percentage of school-age children attending schools is 98%

In order to find out about other key indicators on the economy and population of this country, please click here

Between 1996 and 2005, Mexico reported a moderate per capita income growth of 2% annually.  The country’s economic growth has been relatively stable during the last years, being close to 3% annually between 2000 and 2007. In order to insure a robust creation of employment opportunities and reduce poverty rates significantly, the country needs to improve its competitiveness.

From the institutional point of view, Mexico is evolving towards an ever more democratic society through a deliberate effort to introduce reforms based on a democratic consensus. This is essential, as the three main political parties at the federal level possess big legislative blocks in Congress.

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For five decades, the World Bank has cooperated with Mexico through the delivery of technical assistance and financial resources for development. At the present moment, the Bank is financing 28 projects in the country, totaling $1 billion (annual average), based on the Mexican State’s development priorities. The project portfolio includes loans, technical assistance and donations.  

According to the Country Strategic Alliance (CSA), valid for 2005-2008 (being updated), Mexico is defined as a Middle Income Country (MIC), which requires a series of services that go beyond the strictly financial, and which include other areas where the transfer of knowledge and learning are critical.

The CSA consists of four pillars, designed for:

• Reducing poverty and social inequality
• Increasing global competitiveness
• Institutional strengthening
• Promotion of environmental sustainability

As a result of the new relationship between Mexico and the World Bank, the type of services offered is better adapted to Mexico’s present needs.

Thus, the crux has passed from traditional financial loans to value-added products and services that support the authorities’ efforts to confront priorities such as climatic change, handling and prevention of natural catastrophes and quality education, areas where the World Bank offers comparative advantages based on its global experience.

Mexico has been one of the main consumers of the Bank's recently generated financial products and services. It became, for example, the first country in using products valued in local currency, which have eliminated the currency exchange risks in financial operations with sovereign States.
Mexico also leads in the implementation of donations from the Global Environment Fund (GEF), and in carbon funds administered by the World Bank, which generate additional financial income through the sale of non-emitted carbon emissions by creating clean energy projects.

Government officials are working together with World Bank staff to gradually introduce the WB’s social, environmental and fiduciary safeguards, renowned as one of the highest international standards, in an institutional fashion.

Traditionally, Mexico has worked alongside the World Bank in establishing platforms for open public dialogs on key issues of the development agenda, from energy to social equality.  

The new CSA must be presented before the Bank’s Board of Directors by spring 2008.

In order to get to know more details on the World Bank’s current tasks in Mexico, please consult the new Report of Advances in the Strategic Alliance with the Country.

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The following is a selection of current World Bank projects in Mexico.  For a full list of projects in the country, click here.

Poverty reduction
The Second Phase of Rural Financing Project (Bansefi) supports the Mexican government’s efforts to develop financially viable savings-and-loans institutions, that are operationally effective and technologically updated, so that they are more accessible to the general population which had not been served before. In this way, the project improves access to financial services by the poorest, allowing them to increase their saving, investment and risk management capabilities. This project goes beyond the mere development of human capital and strengthens the economic capability of the underprivileged population, by permitting them to acquire physical and financial assets that will allow them to sustain financial shocks better.
 
Environment
With the Conservation of Biodiversity in Indigenous Communities of Oaxaca, Michoacán and Guerrero States Project areas of high biodiversity are preserved in these entities, emphasizing the strengthening and promotion of community initiatives. One of the project’s central objectives is to make the most of the positive cultural traits and traditional administrative ways that these communities have developed regarding their natural resources.
 
Competitiveness
With the Innovate to Compete Program, government efforts to improve the competitiveness of the Mexican economy are supported through the strengthening of the private sector’s innovative capacity, accelerating the formation of human capital and increasing the international integration of the innovative system. The financing granted to the program increases support for business innovation, mainly through programs coordinated by the National Council for Science and Technology, besides accelerating the formation of human capital through the coordinated and strategic use of a scholarship fund.

Agriculture
The main beneficiaries of the Land Fund and Young Rural Entrepreneur Program are young low-income farmers, which are given the opportunity to acquire or rent productive land, as well as giving senior farm laborers the option to transfer their lands. The program is framed within an integral rural development strategy that promotes the improvement and dynamism of rural real estate markets by giving non-agricultural profit opportunities, such as ecotourism for young farmers.

Education
The Quality Schools Program contributes to increase schools’ autonomy and self-management capabilities, improving educational quality by taking into account the following indicators: coverage, social participation and academic results. The program’s main components include granting scholarships, monitoring and supervision, and developing evaluation policies on school performance.

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Even though recent trends in poverty reduction are encouraging –mainly regarding rural poverty–, Mexico faces challenges such as reducing urban poverty, which is stagnant, as well as making its social security system less regressive and more equal, in order to provide better coverage for poor people, according to the Income Generation and Social Protection for the Poor Report made by the World Bank. This study is the second on the subject, in a series of three that have been published by the Bank. Moreover, the Bank found, in Decentralization and Providing Services to the Poor, the series’ third report, that even though during the last twelve years Mexico has reorganized and decentralized some of its government projects benefiting this segment of the population, the quality of services and accountability has to be improved, as those indicators are still low when considering OECD standards and average values for the rest of Latin America.

It is now essential to achieve a robust economic growth rate in order to make advances in poverty reduction. In the middle term it is still necessary to make a series of macroeconomic reforms and improvements in service provision in order to promote the reduction of poverty driven by economic growth.

Updated March 2008

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