Mexican exports depend little on national inputs

Mexican exports show a «very low» dependence on domestic upstream sectors in all broad export sectors, a report published by the World Bank indicated.

In contrast, Mexico has a strong backward participation in Global Value Chains (GVCs).

Indeed, the initial or upstream sectors (indirect national) only contribute 25% of the total value of the country’s exports, compared to 36% of the foreign contribution.

The discrepancy is even greater in the manufacturing export sector, where domestic inputs account for 28% of the value of exports, compared to 47% for foreign inputs.

In 2021, Mexican exports of products totaled 494,224.5 million dollars, which represented an increase of 18.5% over 2020.

On the contrary, Mexico’s foreign purchases rose at an interannual rate of 32.1%, to 505,715.6 million dollars.

With this, Mexico practically achieved a total trade (imports plus exports) of 1 billion dollars for the first time (999,940.1 million).

Previously, exports showed a strong downward trend, growing 10% in 2018, slowing to 2% in 2019 and plummeting to -9% in 2020, impacted by the Covid-19 pandemic.

In particular, Mexican exports benefited last year from the fiscal stimuli granted in the United States -its main destination-, from the recent entry into force of the Treaty between Mexico, the United States and Canada (USMCA) and from the trade war between United States and China.

China is at the other end of the spectrum, where the contribution of domestic inputs is almost three times that of foreign ones.

Although the greater reliance of manufacturing exports on domestic inputs is common in natural resource-intensive countries such as Brazil, Argentina, Peru, South Africa, and Chile, other peer countries, such as Turkey and Poland, also rely more on domestic inputs.

The low share of domestic inputs in services, agriculture, and mining in Mexican exports points to more systemic challenges for developing linkages.

Mexican exports

Mexico’s manufacturing sector is not only slightly dependent on domestic goods inputs, but also on domestic service inputs.

Mexican manufacturing exports are highly dependent on service inputs, accounting for around 37% of the total value of manufacturing exports in 2015.

But while services account for a similar share in Poland or Turkey, Mexico’s manufacturing exports depend more on imported service inputs (20%) than on domestic service inputs (18 percent).

Only Thailand and Malaysia have a lower share of domestic service inputs. Relative to total service inputs used in manufacturing exports, Mexico’s share of domestic inputs is the second lowest.