Introduction
The first year of President Claudia Sheinbaum’s administration concludes with the highest fiscal deficit in the last 40 years, indicating that spending exceeds revenue. This fiscal challenge stems from the financial mismanagement inherited from Andrés Manuel López Obrador’s administration. Crafting a successful and efficient governance program becomes arduous when dealing with an inadequately managed financial dynamic that ultimately results in unhealthy finances, coupled with a substantial debt accumulated within a single six-year term, equivalent to 72 years of net debt.
Economic Context and Challenges
According to the most accurate predictions, including official ones, the economic growth for this first year of Sheinbaum’s presidency will be close to zero. This implies that Morena-led government has not generated growth even near 1%, and when adjusted for population growth, the figure becomes negative at -1.4%. Unfortunately, the second year of Sheinbaum’s presidency is not expected to improve upon the previous seven years.
The Mexican economy’s poor performance is attributed to its heavy reliance on trade with the United States, with no other significant growth drivers. The federal budget, amounting to 10.1 trillion pesos, does not appear to stimulate growth. Should the USMCA relationship falter, leading to trade cancellation or a mere tariff agreement, the economy would struggle to recover throughout the six-year term.
Historical Economic Mismanagement
The preceding two administrations have failed to meet the country’s circumstances and needs, especially missing opportunities arising from the commercial conflict between the U.S. and China.
- Diplomatic Relations with the U.S.: The previous administration neglected crucial diplomatic ties with the U.S., focusing on drug trafficking and violating the USMCA, simultaneously opening doors for Chinese products of poor quality and an influx of Chinese citizens to operate largely informal and illegal trade.
- Chinese Influence: The influx of Chinese products, including precursor chemicals for fentanyl and other drugs, has become evident, highlighting the consequences of weakened diplomatic relations with the U.S.
Future Outlook
The population will continue to grow, while the budget shrinks and debt escalates. Regrettably, no government should inherit such a challenging situation, but this is Mexico’s reality. The country’s history with these issues is well-known.
