Introduction to the Economic Stagnation in Mexico
Mario, an Uber driver in Mexico City, shares his experience: “I’ve been online for three hours and only completed two rides.” This anecdote mirrors the data confirming Mexico’s economic stagnation. According to the Global Indicator of Economic Activity (IGAE) published by INEGI, in August 2025, the economy grew a mere 0.6% compared to the previous month and showed no annual variation.
Sectorial Analysis Reveals a Stark Contrast
The sectoral breakdown highlights the disparity: while primary activities, such as agriculture, advanced over 15% annually, secondary activities—including industry, construction, and manufacturing—declined by 2.7%. Tertiary services, such as digital and in-person services, barely grew by 0.8%. Seasonally adjusted figures paint an even bleaker picture, with the IGAE dropping by 0.9% compared to August 2024 and an accumulated decline of 0.1% in the first eight months of the year.
September Forecast Confirms the Trend
The Indicador Oportuno de la Actividad Económica (IOAE) for September anticipates an annual contraction of 0.6% and a mere monthly advance of 0.1%. The setback originates from the industrial side, with an estimated annual decline of 3% in secondary activities while services maintain a slight growth of 0.8%.
Structural Issues Hindering Mexico’s Economy
The problem is structural, not temporary. Mexico’s manufacturing engine, long fueled by its integration with the United States, is now suffering from a slowdown in U.S. industrial activity. The Federal Reserve Board’s recent reports show a loss of momentum in U.S. manufacturing production since the summer, affected by high-interest rates, reduced private investment, and post-pandemic spending cuts. This slowdown translates into fewer orders, less working hours, and reduced new investments in Mexican plants.
Furthermore, the strong dollar and restrictive monetary policy by the Federal Reserve increase credit costs and diminish Mexico’s export competitiveness, particularly in sectors relying on imported inputs. Political and regulatory uncertainty in key sectors like energy, construction, and telecommunications has also stalled domestic investment decisions.
Mexico’s Contradiction: Nearshoring Disconnect
Mexico faces a contradiction: while the official discourse celebrates nearshoring, figures reveal an economy failing to translate opportunities into genuine growth. Manufacturing exports cannot compensate for internal weakness; fixed capital investment remains below pre-pandemic levels; and total factor productivity, according to INEGI and Banco de México data, has stagnated for over a decade.
Mexico requires more than favorable agricultural prices or record remittance flows to sustain consumption. It needs profound structural reforms, legal certainty, and a modern industrial policy fostering innovation and competition.
Key Questions and Answers
- What does Mario’s experience tell us about the Mexican economy? Mario’s experience reflects the broader economic stagnation in Mexico, where drivers struggle to find daily demand, signaling the slowdown before economists measure it.
- What are the sectorial disparities in Mexico’s economy? While agriculture and similar primary activities have grown by over 15% annually, secondary activities (industry, construction, and manufacturing) have declined by 2.7%. Tertiary services, like digital and in-person services, have only grown by 0.8%.
- What are the structural issues affecting Mexico’s economy? Structural issues include a slowdown in U.S. industrial activity, increased credit costs due to a strong dollar and restrictive monetary policy, and political/regulatory uncertainty in key sectors.
- What reforms does Mexico need to stimulate growth? Mexico requires profound structural reforms, legal certainty, and a modern industrial policy promoting innovation and competition to overcome its economic stagnation.
