Background and Context
For two years, the construction sector in Mexico experienced a boom, driven by public investments in iconic projects like the Tren Maya railway and private sector optimism fueled by nearshoring activities, such as industrial park developments. Although it did not reach its historical peak from 2007, the sector saw growth of 14.4% in the first half of 2023 and 10.1% in the first half of 2024.
However, this growth trajectory has now shifted dramatically. The first half of 2025 saw a historic decline of 17.2% in the construction sector’s output, with public projects experiencing a 43.2% drop and private projects slowing down considerably from an 8.8% growth rate in the first half of 2024 to just 1.7% this year.
Government Fiscal Efforts and Business Uncertainty
The decline in the construction sector can be attributed to two primary factors. First, the federal government is working to reduce its fiscal deficit from 5.7% of the GDP (the highest in three decades) to 3.9%, which translates into less projected physical investment spending for 2025, as outlined in the Federal Budget of Expenditures.
Second, there is uncertainty in the business climate due to the tightening of tariff policies by the United States and ongoing reforms such as judicial, competition, and telecommunications reforms, whose effects are still being processed.
Sector-wise Breakdown
The 17.2% decline in the construction sector’s production value by June can be seen as follows:
- Oil and petrochemical projects fell by 51.4%
- Transportation and urbanization projects decreased by 41.4%
- Water, irrigation, and sanitation projects also experienced a decline but to a lesser extent of 28.2%
On the other hand, building projects, dominated by private investments, saw a 0.8% contraction, contrasting with the 9.9% growth observed in the first half of 2024. The “Other Construction” category was the only one to show growth, with a 3.2% increase.
Public Sector Construction: Petroleum as a Drag
Within the public sector component, the significant drop in petroleum-related construction coincides with a substantial decrease in the completion of exploration and development wells in Pemex, which only reached 33 compared to 78 in the first half of 2024.
This decline occurs as contractors to the state-owned company have had to reduce their activities and services due to unpaid debts. Meanwhile, the decrease in transportation and urbanization projects reflects a smaller volume of work following the completion or near-completion of projects like the Interoceanic Train, Tren Maya, and Mexico-Toluca Interurban Train.
The change in government, which took several months to define its own infrastructure plan, also contributed to the shrinkage of public works.
A reactivation is expected in the second half of 2025 as the passenger train routes of this administration’s plan, including Mexico-Querétaro, Querétaro-Irapuato, and Saltillo-Nuevo Laredo, accelerate.
Modest Recovery in June
According to the National Survey of Construction Companies (ENEC) released on Monday by the National Institute of Geography and Statistics (Inegi), there was a modest recovery in the production value of construction companies in June, with a 0.9% monthly increase. However, this was insufficient to offset the 2% decline in May.
Within this, the building activity saw a 2.9% advance, while transportation and urbanization increased by 0.6%. Conversely, water, irrigation, and sanitation experienced a 12.1% decline, while other construction activities fell by 1.7%, electricity and telecommunications by 1.4%, and petroleum and petrochemicals by 1%.
Simultaneously, employment continued to decline with a monthly slide of 0.5% (the thirteenth consecutive month), implying that wages were 11.2% lower than in June 2024.
Key Questions and Answers
- What caused the decline in Mexico’s construction sector? The decline is attributed to government fiscal efforts to reduce the deficit and business uncertainty due to tightening tariff policies by the United States and ongoing reforms.
- Which sectors were most affected by the decline? The petroleum and petrochemical, transportation and urbanization, as well as water, irrigation, and sanitation sectors experienced significant drops.
- What is expected for the construction sector in the second half of 2025? A reactivation is anticipated as the passenger train routes of the current administration’s plan accelerate.
- What was the employment situation in June 2025? Employment continued to decline with a monthly slide of 0.5%, leading to wages being 11.2% lower than in June 2024.
