Current Fiscal Deficit Among Mexican Municipalities
Mexico faces a fiscal revenue shortfall, with only 11% of municipal total income coming from local sources on average in 2023. The rest comes from state and federal government transfers, compromising their ability to deliver quality public services according to the Instituto Mexicano para la Competitividad (Imco).
Successful Case Study: Mérida, Yucatán
Imco’s recent study, “Successful Cadastral Management: The Case of Mérida, Yucatán,” highlights the underutilized potential in municipal governments to boost local income. Among 31 state capitals, only Querétaro and Mérida have an optimal level of fiscal autonomy.
Mérida stands out as a successful case in Predial tax collection, with 22% of its local income (1,138 million pesos) coming from Predial. If all 31 capitals reached this Predial income proportion, Mexico would have collected 20,537 million pesos in 2023 instead of the actual 14,180 million pesos, leaving a deficit of 6,356 million pesos.
Comparison with OCDE Countries
Mexico’s local governments collected 67,000 million pesos in taxes in 2022, equivalent to 0.22% of the Gross Domestic Product (GDP). In comparison, other Latin American countries like Brazil (0.6%), Colombia (0.7%), and Chile (0.8%) collected a higher proportion of their GDP through taxes.
Had Mexican local governments collected Predial taxes in 2022 at the same proportion as Chile’s GDP, the total would have been 235.6 billion pesos. Mexican municipalities miss out on 100,000 to 200,000 million pesos annually by not reaching a Predial collection percentage close to countries with similar characteristics, like Chile and Brazil.
Achieving the OCDE target would increase Predial revenue to over 567,000 million pesos.
Opportunities for Improvement
- Centro, Tabasco: Has the largest unrealized revenue potential at 988 million pesos, collecting only 134 million pesos from Predial in the given period.
- Mexicali: With a deficit of 706.5 million pesos, it collected only 528.66 million pesos from Predial.
- Aguascalientes: Projected revenue of 1,002 million pesos but only captured 386.4 million pesos.
Predial is the primary source of local income for municipalities, crucial for fiscal autonomy. Being a progressive tax with high revenue potential, its taxable base (immovable properties) is stable, visible, and subject to taxation. Efficient collection enables local governments to finance public services independently of federal or state transfers.
Current Cadastral Situation in Mexico
Mexico’s cadastral situation is deficient: of 1,980 property registers, only 803 (40%) have basic information like property type, construction status, and predial classification. Moreover, cadastral management tasks are only performed in 995 municipalities, while in 823, Predial is merely collected without improving systems.
Case Study: Mérida’s Success
Since 2009, Mérida initiated a cadastral improvement policy, increasing Predial tax collection. By 2025, the municipality aimed for a 900 million pesos collection target, capturing nearly 700 million pesos (78% of the total) just in the first month. Mérida generates 40% of its total income from local resources.
Mérida’s fiscal management results reflect in the quality of municipal services. Citizen satisfaction indicators place Mérida first nationally for public parks and gardens. High approval ratings are also seen in essential services like waste collection, water supply, and road maintenance.
