Introduction to Andrés Manuel López Obrador’s Legacy
Andrés Manuel López Obrador’s legacy to President Claudia Sheinbaum includes a highly indebted country. At the beginning of his administration, the public debt had reached such high levels that it became practically impossible for Sheinbaum not to publicly commit to reducing them.
Debt Levels Over Time
In 2018, when López Obrador just began his term, the Requerimientos Financieros del Sector Público (RFSP) — the difference between budgetary revenues and public sector expenditures, or indebtedness — were 2.1% of the Gross Domestic Product (GDP). By 2024, this figure had risen to 5.7% of the GDP. Similarly, the accumulated balance of RFSP increased from 43.6% of GDP in 2018 to 51.4% by the end of López Obrador’s term.
Comparing Mexico’s Debt to Other Nations
While these figures may seem alarming, the situation appears less dire when comparing Mexico’s debt to other countries based on their debt-to-GDP ratios. For instance, according to the International Monetary Fund (IMF), Japan, France, the United States, and the United Kingdom had debt-to-GDP ratios of 134.6%, 105%, 96.5%, and 93.7%, respectively.
When comparing Mexico to other Latin American countries, such as Argentina (85.3%), Brazil (61.5%), and Colombia (53.2%), it becomes clear that Mexico’s debt-to-GDP ratio is not uniquely problematic.
Debt Sustainability and Income Capacity
However, simply looking at the debt-to-GDP ratio does not fully capture a country’s ability to repay its debts. The sustainability of debt is closely tied to a nation’s income capacity. For example, Japan and the United States have low income-to-debt ratios (3.6 and 3.2 times annual income, respectively), indicating that their debt levels are manageable given their moderate income levels.
France, with a 105% debt-to-GDP ratio, has an income-to-debt ratio of 51.4%, meaning its debt equals twice its total income. Countries like Colombia and Brazil exhibit healthier debt-to-income ratios of 1.9 and 1.6, respectively, suggesting that their obligations are less burdensome relative to their revenue-generating capabilities.
These examples illustrate that observing debt levels in relation to the GDP is insufficient; a nation’s capacity to repay its debts also depends on the strength of its public income.
Mexico’s Debt and Income
In Mexico, the debt balance is more than double the size of annual budgetary income. On average over the past ten years, this balance has been 2.2 times greater than annual public income, reaching 2.3 times in 2024.
As the proportion of debt relative to income increases, Mexico’s repayment capacity has deteriorated in recent years. In 2018, the debt accounted for 10.1% of income, peaking at 25.9% in 2024.
Strategies to Reduce Debt
To lower debt levels and meet the goal of reducing public debt from 5.7% to 3.9% of GDP for the current year, a decrease in spending (1.4 percentage points less than in 2024) and an increase in income by 0.2 percentage points above 2024 levels have been proposed.
However, the feasibility of this scenario is questionable. Economic growth may not reach the target set by the Secretariat of Finance and Public Credit (SHCP) — ranging from 1.5% to 2.3% — especially considering negative growth projections by international organizations like the OECD (-1.3%) and weak growth estimates from Banco de México (0.1%).
Regarding spending, President Claudia Sheinbaum has committed to unbudgeted resource allocations throughout 2025, including potential rebates for Mexican expatriates’ remittances or teacher salary increases for the National Coordinator of Education Workers (CNTE). Such unforeseen expenses accumulate over time, negatively impacting spending reduction and, consequently, public debt.
Addressing the Debt Challenge
Reducing public debt should not be viewed as a good intention but rather as a structural necessity crucial for the country’s financial stability. With diminishing room for maneuver, the government must decide whether to maintain the status quo or face political costs and clean up the nation’s finances.
Key Questions and Answers
- What is the current state of public debt in Mexico? Under President López Obrador’s administration, public debt has grown significantly, reaching 51.4% of the GDP by the end of his term.
- How does Mexico’s debt compare to other countries? While Mexico’s debt-to-GDP ratio is high, it is not unique among developed and emerging economies. Countries like Japan, the United States, France, and the United Kingdom have even higher ratios.
- What factors influence a country’s ability to repay its debts? A nation’s income capacity plays a crucial role in determining its ability to repay debts. Countries with lower debt-to-income ratios, like Colombia and Brazil, are better positioned to manage their obligations.
- What strategies are being proposed to reduce Mexico’s public debt? Proposals include cutting spending by 1.4 percentage points and increasing income by 0.2 percentage points relative to 2024 levels.
- What challenges might hinder these debt reduction efforts? Slow economic growth and unforeseen spending commitments, such as remittance rebates or teacher salary increases, could complicate debt reduction efforts.
