Mexico Reports a 41.5 Percent Contraction in Productivity

From 1970 to 2023, Mexico reported a 41.5 percent contraction in productivity (capital and labor), a figure that surpasses the regional average, which is also negative at 22.9 percent, according to the Economic Commission for Latin America and the Caribbean (ECLAC).

In its study, Panorama of Productive Development Policies in Latin America and the Caribbean, the organization explains that only Venezuela surpasses Mexico, with an 82.1 percent decline in productivity. This leaves Mexico far behind countries with positive results, such as the United States, which recorded 37 percent productivity, and South Korea, with 57 percent.

With these results from 2013 to 2024, the Latin American region as a whole is heading toward another "lost decade," with growth of only 0.9 percent, a much lower figure than the "sadly lost decade of the 1980s, when growth was 2.3 percent."

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The document revealed that for decades, Mexico has maintained negative productivity levels. In the 1970s, productivity fell by 2.2 percent; in the 1980s, the gap deepened by 21.6 percent; while in the 1990s, it recovered somewhat, slowing the decline to 5.9 percent.

However, from 2000 to 2010, the drop was 11.8 percent, and from 2010 to 2023, there was a decline of 7.6 percent.

In this regard, the productivity gap in the region has widened in the last two decades: while in 2005, the productivity of high-income countries in the region was $25 per hour worked, and for middle- and low-income countries, it was $5 per hour worked; by 2024, productivity was $34.4 per hour worked and $6.5 per hour worked, respectively.

According to ECLAC, the failure of productivity in the region — including Mexico — is due to technological lags, educational deficiencies, and a lack of talent, although this varies by sectors, companies, and regions.

That is, by sectors, "the highest productivity levels are found in mining, quarrying, and in electricity, gas, and water. However, these sectors employ only 1.4 percent of the workforce."

Meanwhile, the sectors of community, social, and personal services; trade; restaurants and hotels; and agriculture, hunting, forestry, and fishing, which together account for 63.8 percent of employment, show very low productivity levels.

In the business sector, micro, small, and medium-sized enterprises (MSMEs) dominate the region, making up 99 percent of businesses. However, the productivity gap is significant: medium-sized companies in Latin America and the Caribbean have only 65 percent of the productivity of large companies, small companies have 38 percent, and micro-enterprises reach only 17 percent.

Finally, the report revealed that economic and productive dynamism also depends on productive capacities within regions in individual countries, with some countries in Latin America and the Caribbean seeing the richest region having more than 12 times the productivity of the poorest region within their own borders.