2023 POLICY ROADMAP

Economic expansion slowed in Mexico in 2023, with the annual rate of GDP growth falling to around 3% in the first three quarters of the year. Inflation had also fallen to just over 4% by the end of October. Interest rates, however, continued to rise.

Two out of three companies in Mexico in 2023 reported that their costs had increased, including price hikes for raw materials, while one in 10 reported a drop in sales.

In 2023, regulatory changes impacting businesses include new official Mexican standards for health and for telecommuting, increases in holiday entitlements and increased employer pension contributions. The Federal Entrepreneurship Law continued to make progress in Congress, aiming to promote new business registrations and to support potential high-impact entrepreneurship.

2023 Framework Conditions Review1

The assessed overall quality of the Mexican entrepreneurial environment fell sharply in the pandemic, with some evidence of recovery but then another sharp fall in 2022, and some small improvement in 2023.

In 2023, there were 36 Mexican participants in the GEM National Expert Survey (NES), with just three of Mexico’s Entrepreneurial Framework Conditions (EFCs) scored as sufficient (score ≥5.0), the same number
as a year before. As in many economies, Physical Infrastructure was rated the strongest of Mexican conditions, and Entrepreneurial Education at School the weakest. Mexico had five conditions rated among the bottom 10 in GEM 2023, with Entrepreneurial Education at School ranked lowest at 48th out of 49, with only Iran scoring lower. Yet nine Mexican conditions had higher scores in 2023 compared to one year earlier, with the largest increase being for Social and Cultural Norms. That left four conditions with lower scores, and the biggest fall was for Ease of Entry: Market Dynamics.

Mexico’s score for the quality of its entrepreneurial environment in 2019 had been 4.7, ranked 23rd of 54 economies. At the start of the COVID-19 pandemic this fell to 4.1, before recovering to 4.4 in 2021, falling sharply to 3.8 in 2022 as energy prices rose, and then improving slightly to 3.9 in 2023, leaving Mexico ranked 41st of 49 economies.

2023 Entrepreneurial Activity Review

In the GEM Adult Population Survey (APS), more than two in five adults in Mexico reported that their household income had fallen in 2023, well down on the three in four of one year earlier.

Entrepreneurship has a good public profile in Mexico, with more than one in two adults knowing someone who had recently started a business (above pre-pandemic levels), three in five seeing good opportunities to start a business locally, and a high seven out of 10 adults considering they had the skills and experience to start a business themselves. However, nearly one in two of those seeing good opportunities would not start a business for fear it might fail. The proportion of adults in Mexico not already doing so who expected to start a business within the next three years was one in four, up from less than one in five the year before.

The percentage of adults who were already starting or running a new business in Mexico increased to 17% from 13% in 2022, with men a little more likely than women to be starting a business, but the gap was small (about one percentage point). Mexico was one of a small number of economies with very low levels of Established Business Ownership, at one in 25 adults or less, Oman, Israel and the Slovak Republic being the others. This implied that in 2023 Mexico had more than four adults starting a new business for each one owning an established one, a finding that points to considerable difficulties in sustaining new businesses long enough for them to become established and reflecting the weaknesses in the Mexican entrepreneurial environment noted earlier. This correlates to the relatively large number of informal businesses in Mexico. As noted above, the Federal Government is improving mechanisms to formalize small business, via tax facilitation.

Four out of five new entrepreneurs in Mexico agreed with the motivation of earning a living because jobs are scarce, and seven out of 10 expected to use more digital technologies in the next six months. Just one in eight had customers beyond their country, although three in 10 expected to employ at least another six people over the next five years, an expectation probably helped by just three in 10 being solo entrepreneurs with just one owner and no current employees.

1 A brief description of the GEM approach is given in the footnote on p. 107.