Why isn’t Mexico rich?

Speaking about Latin American country studies, Gordon Hanson has a new NBER paper:

Over the last three decades, Mexico has aggressively reformed its economy, opening to foreign trade and investment, achieving fiscal discipline, and privatizing state owned enterprises. Despite these efforts, the country’s economic growth has been lackluster, trailing that of many other developing nations.

…I review arguments for why Mexico hasn’t sustained higher rates of economic growth. The most prominent suggest that some combination of poorly functioning credit markets, distortions in the supply of non-traded inputs, and perverse incentives for informality creates a drag on productivity growth. These are factors internal to Mexico.

One possible external factor is that the country has the bad luck of exporting goods that China sells, rather than goods that China buys.