Jun 042012
 

A previous post—How “complex” is the Mexican economy?—discussed The Atlas of Economic Complexity and noted that Mexico’s Economic Complexity Index (ECI) of 1.145 ranked it 20th among 128 countries. ECI indicates a wide range of complex knowledge capabilities related to productive enterprises. Mexico has a very high ECI given its income level; all other countries in the top 20 have significantly higher incomes than Mexico.

According to the Atlas, during the rest of the decade Mexico’s GDP should grow relatively rapidly to catch up with its ECI. Analyses in the Atlas indicate that during the last few decades countries with higher than expected ECIs compared to their income levels experience more rapid economic growth. While this relationship is empirically true, it should be noted that it does not explicitly include other factors thought to be important to economic growth (see Section 4 of the Atlas). Some of these other factors are governance and institutional quality, corruption, political stability, measures of human capital and competitiveness indicators. The Atlas implies that these other factors contribute to and thus are indirectly part of the Economic Complexity Index.

The analysis in the Atlas predicts that Mexico’s annual growth in real per capita GDP will be 3.5% from 2009 to 2020, ranking it 10th in the world in growth rate (see table). (The growth rates for some other countries are given in footnote 1 below.)  Mexico’s annual growth in real per capita GDP is impressive given that its growth was only 0.8% per year for 1999 to 2009, the same as that for the USA. Growth in these two countries was slowed significantly during this period as a result of the very severe recession, the worst since the great depression. This rather slow growth is surprising given that Mexico’s ECI increased from 1998 to 2008 was ranked 30th worldwide. Though the Mexican economy suffered significantly during this period, it continued to develop new productive capabilities and become more complex. This added complexity is expected to generate accelerated economic growth in the current decade.

RankCountry% growth in GDP/person, 1999-2009Expected % growth in GDP/person, 2009-2020, Income/person, 2009Expected income/person, 2020
1China9.64.33,7445,962
2India5.64.31,1921,886
3Thailand3.14.03,8936,023
4Belarus7.94.05,0757,806
5Moldova4.84.01,5162,321
6Zimbabwe449.03.8 - 6.2676?
7Ukraine5.23.72,4683,694
8Bosnia-Herzegovina4.13.64,5256,669
9Panama3.93.67,15510,529
10MEXICO0.83.58,14311,894

The low growth rate of 0.8% per year for 1999 to 2009 represents “real” per capita growth corrected for inflation and population growth. In nominal terms, Mexico’s total GDP growth from 1998 to 2008 was 1.8% per year. It is expected to grow 4.8% per year for 2009 to 2020, which ranks its 22nd in the world, behind numerous poor African countries with rapidly growing populations. Of large or populous world countries, the only ones ranked ahead of Mexico are India (ranked 8th), the Philippines (12th), Egypt (14th), Pakistan (18th) and China (20th).

In summary, the Atlas of Economic Complexity predicts that the Mexican economy will grow very rapidly during the rest of this decade and beyond. Let’s hope that this prediction becomes a reality.

Footnote 1:

For comparison: Indonesia ranked 21st at 3.3%, Pakistan 27th at 3.1%, Guatemala 35th at 3.0%, South Africa 41st at 2.9%, Turkey 43rd at 2.8%, Brazil 48th at 2.7%, Argentina 54th at 2.6%, Russia 59th at 2.6%, USA 91st at 2.0%, Canada 104th at 1.7% and Nigeria 118th at 1.1%.

Source:

Ricardo Hausmann, Cesar Hidalgo, et. al. The Atlas of Economic Complexity, The Observatory of Economic Complexity (Harvard HKS/CDI – MIT Media Lab). Retrieved 19 May 2012.

  4 Responses to “Connections between the Economic Complexity Index and Mexico’s GDP growth”

  1. Mexico has experienced three very different and very interesting periods of (economic) growth since the conquest.
    The establishment of the Haciendas and extractive industries, the Porfiriato and the “Mexican Miracle” 1935 to 1975(+/-).Mexico achieved growth of GDP of between 3 to 6.5% pa during the Mexican Miracle and one has to ask “What happened to all the money?”. Why didn’t Mexico develop more. Of what use is a growth of GDP if it does not benefit the country at large?

    “Mexico has a very high ECI given its income level; all other countries in the top 20 have significantly higher incomes than Mexico.”
    Mexico is an economy of monopolies and cartels and until this changes the vast majority of Mexican people will not feel much benefit from the growth of GDP. 3% growth would mean a surge in the GINI from 50 upwards.

    I too hope for growth in Mexico but if nothing continues to be done about education in Mexico from pre-school to post grad there will not be growth;that’s my off the cuff and pessimistic prediction. Sorry.

  2. Steven;

    Thanks for you useful and thought provoking comments. “All that money” has gone into some rich pockets AND has greatly improved the life of Mexicans as measured by increasing education levels, longer life expectancy, lower infant mortality, etc. Girls under age ten now are better educated than boys. Yes, there are many problems and great room for improvement. But progress has been impressive tome. But again, I am an optimist.

    Rick

  3. Thirty years ago more than 80% of all Mexican exports were commodities, oil, mining, primary products most of them. The populist governments of the seventies and early eighties threw Mexico into a spiral of crisis after crisis, inflation, devaluation, poverty, unemployment. But Mexico took the right steps to correct a lot of its problems, we opened our doors to world trade, we signed free trade agreements with many countries, we privatized many state owned companies, we pursued an industrialization policy rather than dependence on commodities.

    Today, 85% of our exports are manufactured goods, unlike our south american neighbors, we do not export large volumes of soy, but plasma television sets, cellulars, aircraft parts, automobiles, many electronic components and products, software, you name it.

    And our economy has gained complexity and diversity.

    Thanks for this great article.

  4. Jose:
    >
    > I agree with your comments 100%. I am particulary indebted to Ernesto Zedillo and the reforms implemented in the 1990s (http://geo-mexico.com/?p=2847). However, there is still work to be done with the monopolistic practices in many key industries: oil, telecommunications, education, beverages, corn, etc.

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