INVESTMENT CLIMATE Introduction According to an economic report on Mexico published in 1971 by the First National City Bank, economic growth in Mexico has been financed largely through domestic savings, with less than 10 percent of gross fixed domestic capital formation financed from abroad. A rising level of well-directed investment has been a key determinant in Mexico's economic growth. Moreover, the marginal capital-output ratio is satisfactory, with about $1.00 of additional real income generated, on the average, by $3.00 of investment. Gross investment as a percentage of GDP has risen from about 10 percent in the early 1940s to some 20 percent in the 1960s. By 1970, the level reached an estimated $6.8 billion, or almost 20 percent of GDP. Table 5 indicates the money supply and the growth rate of real GDP (in terms of 1960 prices) during the 1961-70 period. Table 5 Money Supply and Gross Domestic Product 1961-70 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 Money supply (billions of pesos, year end) 18.0 20.3 23.7 27.6 29.5 32.8 35.4 40.0 44.3 49.0 Growth rate (%) 6.6 12.5 16.8 16.7 6.8 10.9 8.1 13.0 10.9 10.4 Current GDP (millions of pesos) 163.27 176.03 195.98 231.37 252.03 280.09 306.32 339.15 374.90 423.10 Growth rate (%) 8.5 7.8 11.3 18.1 8.9 11.1 9.4 10.8 10.5 12.9 Real GDP, 1960 prices (millions of pesos) 157.93 165.31 178.52 199.39 212.32 227.04 241.27 260.90 277.40 298.70 Growth rate (%) 4.9 4.7 8.0 11.7 6.5 6.9 6.3 8.1 6.3 7.7 * Preliminary Source: Bank of Mexico. Mexico's successful record of stability has resulted largely from its intelligent use of money and credit policy, as well as the effective discipline over the banking systems exercised 13