Trading Places
Unveiling the geographic transformation of Mexico’s economic growth.
Mexican economic output has historically been driven by four key states: Mexico City (15% of total GDP), State of Mexico (9%), Nuevo León (8%), and Jalisco (7%). However, data suggests that the country could be set for important shifts in the geographic composition of its economic development.
In today’s post, we present key insights across three topics that we consider could influence the economic landscape of the country from a geographic standpoint in the years to come.
Executive summary
Every single state that makes up “el Bajío” has increased its share on the country’s total economic output. Between 2003 and 2022, the region reported a CAGR on its real-GDP of above 2.3% — 91 basis points above the rest of the Mexican economy, and contributed close to 34% of the country’s economic growth in the past ten years; despite accounting for just 22% of total GDP during the same period (on average).
Demographics may play a key role on labor supply. According to CONAPO, Mexico (as a whole) is set to face serious consequences on the aging of it’s population — per the institution’s projections, only 44% of the country’s total population will be considered prime-age working adults1 by the end of 2060 (vs. 50% as of “today”). This could result in increased economic development for states and regions where the share of prime-age adults considerably surpasses the country’s average, such as: Baja California Sur, Quintana Roo and Querétaro.
Change in average cash balances per banking account could be a proxy for growth. Based on CNBV data, the average banking account in Mexico (excluding corporates) had an average balance of MXN $24 thousand as of April 2024, implying a 6-year CAGR of 4% (a rate close to the country’s average inflation). Out of the 16 states with an above median CAGR on their average cash balances, only 5 recorded an economic growth below the country’s median.
The rise of “the Bajío” region
According to INEGI’s data, the seven states that make up “the Bajío” region increased their share in the country’s total economic output to 22% by the end of 2022, up from 19% in 2003.
The Bajío region is made up from: Aguascalientes, Guanajuato, Jalisco, Michoacán, Querétaro, San Luis Potosí, and Zacatecas.
However, the economic success of central Mexico is not limited to its increased influence on the country’s GDP. For instance, prior to 2019, labor productivity in the region significantly lagged behind the rest of the country across key industries. This gap has not only been closed in recent years, but the region now surpasses the average productivity indices reported by the remaining states, according to the latest INEGI data.
On top of the premium and rise in productivity within the region, “el Bajío” also boasts competitive labor force costs in manufacturing when compared to other states — with weighted-average salary per hour in the industry being estimated at about 3% lower than the national average.