Mexico Country Risk Report

The administration under Claudia Sheinbaum offers a mix of pragmatism and continued state interventionism. Sheinbaum’s fiscal policies aim to stabilize public finances after pre-election spending increased the deficit from 3.4% of GDP in 2023 to 4.7% in 2024. Fiscal revenues remain weak (17% of GDP), prompting expanded tax incentives for local and foreign companies, especially in technology and R&D, effective through 2030.

Nearshoring presents a key medium-term growth driver. Mexico’s status as the US’s top trading partner and the unveiling of the “Plan México” strategy – targeting 15% national content growth in automotive and electronic exports by 2030 – highlight its industrial ambitions. However, investment bottlenecks in energy and manufacturing sectors, combined with slower US demand under the Trump administration, temper these prospects. Achieving a USD100bn annual FDI target by 2030 would require reversing declines in new capital investment, which fell to historic lows of 5.8% of total FDI in 2024. The government's focus on rail and the helpful narrative around creating an alternative to the capacity-constrained Panama Canal may also sustain private investment. The government seeks to grow energy generation capacity by 16% and expand renewable energy integration. Streamlined permitting processes and public-private partnerships are vital to achieving these targets, offering potential relief to Mexico’s energy-intensive industries.

Mexico’s current account dynamics remain stable, buoyed by remittances and reserves. Nevertheless, risks persist around the 2026 USMCA renewal, where protracted negotiations or a US withdrawal could sharply impact trade and investment flows. A disruption in these agreements would have far-reaching implications for sectors dependent on open trade, including automotive, electronics and agriculture, with the latter plagued by consecutive periods of drought.