Mexico
Mexico has a free market economy that recently entered the
trillion dollar class. It contains a mixture of modern and outmoded
industry and agriculture, increasingly dominated by the private
sector. Recent administrations have expanded competition in
seaports, railroads, telecommunications, electricity generation,
natural gas distribution, and airports. Per capita income is
one-fourth that of the US; income distribution remains highly
unequal. Trade with the US and Canada has tripled since the
implementation of NAFTA in 1994. Mexico has 12 free trade agreements
with over 40 countries including, Guatemala, Honduras, El Salvador,
the European Free Trade Area, and Japan, putting more than 90% of
trade under free trade agreements. The new Felipe CALDERON
administration that took office in December 2006 faces many of the
same challenges that former President FOX tried to tackle, including
the need to upgrade infrastructure, modernize the tax system and
labor laws, and allow private investment in the energy sector.
CALDERON has stated that his top priorities include reducing poverty
and creating jobs. The success of his economic agenda will depend on
his ability to garner support from the opposition.
Micronesia, Federated States of Economic activity consists primarily of subsistence farming and fishing. The islands have few mineral deposits worth exploiting, except for high-grade phosphate. The potential for a tourist industry exists, but the remote location, a lack of adequate facilities, and limited air connections hinder development. The Amended Compact of Free Association with the US guarantees the Federated States of Micronesia (FSM) millions of dollars in annual aid through 2023, and establishes a Trust Fund into which the US and the FSM make annual contributions in order to provide annual payouts to the FSM in perpetuity after 2023. The country's medium-term economic outlook appears fragile due not only to the reduction in US assistance but also to the slow growth of the private sector.
Midway Islands
The economy is based on providing support services
for the national wildlife refuge activities located on the islands.
All food and manufactured goods must be imported.
Moldova
Moldova remains one of the poorest countries in Europe
despite recent progress from its small economic base. It enjoys a
favorable climate and good farmland but has no major mineral
deposits. As a result, the economy depends heavily on agriculture,
featuring fruits, vegetables, wine, and tobacco. Moldova must import
almost all of its energy supplies. Moldova's dependence on Russian
energy was underscored at the end of 2005, when a Russian-owned
electrical station in Moldova's separatist Transnistria region cut
off power to Moldova and Russia's Gazprom cut off natural gas to
Moldova in disputes over pricing. The economy achieved six percent
or more GDP growth every year from 2000-2005, though this was based
largely on consumption fueled by remittances received from Moldovans
working abroad. Russia's decision to ban Moldovan wine and
agricultural products, coupled with its decision to double the price
Moldova paid for Russian natural gas, slowed GDP growth in 2006 and
greatly exacerbated Moldova's economic troubles. Economic reforms
have been slow because of corruption and strong political forces
backing government controls; nevertheless, the government's primary
goal of EU integration has resulted in some market-oriented
progress. The economy remains vulnerable to higher fuel prices, poor
agricultural weather, and the skepticism of foreign investors. Also,
the presence of an illegal separatist regime in Moldova's
Transnistria region continues to be a drag on the Moldovan economy.
Monaco
Monaco, bordering France on the Mediterranean coast, is a
popular resort, attracting tourists to its casino and pleasant
climate. In 2001, a major construction project extended the pier
used by cruise ships in the main harbor. The principality has
successfully sought to diversify into services and small,
high-value-added, nonpolluting industries. The state has no income
tax and low business taxes and thrives as a tax haven both for
individuals who have established residence and for foreign companies
that have set up businesses and offices. The state retains
monopolies in a number of sectors, including tobacco, the telephone
network, and the postal service. Living standards are high, roughly
comparable to those in prosperous French metropolitan areas.
Mongolia
Economic activity in Mongolia has traditionally been based
on herding and agriculture. Mongolia has extensive mineral deposits.
Copper, coal, molybdenum, tin, tungsten and gold account for a large
part of industrial production. Soviet assistance, at its height
one-third of GDP, disappeared almost overnight in 1990 and 1991 at
the time of the dismantlement of the USSR. The following decade saw
Mongolia endure both deep recession due to political inaction and
natural disasters, as well as economic growth because of
reform-embracing, free-market economics and extensive privatization
of the formerly state-run economy. Severe winters and summer
droughts in 2000-2002 resulted in massive livestock die-off and zero
or negative GDP growth. This was compounded by falling prices for
Mongolia's primary sector exports and widespread opposition to
privatization. Growth was 10.6% in 2004, 5.5% in 2005, and 7.5% in
2006, largely because of high copper prices and new gold production.
Mongolia's economy continues to be heavily influenced by its
neighbors. For example, Mongolia purchases 80% of its petroleum
products and a substantial amount of electric power from Russia,
leaving it vulnerable to price increases. China is Mongolia's chief
export partner and a main source of the "shadow" or "grey" economy.
