Gross Domestic Product (GDP) Growth Analysis
The evidence of economic failure is evident. The GDP, measured at 2018 prices, for the first quarter of 2025 was 24,919.3 billion pesos, compared to 24,605.3 billion pesos in the fourth quarter of 2018. Over the course of 25 quarters under Morena’s rule, the cumulative growth has only been a meager 1.27%, with an average quarterly growth rate of just 0.05 percent.
Alternative Economic Growth Measurement: The Global Activity Index
Another measure of economic failure is the Global Activity Index, an approximation of monthly GDP. In November 2018, the last month of Peña’s administration, this index stood at 104. According to INEGI, by May of this year, the index reached 104.7. Considering this level, the accumulated growth in economic activity over the 77 months under the current administration is a mere 0.67%, with an average monthly growth rate of only 0.008 percent.
The Reasons Behind the Economic Failure
The reasons for this economic failure are well-known: the arbitrary cancellation of the airport project, which discouraged private investment; the decision to discriminate against private electricity providers; the embrace of criminal organizations and subsequent rise in crime; and the increasing use of extortion, acting as an additional illegal tax. Additionally, the lack of a countercyclical fiscal policy during the pandemic deepened the 2020 downturn and prevented a more significant rebound in 2021. The weakening of the public sector’s net financial position due to resource allocation in various funds and trusts, excessive borrowing of seven billion pesos between 2019 and 2024, implementation of numerous government transfer programs that purchase political loyalty but hinder overall productivity, and the squandering of billions of pesos on López’s public works projects, all deficit-ridden and socially unproductive, have further exacerbated the situation.
The Path Ahead: Prosperity or Further Decline?
Some may argue that “the past is the past,” but the future may bring even worse consequences due to the aforementioned issues, as well as the destruction of the foundations necessary for growth. President Sheinbaum’s contributions to this destruction have been significant.
Mexico’s Economic Ambitions: A Critical Examination
President Sheinbaum aims for Mexico to become one of the world’s top ten economies. However, given its territorial size and population, Mexico should naturally be among the world’s largest economies in absolute terms. Let’s compare Mexico to France and Japan:
- Mexico vs. France: Mexico is three times larger than France, with a population twice that of France. However, in 2023 (current dollars adjusted for PPP), France’s GDP was $3,982 billion, while Mexico’s was $3,216 billion. This results in a GDP per square kilometer of $6.2 million for France versus $1.6 million for Mexico, and a GDP per capita three times higher in France than in Mexico.
- Mexico vs. Japan: Both countries have similar populations, but Japan’s aggregated GDP is twice that of Mexico. Japan’s GDP per square kilometer is ten times greater than Mexico’s.
The goal should not be to rank among the top ten absolute economies but rather to increase the GDP per capita. To achieve this, consistent and sustained high growth is required. However, the incentives derived from the current institutional framework do not support this objective.
Institutional Challenges and Future Uncertainties
The destruction of checks and balances, especially the judicial power, and the establishment of an authoritarian regime have eliminated the legal certainty needed to encourage investment. Moreover, President Sheinbaum’s inclination towards increased government involvement in the economy—characterized by inefficiency, low productivity, and opacity—results in social resource wastage, reduced aggregate productivity, and slower growth. The government’s financially weakened position further compounds these issues. Additionally, uncertainties surround the future of the T-MEC.
This year, under the best-case scenario, the economy is expected to stagnate. However, institutional destruction suggests that stagnation may persist for several years, causing the GDP per capita to decrease instead of grow and failing to position Mexico among the world’s top ten economies.
Key Questions and Answers
- What is the current state of Mexico’s economy under Morena’s governance? The economy has shown minimal growth, with a cumulative increase of only 1.27% over 25 quarters and an average quarterly growth rate of just 0.05 percent.
- How does Mexico’s economic performance compare to other countries? When compared to France and Japan, Mexico lags behind in terms of GDP per capita and per square kilometer, indicating that it is not utilizing its resources as efficiently.
- What factors have contributed to Mexico’s economic stagnation? Factors include the arbitrary cancellation of the airport project, discrimination against private electricity providers, rising crime rates, excessive borrowing, and the government’s increasing involvement in the economy.
- What are Mexico’s economic ambitions, and how realistic are they? President Sheinbaum aims for Mexico to be among the world’s top ten economies. However, given its size and population, Mexico should naturally be one of the largest economies in absolute terms. The current institutional framework and government policies do not support achieving this goal.
- What challenges and uncertainties does Mexico’s economy face? Institutional destruction, weakened public finances, increased government involvement in the economy, and uncertainties surrounding international trade agreements pose significant challenges to Mexico’s economic growth.
