Overview of Mexico’s Financial Strategy for Economic Growth
The Mexican government, under the leadership of Secretary of Finance and Public Credit Edgar Amador Zamora, is developing a portfolio and investment strategy to boost public investment above the medium-term trend. This initiative aims to stimulate long-term GDP growth and strengthen private investment attraction.
Key Financial Objectives
- Maintain fiscal deficit reduction path: Continue efforts to lower the fiscal deficit while ensuring financial stability.
- Increase public revenue: Strengthen public finances and improve the status of key energy companies, Pemex and CFE.
- Maintain and enhance Mexico’s credit rating: Ensure a solid financial foundation for the country.
- Boost public investment: Accelerate economic growth through increased public sector investments.
Optimistic Outlook on Mexico’s Economy
Secretary Amador Zamora expresses optimism regarding Mexico’s economic performance. He dismisses concerns about potential inflationary impacts from the upcoming increase in special taxes on products and services, starting in 2026.
Investor Confidence and Economic Indicators
Despite public discussions about legal framework changes, such as the judicial reform and amendments to the amparo law, Amador Zamora believes investors are more focused on Mexico’s long-term potential. Key economic indicators supporting this view include:
- Record-high Foreign Direct Investment (FDI);
- Historically low unemployment rates;
- Consumer confidence above long-term averages;
- Stable and liquid exchange rate;
- Declining short-term and long-term interest rates;
- Improved financial and operational performance of Pemex and CFE;
- Lower Credit Default Swaps (CDS) indicating reduced risk for Mexico.
Addressing Recent Economic Contraction
Amador Zamora addresses the recent 0.3% economic contraction in Q3, attributing it to temporary factors like the US trade policy adjustments. He emphasizes that this contraction is sector-specific and not indicative of a broader economic weakness.
Investment in Fixed Capital
Regarding the decline in Gross Fixed Capital Formation (IFB) to 2.7% monthly and 8.9% interannual, Amador Zamora explains this as a statistical effect when comparing to record levels achieved last year due to large-scale infrastructure projects like the Tren Maya, Istmo projects, refineries, and others.
However, in the medium term, IFB growth remains robust. The government aims to further increase public investment, particularly in machinery, equipment, and physical capital focused on infrastructure. This will elevate long-term GDP growth rates.
Strengthening Tax Revenue
Amador Zamora stresses the importance of bolstering tax revenue as a cornerstone for public finances. Projected tax revenues are expected to reach 15.1% of the GDP, a modern-era high for Mexico.
Over the past seven years, tax revenues have grown by more than 3 percentage points of GDP, providing significant stability to budget financing. Historically, Mexico’s public finances depended on oil revenues, which were highly volatile. Now, Mexico is nearing the average of developing countries in terms of tax-based financing.
Key Questions and Answers
- Q: What is the Mexican government’s strategy to boost economic growth?
A: The government is developing a public investment portfolio and strategy to increase investments in machinery, equipment, and physical capital focused on infrastructure. - Q: How does Amador Zamora view recent economic contraction?
A: He considers it temporary and sector-specific, attributing it to US trade policy adjustments. - Q: What is the significance of tax revenue growth for Mexico’s finances?
A: Growing tax revenues provide stability to public finances and move Mexico closer to the average of developing countries in tax-based financing.