The World Bank and other international financial institutions
estimate the grey economy to be at least equal to that of the
official economy, but the former's actual size is difficult to
calculate since the money does not pass through the hands of tax
authorities or the banking sector. Remittances from Mongolians
working abroad both legally and illegally are sizeable, and money
laundering is a growing concern. Mongolia settled its $11 billion
debt with Russia at the end of 2003 on favorable terms. Mongolia,
which joined the World Trade Organization in 1997, seeks to expand
its participation and integration into Asian regional economic and
trade regimes.
Montenegro
The republic of Montenegro severed its economy from
federal control and from Serbia during the MILOSEVIC era and
continues to maintain its own central bank, uses the euro instead of
the Yugoslav dinar as official currency, collects customs tariffs,
and manages its own budget. The dissolution of the loose political
union between Serbia and Montenegro in 2006 led to separate
membership in several international financial institutions, such as
the European Bank for Reconstruction and Development. On January 18,
2007, Montenegro joined the World Bank and IMF. Montenegro is
pursuing its own membership in the World Trade Organization as well
as negotiating a Stabilization and Association agreement with the
European Union in anticipation of eventual membership. Severe
unemployment remains a key political and economic problem for this
entire region. Montenegro has privatized its large aluminum complex
- the dominant industry - as well as most of its financial sector,
and has begun to attract foreign direct investment in the tourism
sector.
Montserrat
Severe volcanic activity, which began in July 1995, has
put a damper on this small, open economy. A catastrophic eruption in
June 1997 closed the airports and seaports, causing further economic
and social dislocation. Two-thirds of the 12,000 inhabitants fled
the island. Some began to return in 1998, but lack of housing
limited the number. The agriculture sector continued to be affected
by the lack of suitable land for farming and the destruction of
crops. Prospects for the economy depend largely on developments in
relation to the volcanic activity and on public sector construction
activity. The UK has launched a three-year $122.8 million aid
program to help reconstruct the economy. Half of the island is
expected to remain uninhabitable for another decade.
Morocco
Moroccan economic policies brought macroeconomic stability
to the country in the early 1990s but have not spurred growth
sufficient to reduce unemployment that nears 20% in urban areas.
Poverty has increased due to the volatile nature of GDP, Morocco's
continued dependence on foreign energy, and its inability to promote
the growth of small and medium size enterprises. However, GDP growth
rebounded to 6.7% in 2006 due to high rainfall, which resulted in a
strong second harvest. Despite structural adjustment programs
supported by the IMF, the World Bank, and the Paris Club, the dirham
is only fully convertible for current account transactions and
Morocco's financial sector is rudimentary. Moroccan authorities
understand that reducing poverty and providing jobs is key to
domestic security and development. In 2004, Moroccan authorities
instituted measures to boost foreign direct investment and trade by
signing a free trade agreement with the US, which entered into force
in January 2006, and sold government shares in the state
telecommunications company and in the largest state-owned bank.
Long-term challenges include preparing the economy for freer trade
with the US and European Union, improving education and job
prospects for Morocco's youth, and raising living standards, which
the government hopes to achieve by increasing tourist arrivals and
boosting competitiveness in textiles.
Mozambique
At independence in 1975, Mozambique was one of the
world's poorest countries. Socialist mismanagement and a brutal
civil war from 1977-92 exacerbated the situation. In 1987, the
government embarked on a series of macroeconomic reforms designed to
stabilize the economy. These steps, combined with donor assistance
and with political stability since the multi-party elections in
1994, have led to dramatic improvements in the country's growth
rate. Inflation was reduced to single digits during the late 1990s
although it returned to double digits in 2000-06. Fiscal reforms,
including the introduction of a value-added tax and reform of the
customs service, have improved the government's revenue collection
abilities. In spite of these gains, Mozambique remains dependent
upon foreign assistance for much of its annual budget, and the
majority of the population remains below the poverty line.
Subsistence agriculture continues to employ the vast majority of the
country's work force. A substantial trade imbalance persists
although the opening of the Mozal aluminum smelter, the country's
largest foreign investment project to date, has increased export
earnings. In late 2005, and after years of negotiations, the
government signed an agreement to gain Portugal's majority share of
the Cahora Bassa Hydroelectricity (HCB) company, a dam that was not
transferred to Mozambique at independence because of the ensuing
civil war and unpaid debts. More power is needed for additional
investment projects in titanium extraction and processing and
garment manufacturing that could further close the import/export
gap. Mozambique's once substantial foreign debt has been reduced
through forgiveness and rescheduling under the IMF's Heavily
Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and is
now at a manageable level.