Many Americans are not sure what to think of our southern neighbors, who we know as Mexico. One question that many people want to know is if Mexico is a truly socialist country.
Mexico is not a truly socialist country but is known to have a mixed economy, which means that Mexico has both capitalist and socialist characteristics and tendencies. Mexico is a mixed economy as both capitalism and socialism as able together.
One of the significant issues with the Mexican system is their government regulations, and their rule of law can be hampered by corruption. The levels of corruption can differ from state to state and area to area, but it can hurt Mexico’s foreign investment, business, and economic environment.
Mexico Is Not A Socialist Country
Mexico is not defined as a Socialist country; in fact, there are no true socialist countries left around the world. Mexico can best be described as a mixed economy.
Mexico’s mixed economy shows characteristics of both capitalism and socialism. Mexico has a private sector that allows individuals and companies to make their own decisions for their business interests.
Mexico also has a public sector where the state will decide how to produce and distribute goods and services for the public interest. In a mixed economy, the private and public economic characteristics are allowed to co-exist; Mexico’s economic system is based on a mixed economy.
Investopedia defines a mixed economy best when it says:
Investopedia said it best when they spoke about how there are elements of both capitalism and socialism in a mixed economy; this clearly defines the Mexican economy.
In Mexico, capitalism and socialism can work together; one does not dominate the other.
The Constitution regulates Mexico’s economy; the rule of economic activities is regulated through laws in the Mexican constitution that define the rights of the public, private, and society. An example of this is that the Mexican Constitution regulates personal property.
Mexico’s economic system is composed of laws, agreements, markets, institutions, incentives, and property rights; this is very similar to the mixed economy that the United States has.
Mexico’s Ranking Of Economic Freedom
Under the heritage index of economic freedom, Mexico is ranked about 67th globally regarding economic freedom. The ranking of the economic freedoms for Mexico is part of the Heritage Economic Freedom study.
The Heritage study looks at four primary areas of freedom for each country that is defined as the following:
- Rule Of Law – The rule of law includes property rights, judicial effectiveness, and government integrity.
- Government Size – The government size factor includes tax burden, government spending, and fiscal health.
- Regulatory Efficiency – The regulatory efficiency factors include business freedom, labor freedom, and monetary freedom.
- Open Markets – Open market factors include trade freedom, investment freedom, and financial freedom.
Mexico’s Ranking Of Capitalism And Socialism
The Heritage Economic Freedom factor is essential to understand how Mexico is viewed for key freedom indicators. Several factors will affect Mexico’s ranking factors of Capitalism and Socialism; these ranking economic ranking factors affect Mexico’s mixed economy.
Below are some of the different economic factors and how they affect Mexico’s capitalism, socialism, and freedom.
Mexico’s Rule of Law
Mexico’s rule of law has to do with property rights. Under Mexican law, property rights are protected, but the way property rights are enforced is very uneven; property registration can also be problematic. Foreign ownership of land is also limited.
The Judiciary in Mexico is independent, but the court decisions are often considered suspect and do not follow the rule of law. Corruption also flourishes in Mexico, so the rule of law is deemed to be weak.
Mexico is also known for many drug cartels that can affect the rule of law and affect a capitalist economy.
Mexico’s Government Size And Taxes
Mexico’s top individual income tax rate is 35 percent, and the highest corporate tax rate is 30 percent. There are also many other taxes such as VAT or value-added tax.
These taxes mean that the average individual pays about 16.5 percent of the domestic income to help the Mexican government.
The Mexican government is supposed to use the tax for the public good, but one of the issues is that not all the money is used for social programs, and a lot of the tax money goes to corruption.
Mexico’s Regulatory Efficiency
Mexico’s government is known for having sudden regulatory changes to policy; all these government changes add to a climate of business uncertainty. Mexico also has questionable enforcement of different policies that affect business and capitalism.
Some states of Mexico have been phasing in some labor courts; the problem is that corruption is still an issue in many parts of Mexico.
Mexico has increased subsidies to the state’s utility and oil companies.
Mexico’s Open Markets And Trade
Mexico has about 23 preferential trade agreements in force: Mexico wants to encourage free trade and open trade within a capitalist system.
Even though Mexico wants to attract and encourage foreign investment, this is hampered by the inconsistent rule of law and corruption at many different levels.
Mexico is very much a mixed economy as Mexico has both capitalist and socialist characteristics in its economy.
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