Introduction
In October 2023, Mexico experienced its best investment moment under the Fourth Transformation (4T), with both public and private sectors actively engaging in major projects like the Tren Maya and a new refinery, as well as capitalizing on nearshoring opportunities. However, the investment landscape has drastically changed since August 2024, with gross capital formation showing negative annual comparisons for eight consecutive months. The latest data from April 2025 indicates a 7.7% decline compared to the same month in the previous year.
Internal Factors Driving Investment Changes
The shift in investment trends can be attributed to internal factors, such as the redefinition of the political scenario following Claudia Sheinbaum’s presidential win and the strain on public finances and security. Donald Trump’s influence amplified these existing issues during his second presidential term.
Political Scenario and Election Outcomes
The political landscape began to take shape after the conclusion of the electoral process that led to Claudia Sheinbaum’s presidential victory. Although anticipated by markets and investors, the election outcomes for congressmen and senators raised concerns. Morena secured a qualified majority in Congress through an “alchemical” transformation of 54% of the votes into three-fourths of legislative seats, thanks to the INE and TRIFE’s complacency/complicity.
Public Finance Emergency
Mexico faces a significant public finance emergency, with a 5.7% PIB deficit being one of the heaviest legacies left by López Obrador for Claudia Sheinbaum’s administration. In 2024, a gap of nearly two trillion pesos emerged between federal government income and expenditure. The six-year term begins with the obligation to drastically reduce this deficit, aiming for at least 4% of PIB.
Public Investment Cuts and Private Sector Uncertainty
The government has shown willingness to make sacrifices to close the income-expenditure gap, with public investment being the most affected sector. Between January and May 2025, public investment has dropped by 29% compared to the same period in 2024, from 471 billion pesos to 347 billion pesos. This reduction translates to approximately 1,300 million dollars less in public investment each month.
Such a substantial decline has not been witnessed since 1995, during Ernesto Zedillo’s severe crisis. In an alternate universe, this public investment downturn could be offset by a surge in private investments. However, uncertainty prevails due to Donald Trump’s announcements on tariffs and changes in North American trade rules, complicating business decision-making processes. Additionally, the judicial reform and security concerns in certain regions or sectors further exacerbate this uncertainty.
Impact on Growth and Employment
The investment decline will limit medium- to long-term growth. In the short term, Mexico’s GDP is near zero in the first two quarters, reflected in a drastic reduction in formal job creation. Only 87,287 formal jobs were generated in the first half of 2025, a quarter of those created in 2023 and the lowest figure in two decades, excluding the pandemic year.
Key Questions and Answers
- When will investment reactivate? According to Axel Christensen, director of investment strategy at Black Rock for Latin America, investment opportunities will be identified once we understand the direction of changes and communicate them effectively to investors.
- What role do investors play in this scenario? Investors need to comprehend the changes taking place, as stated by someone influential in one of the world’s largest investment funds and a key player in financing Latin American infrastructure projects.
- What adjustments are necessary to attract private investments? Listening to investors’ concerns and making necessary adjustments will help attract the private investments Mexico requires.
