Slow Growth: Mexico Edition

For the last eight years or so, going back before the pandemic, Mexico’s economy has been growing at 1% per year or less, which is barely faster than the population of Mexico has been growing. It is a fact of arithmetic that an upper-middle-income country, as Mexico is classified by the World Bank, will not become an upper-income country unless it grows faster than the upper-income countries. Tony Payan, Gabriela Siller Pagaza, José Iván Rodríguez-Sánchez explore the dimensions of the problem in “Locked in Low Gear: Mexico’s Struggling Economy” (Rice University Baker Institute for Public Policy, April 15, 2026). As a starting point, it’s useful to recognize that Mexico’s economy is readily divided into “formal” and “informal.” The informal economy is essentially not taxed or regulated by the government, and workers in this sector tend to be lower-skilled, with less equipment or machinery to do their jobs, and less connection to the modern economy. In addition, informal workers are not…