How Can Mexico Boost Consumer Demand?

HOW CAN MEXICO BOOST CONSUMER DEMAND?

Although Mexico has rolled out many important policies that have supported middle class expansion, more can still be done, especially by addressing the key challenges that have kept Mexico’s income gap wide, in order to boost middle class earning capacity and thereby empower them as the driver of domestic demand.

Robust demand growth depends on narrowing the income gap

Invest in education. Some 45% of the Mexican population aged 15+ had a secondary education in 2016, compared to 65.0% in China. Education can increase social mobility, boost productivity and innovation, which helps move the economy up the value chain and generate better-paid jobs for the middle class.

Boost female labour force participation

Adequate childcare and gender equality in the workplace can help raise the female labour force participation, which is still very low in Mexico. Greater female participation in the labour force will boost incomes for middle class households as most have two income earners.

Enhance access to technology

Mexico still lags behind some of its emerging economy peers in terms of internet use, but the gap is narrowing as Mexican shoppers increasingly embrace e-commerce. Greater access to technology can help to improve the business environment, which will encourage investment, generate jobs and boost consumer income and spending.

Further reduce barriers to foreign direct investment (FDI)

Mexico has taken on substantial reforms to open up some industries to FDI but more needs to be done to further reduce barriers to FDI and improve the business environment. Higher FDI intensity will facilitate technology and knowledge transfers, improve Mexico’s position in the global value chain and support the growth of the formal economy.