Introduction
Amidst a whirlwind of local and international news, crucial yet seemingly mundane topics like public finances often lose focus. This week, in a report to Congress, Mexico’s Secretaría de Hacienda y Crédito Público (SHCP) detailed the government’s fiscal performance in Claudia Sheinbaum’s first year as president. The numbers present a mix of positive, concerning, and worrying aspects for all Mexicans.
Fiscal Performance Overview
The Report on Fiscal Requirements of the Public Sector (RFSP) – a broad measure of fiscal deficit – closed at 4.8% of GDP, down from 5.7% in 2024. Excluding extraordinary support for Pemex payments to suppliers (0.4% of GDP, equivalent to 193 billion pesos), the RFSP would have been 4.3% of GDP.
Some fiscal consolidation progress was made, though the government fell short of its target.
Spending Cuts
In 2025, spending cuts were selectively applied to public investment. Total expenditure fell 1.8% in real terms, with physical investment dropping by 25.7%. The hardest-hit areas were science and technology (-73.9%), environmental protection (-62.9%), transportation (-44.6%), and energy (-32.2%). Meanwhile, pensions grew by 6.8% in real terms, reflecting a structure that safeguarded mandatory spending while sacrificing productive investments. Consequently, the 1.5 percentage point reduction in RFSP was mainly achieved by contracting future growth capabilities rather than making structural changes to current spending.
Revenue Collection
Tax revenue reached a historical high of 15.1% of GDP. The Individual Income Tax (ISR) was the primary driver, growing by 3.7% in real terms, fueled by corporate entities (+4.2%) and, to a lesser extent, physical persons (3.0%). Concerns have been raised about the techniques employed by the SAT with large companies, casting doubt on their sustainability. The Value Added Tax (IVA) showed moderate growth of 2.6% in real terms, reflecting resilient yet moderated domestic consumption. The Impuesto Especial sobre Producción y Servicios (IEPS) grew by 3.0% in real terms, limited by fuel subsidies. Notably, customs trade taxes increased by 38.4% in real terms, indicating heightened customs scrutiny and increased imports. These increases enabled budgetary income to grow by 2.5% in real terms, offsetting the decline in petroleum-related income.
Analysis and Concerns
The RFSP target of 3.9% was not met. Although the 4.3-4.8% figure is better than 2024, it does not reverse the debt trajectory, which reached a record-high 52.6% of GDP. This adjustment was primarily achieved by sacrificing productive and infrastructure investments, with a mere 0.7% growth largely reflecting the fiscal adjustment cost incurred by the government due to excessive 2024 spending, when RFSP reached an unsustainable 5.7% of GDP.
Sheinbaum’s Infrastructure Plan
In this context, Claudia Sheinbaum’s announcement of a 5.6 trillion-peso infrastructure program for her six-year term might seem promising. However, it’s essential to assess whether the conditions for such a plan exist. The viability of non-energy projects must be verified, avoiding the “white elephant” pitfalls of the previous administration. Most crucially, genuine private sector conditions and appetite for the plan must be confirmed.
Uncertainty and Lack of Trust
The ongoing judicial reform-induced uncertainty and distrust further complicate matters, raising questions about the feasibility of these ambitious plans.
Key Questions and Answers
- What is the RFSP, and why is it important? The Report on Fiscal Requirements of the Public Sector (RFSP) measures fiscal deficit. A lower RFSP indicates better fiscal health, crucial for sustainable economic growth and debt management.
- What were the main areas of spending cuts in 2025? Spending cuts were concentrated on public investment, with significant reductions in science and technology, environmental protection, transportation, and energy.
- How did tax revenue perform in 2025? Tax revenue reached a historical high of 15.1% of GDP, driven mainly by the Individual Income Tax (ISR), which grew by 3.7% in real terms.
- Why is there concern about Sheinbaum’s infrastructure plan? Concerns revolve around the viability of proposed projects, avoiding past “white elephant” mistakes, and ensuring genuine private sector participation amidst ongoing judicial reform uncertainty.
