Mexico: rising to the top? It has been predicted that Mexico will be one of the world's top ten economies by 2020. Changes in the industrial structure of the country have been occurring for some time. In 2008, 12% of the labour force were employed in the primary sector (mainly agriculture), 26% in the secondary sector (mainly manufacturing) and 62% in the tertiary sector (services). By 2012, employment had fallen by 1% in the primary sector and by 2% in the secondary sector. In recent years, Mexico has been removing trade protection measures such as tariffs and quotas. The country now has free trade with more than 40 other countries. International trade plays a key role in the Mexican economy, with a third of its output being exported and imports accounting for more than a third of the products bought in Mexico. Nearly 80% of Mexico's exports go to the United States of America (US). Mexican firms have a wide choice of sources for imported raw materials and a large international market in which to sell their products. The main destination of Mexico's falling number of emigrants is the US. After an economic downturn in 2009, the Mexican economy has been growing. Incomes have risen and life expectancy has increased. Table 1 shows the income levels and life expectancy for a number of countries. Table 1: Gross Domestic Product (GDP) per head and life expectancy in selected countries in 2012 | Country | GDP per head (US$) | Life expectancy (years) | |:-------------|:-------------------|:------------------------| | Bangladesh | 700 | 69 | | Canada | 48000 | 83 | | Mexico | 9200 | 77 | | Peru | 5400 | 72 | | Portugal | 22100 | 80 | | South Africa | 7500 | 55 | Although the standard of Mexico's education is not very high, poverty is declining in the country as living standards are rising. More people now have access to better quality health care. In contrast to its neighbour the US, unemployment has been declining in Mexico. Costs of production in Mexico are rising more slowly than in China. Mexico imports products from China and also competes with China in a number of export markets. Some of Mexico's top exporting firms are monopolies within the country. One is Pemex, the state-owned oil and gas monopoly. The firm sells oil throughout the world. Some economists claim that Mexican consumers would benefit from Pemex being sold to the private sector.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2015). The mark or mark type is shown in brackets.

1. [2] 65%
2. [1] 100% - 35%/62% + 1% + 2%
3. [2] Also accept: 62.64%
4. [1] 12%-1% = 11.88%
5. [1] 26% - 2% = 25.48%
6. [1] 100% - 37.36%
7. [1] ability to buy raw materials from abroad/a wide choice of sources for imported raw materials
8. [1] a large market/a large international market in which to sell their products
9. [1] raw materials may be of higher quality or lower price/reduce firms' costs of production
10. [1] a large market may increase potential revenue/increase profits/allow greater advantage to be taken of economies of scale
11. [1] higher income is likely to mean better nutrition
12. [1] people will be able to afford more/better quality healthcare
13. [1] higher income is likely to mean better housing
14. [1] higher income is likely to mean better education
15. [1] higher income may raise living standards
16. [1] countries with higher incomes may have better sanitation
17. [1] higher income may increase government tax revenue (1) and so greater ability to provide good quality healthcare (1)
18. [1] yes/generally yes (as an overall judgement)
19. [1] Canada has highest income and longest life expectancy
20. [1] the four countries with the highest GDP per head (Canada, Portugal, Mexico and Peru) have the longest life expectancy
21. [1] South Africa has a higher GDP per head than Bangladesh but a lower life expectancy
22. [1] Peru has lower GDP per head than South Africa but a longer life expectancy
23. [1] Bangladesh does not follow the trend
24. [1] improved economic performance/expected to be one of the top ten economies
25. [1] likely to increase employment opportunities/incomes
26. [1] higher incomes/reduced poverty
27. [1] improved living standards
28. [1] improved healthcare/longer life expectancy
29. [1] improved quality of life
30. [1] falling unemployment in Mexico/rising unemployment in USA
31. [1] increased employment opportunities/living standards in Mexico
32. [1] price of Chinese exports may increase
33. [1] this may make Mexican exports/Mexican products relatively more price competitive
34. [1] Mexico may be able to capture some of China's share of foreign markets/domestic firms may gain
35. [1] improve current account/balance of payments position
36. [1] reduce unemployment
37. [1] increase GDP
38. [1] may encourage Chinese MNCs to set up in Mexico to take advantage of lower costs
39. [1] may raise GDP in Mexico
40. [1] increase employment in Mexico
41. [1] imports from China will be more expensive
42. [1] if there are not domestic substitutes
43. [1] this may cause inflation in Mexico
44. [1] due to higher raw material costs
45. [1] and less pressure on domestic firms to keep prices low
46. [1] any Chinese MNCs based in Mexico may experience lower profits/losses in plants in China
47. [1] this may lead to a reduction in investment in their plants in Mexico
48. [1] and/or cause them to raise prices in Mexico to compensate for their losses in China
49. [1] costs may rise in China but these may reflect higher quality
50. [1] if quality of Chinese products does rise, demand for Chinese products may remain high
51. [1] many firms in perfect competition
52. [1] but only one in monopoly
53. [1] barriers to entry into and exit from the industry in monopoly
54. [1] none in perfect competition but high in monopoly
55. [1] perfectly competitive firms are price takers
56. [1] whereas monopolists are price makers
57. [1] homogeneous product in perfect competition
58. [1] whereas unique in monopoly
59. [1] perfect information in perfect competition
60. [1] but not monopoly
61. [1] may introduce more competition
62. [1] this may lower prices
63. [1] may provide a greater profit incentive
64. [1] this may raise efficiency
65. [1] encourage firms to produce what consumers want
66. [1] lower costs of production
67. [1] may increase investment
68. [1] this could improve the quality of products
69. [1] firms knowing they will not be supported by the government
70. [1] may be forced to be more efficient
71. [1] may be easier to raise finance
72. [1] can sell shares
73. [1] a private sector monopoly may abuse market power
74. [1] may restrict supply
75. [1] raise price
76. [1] reduce quality
77. [1] private sector firms are unlikely to charge prices below cost to help poor consumers
78. [1] private sector firms may not take into account external costs and benefits/welfare
79. [1] so they may under or over-produce
80. [1] the state may have financial resources
81. [1] be able to invest on a larger scale