Understanding the Investment Breakdown
According to the 2026 Projected Federal Budget of Expenditures (PPEF), Chiapas is set to receive the highest allocation of physical investment funds from the federal government. This accounts for 11% of the total 321,978 million pesos earmarked for states and municipalities.
What are Physical Investment Funds?
These funds, known as physical investment funds, are federal resources transferred to states and municipalities for public works and infrastructure projects. They include the FAIS (Fondo de Aportaciones para la Infraestructura Social), FORTAMUN (Fondo de Aportaciones para el Fortalecimiento de los Municipios y de las Demarcaciones Territoriales del Distrito Federal), and FAFEF (Fondo de Aportaciones para la Infraestructura Social Municipal). Additionally, they encompass Decentralization Conventions (Ramo 16), such as those with the National Water Commission.
Budget Increase for 2026
The total investment budget is projected to rise by 17.0% in 2026, from 275,097.1 million pesos approved in 2025 to 321,978.0 million pesos in the 2026 proposal.
Other States Receiving Significant Investments
Following Chiapas, the State of Mexico will receive 9.5%, Veracruz 7.0%, Oaxaca 6.0%, Guerrero 5.5%, Puebla 4.5%, the City of Mexico 10.6%, and Michoacán 3.5%. Together, these eight entities will account for 52% of the total investment funds, as per an analysis by the Center for Studies of Public Finances (CEFP).
Purpose and Impact of Investment
These funds are intended for the creation, expansion, maintenance, or improvement of capital goods that will provide services over an extended period. According to México Evalúa, infrastructure not only drives economic growth but also indirectly strengthens human capital by facilitating access to essential services like education and healthcare.
Non-Geographically Distributable Funds
Approximately 11.6% of the total budget, equivalent to 37,501.9 million pesos, falls under the category of Non-Geographically Distributable (NDG). These funds belong to the Fondo para Entidades Productoras de Hidrocarburos (Ramo 23) and forest development programs (Ramo 16). Their final allocation to specific entities will be determined during the fiscal year 2026. These resources surpass the individual budget allocations for any state, except Chiapas and the State of Mexico.
Budget Allocation Trends in 2025
In 2025, the City of Mexico saw the highest percentage growth in its allocation, increasing by 44.5% from 10,012.1 million pesos to 14,462.6 million pesos. Aguascalientes followed with a 39.0% rise in its budget, growing from 1,951.8 million pesos to 2,713.4 million pesos. Baja California experienced a 28.1% increase, adding 1,188.5 million pesos to its budget, moving from 4,234.4 million pesos to 5,422.9 million pesos.
Conversely, Baja California Sur is the only federal entity to experience a reduction in its physical investment budget, decreasing by 32.4% from 1,869.3 million pesos to 1,263.0 million pesos.
Federalized Spending
In 2026, federalized spending will constitute 27.8% of the total spending, the lowest proportion since 1998. This implies less public policy capacity in areas like sewage, streets, lighting, and waste management, which are obligations of federal entities and municipalities, according to México Evalúa.
Factors Influencing Federal Spending Distribution
Jorge Eduardo Cano Anaya, coordinator of the public spending program at México Evalúa, explained that states in southeastern Mexico receive more funds due to specific funds allocated to these oil-producing states. The City of Mexico, he noted, has a higher level of federalized spending due to its high economic activity. The distribution formulas include a component based on local revenue collection, reflecting its inclination to redistribute resources tied to economic development or activity level.
Key Questions and Answers
- What are physical investment funds? These are federal resources transferred to states and municipalities for public works and infrastructure projects.
- Why is Chiapas receiving the largest share? Chiapas, along with the State of Mexico, is allocated 11% of the total physical investment funds due to specific funds for oil-producing states.
- What is the significance of the budget increase for 2026? The total investment budget is projected to rise by 17.0%, indicating a higher focus on infrastructure development.
- How will the Non-Geographically Distributable funds be allocated? The final allocation of these resources, exceeding 37,501.9 million pesos, will be determined during the fiscal year 2026.
- What does the reduction in Baja California Sur’s budget imply? This decrease suggests a reallocation of resources, possibly to other states with higher needs or growth potential.
- How does federalized spending impact local governments? With 27.8% of the total spending being federalized, local governments have less capacity for public policy in areas like sewage, streets, lighting, and waste management.
