ABM Urges Fiscal Discipline, Spending Efficiency in Mexico

The Association of Banks of Mexico is urging the federal government to implement fiscal discipline, reduce state transfers to non-productive entities, and expand the formal tax base ahead of upcoming budget negotiations. This policy recommendation comes as Mexico faces GDP growth estimates between 1.1% and 1.6%, elevated fiscal risks, and sovereign rating vulnerabilities driven by ongoing financial support to PEMEX. Balancing public expenditure and safeguarding investment-grade status are critical to maintaining financial stability, private credit expansion, and long-term economic growth across Mexico's banking, infrastructure, and energy sectors.

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The Association of Banks of Mexico (ABM) called on the federal government to present a balanced, responsible economic package for the upcoming fiscal year that curtails public spending on unproductive state activities, reduces the fiscal deficit, and expands tax collection by formalizing the informal economy. Speaking following his participation in the sixth Financial Forum of the National Housing Development and Promotion Industry Chamber (Canadevi), ABM President Emilio Romano Mussali emphasized that enhancing spending efficiency is essential to preserve Mexico's sovereign investment-grade credit rating and ensure macroeconomic stability.

"To ensure financial stability for banks and all Mexicans, we are expecting a budget that is responsible, achievable, and balances public finances so we can avoid greater debt and a larger deficit," Romano said. "If Mexico loses its investment-grade status, it would be extremely grave; there will be no 9% mortgages, forget it. Spending must enter into that discussion, particularly questioning whether transfers to companies not generating expected profits represent the most efficient use of national resources."

The banking leadership highlighted that federal tax collection currently equals 17% of national gross domestic product (GDP). According to ABM analysis, revenue collection must increase by two to three percentage points of GDP to mitigate sovereign fiscal vulnerabilities and prevent debt accumulation. 

Rather than increasing taxes on existing taxpayers, the association advocates for expanding the tax base by incorporating informal market activities into the formal economy, eliminating tax exemptions, and enhancing collection quality. Romano noted that ABM is actively collaborating with the administration of President Claudia Sheinbaum to advance these fiscal efficiency objectives.

ABM Calls Out Federal Support for PEMEX

A central focus of ABM's expenditure review centers on federal financial transfers to state-owned enterprises, particularly PEMEX. Romano pointed out that federal spending currently exceeds sustainable levels by approximately two percentage points of GDP, questioning whether continuous capital allocations to the state oil entity yield sufficient economic returns for the country. Per the ABM chief, reallocating public savings away from underperforming state operations toward national economic digitalization would generate higher economic growth, reduce operational friction, and deliver broader productivity gains across domestic commercial sectors.

The fiscal warnings coincide with broader financial pressures surrounding the state oil company. Federal equity contributions to PEMEX reached MX$100.4 billion (US$5.92 billion) in 1H26, marking a 6.2% increase compared to the same period in 2025. This continuous sovereign backing reflects a multi-year trend where federal transfers outpace the company's oil revenues, driven in part by a refinery-first operational strategy that has constrained high-value crude exports.

These sovereign interventions have heightened rating agency scrutiny regarding Mexico's fiscal trajectory and overall economic health. In May 2026, S&P Global Ratings revised its credit outlook for PEMEX from stable to negative, reflecting a parallel shift in Mexico's sovereign outlook. S&P warned that PEMEX's weak standalone operational profile and continuous reliance on multi-billion-dollar federal transfers place direct pressure on national fiscal stability and elevate sovereign credit risks.

Future Outlook

ABM characterizes 2026 as a transition year for the Mexican economy, marked by deceleration following the 2024 election cycle, persistent inflation, and moderated consumer demand. Official GDP growth projections for full-year 2026 range between 1.1% and 1.6%. 

Romano attributed the country's inability to achieve growth rates above 3% to structural frictions that limit value addition across domestic sectors. Key constraints include public safety challenges, regulatory uncertainty, the judicial sector reform, the upcoming review of the United States-Mexico-Canada Agreement (USMCA), and pending definitions regarding private energy investment rules.

Despite first-half economic headwinds, the commercial banking sector projects an operational recovery during 2H6. National investment levels have stabilized at approximately 23% of GDP following a prolonged contraction. While historical economic data indicates that sustained expansion requires investment levels exceeding 25% of GDP, ABM anticipates that nearshoring dynamics and improved regulatory certainty will reactivate private capital deployment in 2027.

Furthermore, commercial banks retain significant capacity to support private sector growth provided structural conditions remain stable. ABM has outlined strategic targets to allocate approximately MX$4.5 trillion (US$265.27 billion) to productive investment projects through 2030, contingent on maintaining legal certainty and public security to safeguard private investments across Mexico's financial ecosystem.