Introduction to the Situation
I carefully read Alejandro Werner’s article from the previous Sunday, published in a national newspaper. The piece discusses decisions made by President Sheinbaum’s administration, as implied in the 2026 Economic Package sent to the Chamber of Deputies on September 8th. Werner clearly explains how the government has chosen to test market resilience by postponing public finance deficit reduction, which he estimates will result in public sector debt reaching approximately 60% of the GDP by the end of the six-year term.
Historical Context and Implications
To provide context, during the last two six-year terms labeled “neoliberal” by the 4T, public debt as a percentage of GDP increased from 28.2% to 43.6%. If Werner’s estimations hold, in two six-year terms under the 4T, public debt would rise from 43.6% to 60%, an increase of 16.4 percentage points relative to the economy’s size. This implies that the repeated promise of significant changes for the country without increased debt has not only failed but left Mexico in a challenging position, as it is the OECD member country with the lowest tax revenue as a percentage of GDP.
Optimistic Economic Assumptions and Their Consequences
Since the 2026 Economic Package’s presentation, it became clear that the Secretariat of Finance and Public Credit (SHCP) once again built this instrument with overly optimistic growth projections for the economy. This means that the actual income used to construct this package might be overestimated, resulting in real 2026 income being lower than what was used to calculate the upcoming year’s spending distribution.
Werner warns in his article that overly optimistic economic growth expectations also underestimate spending on pensions. Consequently, the actual pension spending in 2026 will likely exceed SHCP’s estimates for the upcoming year.
Pension Spending Discrepancy
Since the 2026 Budget Project was sent to the Chamber of Deputies, a real increase of around 0.5% in contributory pensions spending has drawn attention. To illustrate the unlikelihood of the proposed 2026 amount, consider the CIEP data on average annual growth rate for contributory pensions spending: 5.0% real annual growth.
Future Financial Challenges
With overly optimistic growth projections and conservative pension spending increment estimates, coupled with the failure to meet public finance deficit targets, we are heading towards 2027—an election year. It is unlikely that the government will exercise fiscal discipline given the upcoming elections and internal fissures within the ruling group. This situation may lead to excessive spending on social programs and infrastructure projects, further straining public finances.
Key Questions and Answers
- What is the current public debt situation in Mexico? Public debt as a percentage of GDP has increased from 28.2% to 43.6% during the last two six-year terms, and if current trends continue, it may reach 60% by the end of the next six-year term.
- How does the 2026 Economic Package reflect government decisions? The package demonstrates optimistic growth projections and underestimated pension spending, which may lead to a significant discrepancy between projected and actual income.
- What are the implications of overly optimistic economic growth expectations? Overly optimistic growth projections underestimate pension spending, potentially leading to larger-than-expected expenditures in this area.
- What challenges does Mexico face regarding public finances? With upcoming elections and internal divisions within the ruling group, there is a risk of excessive spending on social programs and infrastructure projects, further straining public finances.
