I don't know many foreigners living in Mexico who speak really good Spanish. Because I started studying the language as a kid, continued in college, and used it from time to time as an adult, I had a good basis in Spanish when I moved to live in Mexico full time a few years ago. As a result, becoming proficient enough to comfortably socialize with Mexicans and handle all of my own business affairs has not been the huge step for me that it is for many.
From what I've seen, these people live isolated within a limited social group of people who speak English. Many live happily enough within this circle, but in some ways remain perpetual tourists in the society where they have chosen to live, and forever dependent upon others to interpret and assist in day-to-day living.
Expats who live in Mexico and don't learn the language often count upon bilingual go-betweens to get things done and keep up with what is going on. Many make purchases and use services based upon whether the provider speaks English rather than the quality of the service or products. When it comes to goods and services, non-Spanish speakers often pay a stiff premium for the need to do all transactions in English. These types of services are necessary for short-term visitors and people in transition, but dependence upon them can be limiting for those who live here for the long term.
Why bother with Spanish? Here are a few good reasons I can think of:
Social and cultural: For most people, the biggest benefit of being able to speak the language is access to a vastly larger and more diverse social circle and a greater appreciation of the culture. A Spanish-speaking expat will meet many more possible friends among the locals and among foreigners from other parts of the world who although they may not speak English, likely will speak Spanish. In my case I know French and Italian residents here who don't speak English; we communicate in Spanish. Speaking the language also increases depth of understanding and appreciation of the arts such as music, theater, poetry readings, and all manner of public and cultural events.
There is a lot of cultural information that is transmitted by language, and it's very difficult to understand the real meaning of much that goes on around you without it. This background is not something one absorbs through beginner- or mid-level language classes or by learning a lot of vocabulary. It takes time and immersion in Spanish to get to this stage, but it is well worthwhile for those who choose to live here permanently. When you get to the point that you understand the background cultural context of certain words and expressions, and begin to understand and make jokes, puns and wordplays, you finally are approaching a level of language knowledge in which you can begin to understand the nuances of culture.
I find that among expats there is a fairly dependable correlation between being critical of Mexico and Mexicans and not understanding much Spanish. I think the basis for this attitude is the lack of understanding of the culture they are living in and not knowing any Mexicans beyond a superficial level.
Efficiency: If you speak the language, it is much easier to get things accomplished efficiently and effectively, whether that's shopping, explaining a problem to a police officer, banker, computer tech, plumber or mechanic, or dealing with functionaries in businesses and government offices. If you need medical attention, you can go to the best specialist or doctor of your choice regardless of language issues, and communicate your needs clearly without needing a translator.
Independence: If you speak Spanish, you can go out driving or take buses with much less concern about getting lost because you can always ask directions. You confidently can go exploring in the countryside or look for an address in an unknown area. Most importantly, you are able do these and many more things by yourself and on your own schedule.
Involvement: If you can talk with the locals, it's easier to keep up with happenings in the neighborhood. If you love to chat, you'll find neighbors who will enjoy helping you practice your language skills, and at the same time fill you in on what's going on on your street. You'll also get invited to more neighborhood events, and probably find neighbors willing to help out when you have a problem. In addition, you can keep up with what's going on in the region and country without relying upon someone else's version: you will be able to read the paper and watch or listen to local news.
Intellectual: Studies have shown that language learning, at any age, is good for the brain and memory. Research also shows that it is possible to learn a new language even at an advanced age, so being "too old" is a weak excuse.
Speaking Spanish has enriched my life in Yucatán in so many ways it would be hard to include them all in a blog post. At this point I go for days at a stretch without speaking English at all. I can't imagine living here without being able to participate as fully as possible in the life and culture around me.
Read earlier posts on language learning:
Making it Memorable
Live the Language