Money & costs
Costs
Your dollar, euro or pound will go a long way in Mexico. Assuming the peso’s exchange rate against the US dollar remains fairly stable, you’ll find this is an affordable country to travel in. Midrange travelers can live pretty well in most parts of the country on US$75 to US$125 per person per day. Between US$40 and US$70 will get you a pleasant, clean and comfortable room for two people, with private bathroom and fan or air-conditioning, and you have the rest to pay for food (a full lunch or dinner in a decent restaurant typically costs US$15 to US$25), admission fees, transport, snacks, drinks and incidentals. Budget travelers staying in hostels can easily cover the cost of accommodation and two restaurant meals a day with US$40. Add in other costs and you’ll spend US$60 to US$80.
The main exceptions to this are the Caribbean coast, parts of Baja California and some Pacific resort towns, where rooms can easily cost 50% more than elsewhere.
Extra expenses such as internal airfares, car rentals and shopping push your expenses up, but if you have someone to share expenses with, basic costs per person drop considerably. Double rooms often cost only a few dollars more than singles, and triple or family rooms only a few dollars more than doubles. Rental cars start at around US$50 to US$60 per day, plus fuel, and cost no more for four people than for one.
At the top end of the scale are a few hotels and resorts that charge over US$200 for a room, and restaurants where you can pay US$50 per person. But you can also stay in smaller classy hotels for US$80 to US$120 a double and eat extremely well for US$40 to US$50 per person per day.
Economy
Since the North American Free Trade Agreement (Nafta) came into force in 1994, trade with the US has replaced oil as the most important element in Mexico’s economy. Nafta has steadily eliminated restrictions on commerce and investment between the US, Mexico and Canada, with the result that Mexican trade with the US has more than doubled. The US now receives 85% of Mexican exports and supplies more than half of Mexican imports.
Nafta is unpopular in rural areas and among Mexico’s poor in general, especially in the southern half of the country, for its effect on Mexican small-scale agriculture, which struggles to compete with subsidized imports from the US and Canada. There is now no tariff on imports of corn (maize) to Mexico from the US, where corn growers are heavily subsidized by the government.
The 20th century saw Mexico transform from a backward agricultural economy to one of Latin America’s most industrialized nations. Motor vehicles, processed food, steel, chemicals, paper and textiles joined more traditional industries such as sugar, coffee and mining. Most of Mexico’s exports today are manufactured goods, and over half of these come from the maquiladoras (factories, usually foreign-owned) that import materials and parts for processing or assembly by inexpensive Mexican labor, then export the products, usually to the US.
Since most maquiladoras, and most industry in general, are concentrated in the north of the country and Mexico City, Nafta had the effect of widening the wealth gap between Mexico’s north and its mainly agricultural and underdeveloped south. Draw a line across the middle of Mexico from about Tampico to Colima and you divide very neatly – with the exceptions of the Yucatán Peninsula and Mexico City – those states whose production is near or above the national average from those that are well below it.
Service industries contribute about 70% of Mexico’s Gross Domestic Product and employ about 30% of the workforce. Tourism is one of the most important service industries. Some 20 million foreign visitors a year – more than half of them cross-border day-trippers – bring in more than US$12 billion of foreign exchange, and the domestic tourism business is three times as big. Agriculture employs nearly a quarter of Mexico’s workers but produces only 4% of the national product.
Under the 2000–06 presidency of Vicente Fox, Mexico had achieved a degree of economic stability rare in its turbulent past, which had suffered periodic debt crises and bursts of rapid inflation. By 2006 job creation was almost keeping pace with the growth in the workforce engendered by the rising population. Fox’s successor, Felipe Calderón, also from the business-friendly National Action Party (PAN) nevertheless faced numerous stiff challenges if he was to keep the momentum going and really unlock Mexico’s economic potential.
The country’s nationalized oil industry, provider of 40% of federal government revenue, faced falling production and falling reserves, having failed to invest enough in new exploration and refineries.
Around half of Mexicans still work in the ‘informal economy’ (street vendors, home workers, traffic signal fire-eaters, criminals – anybody whose work is not officially registered). Few of these people scrape together much more than M$50 a day. They don’t pay taxes and they don’t contribute to the country’s social security system, which provides health care and pensions. The Mexican government’s non–oil tax revenue is equivalent to only 11% of GDP, well below levels in the developed world and even below the average for Latin America.
Early tax and pensions reforms by the Calderón government were aimed at boosting the government’s income in order to reduce oil dependency and strengthen social security programs. Greater spending on infrastructure projects and more competition are two of Calderón’s main priorities. As well as oil, the telecommunications, electricity, cement and beer industries are all dominated by a very small number of companies, state-owned or private, with prices for these products generally higher than they could be. Mexico also faces serious competition from the rapidly growing economies of India and especially China, with much lower wage levels than Mexico’s, meaning that their products are often cheaper and that they can more easily attract foreign investment.
Money
Mexico’s currency is the peso, usually denoted by the ‘M$’ sign. Any prices quoted in US dollars will normally be written ‘US$5’ or ‘5 USD’ to avoid misunderstanding. The peso is divided into 100 centavos. Coins come in denominations of 20 and 50 centavos and one, two, five, 10, 20 and 100 pesos. There are notes of 20, 50, 100, 200, 500 and 1000 pesos.
The most convenient form of money in Mexico is a major international credit card or debit card – preferably two if you have them. Visa, MasterCard and American Express cards can be used to obtain cash easily from ATMs in Mexico, and are accepted for payment by most airlines, car-rental companies and travel agents, plus many upper midrange and top-end hotels, and some restaurants and stores. Occasionally there’s a surcharge for paying by card, or a discount for paying cash. Making a purchase by credit card normally gives you a more favorable exchange rate than exchanging money at a bank, and isn’t subject to commission, but you’ll normally have to pay your card issuer a ‘foreign exchange’ transaction fee of around 2.5%.
As a backup to credit or debit cards, it’s a good idea to take a little cash and a few traveler’s checks. US dollars are easily the most exchangeable foreign currency in Mexico. In tourist areas and many Mexican cities along the US border, you can often make some purchases in US dollars, though the exchange rate used will probably not be in your favor. Euros, British pounds and Canadian dollars, in cash or as traveler’s checks, are accepted by most banks and some casas de cambio (exchange houses), but acceptance is less certain if you’re away from main cities and tourist centers. Traveler’s checks should be a major brand, such as American Express or Visa.
ATMs
ATMs (caja permanente or cajero automático) are plentiful in Mexico, and are the easiest source of cash. You can use major credit cards and some bank cards, such as those on the Cirrus and Plus systems, to withdraw pesos from ATMs. The exchange rate that banks use for ATM withdrawals is normally better than the ‘tourist rate’ for currency exchange, though that advantage may be negated by extra handling fees, interest charges and other methods that banks have of taking your money away from you.
To avoid the risk of ‘card cloning, ’ use ATMs only in secure indoor locations, not those in stand-alone booths. Card cloners obtain your card number and PIN by means of hidden cameras, then make a copy of your card and use it to withdraw cash from your account.
Mexico
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