The United States is the largest economy in the world by gross domestic product, still having a slight edge over China. As a result, we don’t always think very much about our neighboring economies. However, Canada and Mexico are relatively powerful economically, with the 10th and 15th largest economies in the world, respectively. Both countries also have a GDP of over $1 trillion, so they should not be overlooked.
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In addition to being economically powerful, Canada and Mexico are each unique, not only culturally and politically, but also economically. Both countries also are important trading partners with the U.S. due to agreements such as NAFTA and now USMCA.
Indeed, understanding our neighboring economies is key to our own economic success. Our economy is intertwined with theirs. This list will take a look at some of the lesser-known and more interesting facts about each country’s economy.
About 3/4 of Canada’s Exports Are to the United States
Although Canada’s economy is largely service-based, the majority of the goods it exports go to the United States. Among those products are natural resources such as oils, vehicles and machinery. Interestingly, nuclear reactors are among Canada’s top exports to the U.S. Canada also had over $6 billion of aircraft and spacecraft exports to the U.S. in 2019. The total amount of Canadian exports in 2019 was $447 billion; exports to the U.S. in that year totaled $358 billion.
Canada Has the Third-Highest Volume of Estimated Natural Resources
When thinking about natural resources, the discussion often centers on oil. Thus, Venezuela and Saudi Arabia are often the countries mentioned, in addition to Iran and others. However, Canada has the third-most oil reserves with 170 billion barrels as of 2016. It also has the third-most estimated natural resources overall with an estimated $33.2 trillion worth. Those resources include industrial minerals like limestone and rock salt, plus energy minerals such as coal and uranium. It also includes precious metals such as gold, platinum and silver.
Canada: Retail Is a Large Part of Its Economy
The service sector is by far the biggest part of Canada’s economy, with 70.2% of the country’s GDP. Retail is a significant portion of Canada’s GDP. In fact, retail ranks first among all sectors in Canada for employment, with 11.5% of people working in retail. For comparison, retail employees made up 6.3% of the total U.S. labor force in 2018. In 2020, retail sales were $606 billion in Canada, down slightly from $615 billion in 2019.
Canada: It Has a Small, but Important Agriculture Industry
Only a small part of Canada is suitable for farming, thanks in large part to its frigid temperatures. According to Brittanica, less than one-twelfth of Canada is farmable land. That may help explain why the agriculture industry employs less than 4% of Canada’s labor force. Nevertheless, the farmland Canada does have is important to its economy, producing food for both its own consumption as well as for exports. The vast majority of Canada’s land suitable for farming is in the Manitoba, Saskatchewan and Alberta provinces.
Canada: More Than One-Third of the Country Is Covered With Forests
Canada is the second-largest country in the world by land area. It is much smaller than Russia but slightly larger than the U.S., which is the third-largest. Of Canada’s 9.98 million square kilometers of land, 347 million hectares (3.47 million square kilometers) are covered in forest land. That accounts for 9% of the world’s total forests and 38% of Canada’s land. As a result, Canada produces abundant amounts of lumber, pulp and paper products. In fact, Canada’s forestry exports are larger than its farm, fish and mineral products combined.
Mexico: It Has a Smaller GDP Than Canada With a Larger Population
Mexico’s nominal GDP was $1.274 trillion in 2019 compared to Canada’s $1.6 trillion in 2019. Indeed, Canada’s GDP is about 25% larger than Mexico’s GDP, but Mexico has 127.6 million people compared to Canada’s mere 37.9 million. That being said, Mexico’s purchasing power parity (PPP) is estimated to be $2.6 trillion in 2021, while Canada’s PPP estimate for 2021 is $1.9 trillion. Thus, Canada’s total economic output is higher than that of Mexico, but your money goes much further when spent in Mexico.
Mexico: Its Economy Is Largely Service-Based
Mexico and Canada’s service sectors make up almost the same percentage of their respective economies. In Mexico, the service sector makes up 64.6% of its economy. The industrial sector takes up most of the remaining output at around 35%. Agriculture makes up 3.47% of GDP — a small percentage, although that is more than double the percent of GDP for Canada’s agriculture sector. Among Mexico’s largest service industries are tourism and banking.
Mexico: It Trades Mostly With the US and Canada
Much like Canada, Mexico does most of its cross-border trade with its North American neighbors. Seventy-five percent of Mexico’s imports go to the United States and 54% of its imports come from the U.S. Although most of its international trade is confined to North America, Mexico also trades with Europe, Japan, Israel and South America. Among its largest exports are automobiles and automobile parts, computers, delivery trucks, crude petroleum and insulated wiring.
Mexico: Much of Its Economy Is in the Informal Sector
According to The Heritage Foundation, 60% of Mexico’s economy takes place in the informal sector. One of the consequences of such a high rate of informality is that the formal labor lacks the depth it may otherwise have. In addition, the informal sector does not benefit from labor laws or social protections. Informal employment declined in the years leading up to the Great Recession but has been on the rise since then. The most recent available data, from 2014, had the informal employment rate at 58.79%.
Mexico: The Industrial Sector Is a Large Part of Its Economy
The industrial sector is a very important part of Mexico’s economy, accounting for around 35% of GDP. Several industries are included in the industrial sector, such as manufacturing, oil and gas, beverages, construction and tourism. Compared to other developing economies, Mexico’s auto industry is relatively advanced, producing some complex components and engaging in research and development. Also of note, this sector includes Cemex, which is the largest construction company in the world. It also includes FEMSA, which has the second-largest Coca-Cola bottling volume in the world, after Coca-Cola Enterprises.
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