92369 COUNTRY HIGHLIGHTS MEXICO 2010 The World Bank interviewed a representative sample of the private sector in 8 of the most active economic regions in Mexico. The sample consisted of 1480 business establishments surveyed from August 2010 through June 2011. The Enterprise Survey covers several topics of the business environment as well as performance 2010 MEXICO ENTERPRISE SURVEY measures for each firm. Below are the main highlights from the survey. Mexican firms added jobs at over 5% but saw only modest gains in sales and productivity Mexican firms increased their employment by 7 over 5% per year, comparable to growth rates in 6 Percentage of annual growth other countries in Latin America & Caribbean 5 (LAC) and to other Upper Middle Income (UMI) 4 economies. Nonetheless, sales growth, in real 3 terms, grew at less than 1%, lagging behind both 2 LAC and UMI averages. In terms of productivity, 1 though, Mexican firms did experience modest 0 growth, compared to declining productivity in the -1 Employment Real sales Labor productivity rest of the region and flat rates in UMI -2 economies. Mexico2010 Latin America & Caribbean Upper middle income However, productivity growth was due to gains from Mexico’s small firms 3 While, overall, firms in Mexico saw their 2 productivity grow, these gains were driven by Percentage of annual labor small firms. Firms with less than 20 full-time 1 productivity growth employees had productivity growth rates above 0 2% annually. By contrast, medium and large firms -1 experienced declining labor productivity growth. Mexico2010 Mexico’s largest firms, with more than 100 -2 employees, reported declines in productivity of 5% -3 small(5-20) annually over the same period. medium(20-99) -4 large(100+) -5 Mexican firms cite informality, tax rates, access to finance, and crime as top obstacles When asked to rank 15 different elements of the Informal competitor Tax rates business environment, the component selected by Access to Finance most private Mexican firms is the practices of the Crime, theft and disorder informal sector, followed by tax rates, access to Corruption Licensing and permits finance and crime, theft and disorder. These four Electricity obstacles cover more than 50 percent of the Political instability Mexican private sector. Compared to the rest of Poorly educated workers Access to Land Upper Middle Income economies, informality and Labor regulations crime are not common as areas of concern for the Tax administration private sector whereas tax rates and access to Courts Transport finance are commonly selected in economies of Customs & trade regulations similar levels of income. 0% 5% 10% 15% 20% Percentage of firms A greater proportion of Mexican firms face competition from the informal sector 80 The Enterprise Surveys also provide evidence 70 based on the experience of the firms navigating the business environment rather than on opinions 60 2010 MEXICO ENTERPRISE SURVEY of Managers. Seven out of every ten firms in 50 Percentage Mexico report competing with the informal 40 sector. This rate is notably higher than 62% 30 reported in the rest of LAC and 53% in UMI 20 economies. This evidence confirms that the 10 choice of informality as the top obstacle is based 0 on the actual experiences of firms. Mexico2010 Latin America & Upper middle income Caribbean Firms competing against unregistered or informal firms (%) Mexican firms exhibit lower levels of access to financial intermediation 100 250 250 Similarly, Mexican firms seem to face 90 Mexico2010 relatively harder conditions than their 80 Latin America & Caribbean 200 200 Upper middle income counterparts in LAC and in UMI 70 economies around the world in financial 60 150 50 Percentage 150 Percentage 50 markets. A considerably lower share of 40 100 00 Mexican firms has a loan or line of credit or 100 30 a checking or savings account than their 20 50 0 50 homologues in LAC or UMI economies. 10 Additionally, Mexican firms are required to 0 0 0 provide higher collateral value relative to Percent of firms with a bank Percent of firms with a Value of collateral loan/line of credit checking or savings account needed for a loan (% the loans they receive. of the loan amount) While losses due to crime in Mexico are high significantly fewer firms actually pay for security 2.5 45 70 The cost of crime – measured as the cost 60 40 of security plus losses due to crime – for 2.0 35 Mexico’s private sector is over 2% of 50 Percentage of annual sales Percentage of annual sales 30 annual sales, confirming the perception 1.5 25 40 that crime is one of the top 4 obstacles for 20 30 firms. Nonetheless, the share of firms 1.0 15 paying for security, an indicator also 20 0.5 10 measured by Enterprise Surveys, is 5 10 considerably lower in Mexico than in LAC 0.0 0 0 Mexico2010 Latin America & Upper middle Mexico Latin Upper Caribbean income 2010 America & middle Cariibbeam income Security costs Losses due to theft and vandalism Percent of firms paying for security The Enterprise Analysis Unit is a joint World Bank and IFC team of economists, survey experts specialized in private sector development. Surveys implemented by the team reveal what businesses and firms experience across the world by interviewing representative samples of the formal, non-agricultural, non-extractive, private sector with 5 employees or more. The resulting globally comparable firm-level data is used to construct business environment indicators and measure firm performance. The findings and recommendations help policy makers identify, prioritize, and implement policy reforms that support efficient private economic activity. For more information on the survey visit http://www.enterprisesurveys.org Generated using Enterprise Survey data as of October 22, 2013