Introduction to Municipal Debt Analysis by the Mexican Government
The Secretaría de Hacienda y Crédito Público (SHCP) recently released the results of its first-half 2025 analysis on municipal debt in Mexico. This evaluation covers 682 out of 2,457 cities with outstanding financial obligations to the SHCP.
Key Findings
- Stable Financial Situation: 97.6% of the analyzed municipalities (600 out of 615) are classified as having sustainable debt levels.
- Transparency Concerns: 9.8% of the cities with debt failed to provide adequate information for evaluation.
- Income Discretionary Resources: These are finances that municipalities can use autonomously, without being previously allocated by federal or state laws for specific expenditures.
- Debt Evaluation Categories: Sustainable, Under Review, and High. The first two indicate a manageable debt level, while the latter suggests potential issues.
Sustainable Debt Levels
Among the 600 municipalities with sustainable debt levels, some notable examples include:
- Campeche, Campeche
- Monclova, Coahuila
- Tonalá, Chiapas
- Camargo, Chihuahua
- Canelas, Durango
These cities have minimal debt percentages relative to their total income from discretionary resources.
Cities Under Review (Yellow Light)
Only 14 cities, or 2.3% of those evaluated, are classified under the “Under Review” category. Aguascalientes is one such city, with a debt-to-discretionary-income ratio of 70%.
- Aguascalientes’s discretionary income: 3,809 million pesos
- Debt service allocation: 10% of discretionary income (385 million pesos)
- High-risk classification due to significant debt allocation impacting operational expenses
Other cities under review include Sabinas (Coahuila), Meoqui and Saucillo (Chihuahua), Mapimí and Panuco de Coronado (Durango), Ahualulco de Mercado and Cabo Corrientes (Jalisco), Cuautla and Tlaquiltengo (Morelos), Tuxpan (Nayarit), Agua Prieta and Puerto Peñasco (Sonora), and Chiconquiaco (Veracruz).
High-Risk Debt (Red Light)
Tlahualilo, Durango, is the sole city classified with high debt levels. Its debt balance exceeded 133% of its discretionary income, placing it in the high-risk category.
- Tlahualilo’s discretionary income: 54 million pesos
- Debt balance: 72 million pesos
- No debt servicing payments made during the evaluation period, possibly due to default or refinancing agreements
Key Questions and Answers
- What is the purpose of the SHCP’s debt evaluation? The evaluation aims to assess municipal debt levels using income discretionary resources as a benchmark.
- What does it mean for a city to have sustainable debt? Cities with sustainable debt levels maintain manageable debt percentages relative to their discretionary income.
- Why is transparency important in this context? Transparent financial information allows for accurate evaluation and ensures accountability.
- What are the implications of high debt allocation? Significant debt allocations can negatively impact a city’s ability to cover operational expenses, including employee salaries and public services.
Conclusion
The SHCP’s analysis highlights that the vast majority of Mexican cities with debt maintain stable financial situations. However, concerns regarding transparency and the potential impact of high debt allocations on operational expenses warrant attention from both local governments and citizens. Regular evaluations by the SHCP will continue to provide valuable insights into municipal debt management across Mexico.
