EY: Most CEOs Plan to Boost Mexico Investment

Corporate investment in Mexico remains resilient as CEOs prioritize regionalization and AI-driven efficiency to navigate structural risks, including the upcoming 2026 USMCA review and heightening fiscal oversight. While the trade review introduces potential tariff volatility, industrial and digital sectors are doubling down on strategic alliances and automated tax compliance to mitigate regulatory and labor pressures. This shift reflects a broader transition toward economic security, where multinational stakeholders must balance rising operational costs—driven by double-digit minimum wage hikes and a proposed 40-hour workweek—against Mexico’s strategic role in North American supply chains.

Despite modest economic growth and rising geopolitical risks, corporate investment in Mexico remains resilient as the country approaches a critical review of its North American trade framework. According to a recent EY survey, 55% of CEOs at companies with more than US$1 billion in annual revenue plan to maintain or expand their investments in Mexico through 2026.

The outlook is supported by strong revenue expectations: 92% of Mexican executives anticipate growth over the next 12 months, with most projecting annual expansion of between 5% and 10%. These projections come amid persistent inflation, tariff volatility and shifting global trade norms.

“We are operating in a different global environment,” said Olivier Hach, Managing Partner, EY Mexico. “But despite everything we are hearing, companies are not stopping. They are adjusting timelines, redirecting capital, but continuing to invest.”

Macroeconomic Fundamentals and the USMCA Review

Mexico’s deep integration with the United States remains its primary economic anchor. Approximately 85% of Mexican exports enter the US market tariff-free. This structural advantage, combined with geographic proximity and resilient domestic demand, continues to support foreign direct investment (FDI). EY partners noted that a significant share of recent FDI inflows reflects the reinvestment of earnings by multinational companies already operating in the country.

The upcoming review of the United States-Mexico-Canada Agreement (USMCA) represents a key strategic inflection point. Technically a review under Chapter 34 rather than a full renegotiation, the process is scheduled to begin formally on July 1. Analysts caution that a simple renewal without changes is unlikely.

US trade officials are expected to focus on rules of origin in key industrial sectors, labor enforcement mechanisms, energy market access and a critical minerals framework aimed at reducing reliance on Chinese supply chains. Gregory Daco, Chief Economist, EY, warned that a failure to reach consensus could trigger a period of heightened uncertainty.

EY’s economic modeling suggests that a breakdown of the USMCA could raise Mexico’s effective tariff rate from 9% to 17%, potentially reducing GDP growth by 0.7 percentage points by 2027. However, Daco noted that the impact would likely be contained, given that tariffs have already risen from near-zero levels in 2024. “The incremental shock from a breakdown would be meaningful but not catastrophic,” he said.

The review reflects a broader global shift from efficiency-driven globalization toward “economic security,” in which governments take a more active role in shaping trade flows. Adam Babrinec, EY’s Geostrategy Lead, said companies must prioritize regionalization and diversification rather than relying solely on globalized operating models.

The US Anchor and Global Fragmentation

The resilience of the US economy remains a key driver of Mexico’s outlook. Daco characterized current US growth as supported by “three A’s”: affluent consumers, AI-driven investment and asset price appreciation. While US output remains solid, job growth has slowed, creating a bifurcated economy in which higher-income households account for most consumer spending.

For Mexico, strong US demand provides stability but also increases exposure to political leverage. Trade flows are increasingly reorganizing into regional blocs rather than collapsing altogether. At the same time, the “geopolitics of scarcity,” particularly around water and critical minerals, is reshaping industrial policy across North America.

Fiscal Enforcement and Technological Sophistication

Domestically, Mexico’s fiscal environment has undergone significant technological modernization. In the absence of a comprehensive tax reform, authorities have intensified enforcement through digitalization and artificial intelligence.

Mexico’s tax authority is now considered one of the most technologically advanced globally. Its strategy relies on AI-driven data cross-referencing to identify risk patterns and initiate automated audits. As a result, tax compliance has shifted from technical interpretation toward data-based verification.

“Mexico is on the podium globally in tax technology,” said Óscar Ortiz Molina, Tax Managing Partner, EY Mexico. “Not just in Latin America, but in the world.”

The fiscal burden remains concentrated: approximately 50% of federal tax revenue is collected from just 0.2% of taxpayers, while an additional 30% comes from salaried individuals. As enforcement has intensified, tax compliance has evolved into a board-level strategic risk. Certain fiscal offenses are now treated as criminal matters, potentially leading to frozen bank accounts or legal penalties.

“Tax has taken on such a strategic role that CEOs and boards are now being called in directly,” Ortiz Molina said. “The authority no longer wants just the company’s accountant. They want senior leadership.”

Labor Reform and the Productivity Imperative

Labor regulation is also evolving. Minimum wage increases have remained in double digits for eight consecutive years, raising social security contributions, profit-sharing obligations (PTU) and tax liabilities.

A proposed constitutional reform to reduce the workweek from 48 to 40 hours is under discussion. While broadly viewed as socially beneficial, the measure would require companies—particularly in manufacturing and hospitality—to redesign operating models. Firms in northern Mexico have already launched pilot programs to test 40-hour structures and negotiate adjustments with unions.

“This is positive socially,” said Jaqueline Álvarez, Labor & Employment Partner, EY Mexico. “But companies must redesign their operating models. They cannot wait for the next announcement.”

Regulatory oversight has become increasingly data-driven, with the Ministry of Labor using AI tools to cross-reference information with tax authorities. The subcontracting reform alone generated MX$500 million in additional social security revenue last year. In this environment, productivity gains are seen as essential to preserving margins amid rising compliance costs.

AI Integration and Capital Allocation

Internally, companies are accelerating transformation through artificial intelligence and strategic partnerships. Seventy-eight percent of surveyed Mexican CEOs report that AI initiatives are already delivering strong or extraordinary results, particularly in predictive analytics, machine learning and inventory optimization.

“It is not a one-year trend,” Hach said. “This will change business models, talent structures and operating processes over the long term.”

About 60% of surveyed companies are currently undergoing strategic transformation programs focused on product innovation and operational efficiency. Nearly 80% of executives expressed confidence that these initiatives will succeed despite external volatility.

Regarding capital deployment, 65% of companies expect to pursue acquisitions over the next year, while 80% prioritize strategic alliances. “It is often more agile to partner than to acquire,” Hach said. “Strategic alliances require less capital, can be scaled more flexibly and allow companies to access technological capabilities without assuming full ownership risk.”

Uncertainty as the New Baseline

EY executives emphasized that geopolitical and regulatory risks are no longer cyclical but structural, requiring sustained scenario planning and strategic agility.

Mexico remains a central node in North America’s supply chains, and reinvestment trends suggest continued confidence among multinational firms. However, the operating environment has grown more complex and demanding.

“Mexico has enormous potential,” Hach concluded. “But the challenge is translating investment into broad-based wellbeing and ensuring that corporate transformation supports long-term national competitiveness.”