Mexico Targets 3.9% Deficit to Keep Credit Rating: SHCP’s Amador

Mexico's Ministry of Finance delivered the 2027 Economic Package targeting a fiscal deficit reduction to 3.9% of GDP to safeguard sovereign credit ratings and public debt sustainability. Supported by record tax collection of 15.9% of GDP and targeted anti-evasion measures, the fiscal plan balances budget consolidation with a projected 2% GDP growth rate. This trajectory directly impacts institutional investors, sovereign bond markets, and commercial sectors managing tighter public expenditure.

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Mexico’s Ministry of Finance and Public Credit (SHCP) delivered the 2027 Economic Package to Congress, proposing a fiscal deficit target of 3.9% of Gross Domestic Product (GDP) to reinforce public accounts and preserve sovereign credit ratings. Finance Minister Édgar Amador Zamora stated that federal revenue projections and spending adjustments aim to protect national creditworthiness, affirming that all eight credit rating agencies evaluating Mexico continue to maintain the country's sovereign debt at investment grade.

Explaining the economic strategy behind the budget proposal, Amador emphasized that federal policy seeks to maintain gradual fiscal convergence without inducing economic contractions or depressing formal employment. "This set of actions we are taking on the revenue and expenditure sides points directly to the confirmation and improvement of public credit and its rating in the short and medium term," Amador stated during a press conference detailing the economic package. "We have the commitment that what we do seeks to improve the quality of the country's public credit."

Addressing private sector analysts who question the feasibility of bringing the public deficit below 4.0% of GDP without structural tax reform, Amador clarified that SHCP maintains continuous, scheduled communications with international credit rating agencies but does not construct federal budgets around external agency mandates. "At no time is the budget subject to the criteria of rating agencies, and this is very important," Amador noted. He explained that fiscal deficit metrics and debt-to-GDP ratios serve as evaluation inputs alongside economic growth, which SHCP projects at a point target of 2.0% of GDP for 2027.

Amador highlighted that the proposed deficit reduction was carefully calibrated in response to conflicting macroeconomic headwinds, ensuring that fiscal adjustments do not over-constrain commercial expansion. "We had to calibrate fiscal convergence in order not to impinge too much on economic activity; we have to care for economic activity and employment while guaranteeing fiscal convergence," he re-emphasized.

Tax Enforcement Strengthens Federal Revenue Baselines

SHCP's revenue strategy relies on administrative modernization, deduction controls, and aggressive anti-evasion enforcement rather than introducing new taxes or raising statutory tax rates. Tax collection is projected to reach a historic record of 15.9% of GDP by the close of the current fiscal year, establishing a baseline unrecorded by any previous administration. 

Alongside tax collection, SHCP outlined an ambitious strategy for non-tax revenues, with virtually all tax revenue categories exhibiting substantial growth. Amador highlighted that total tax revenues generated without structural tax reform from 2019 to date have surpassed total revenue collected during the ten years prior to 2018, even when previous governments enacted formal tax code revisions.

To sustain federal revenue expansion while resisting Value-Added Tax (VAT) rate increases, SHCP is focusing administrative enforcement through the Tax Administration Service (SAT) on deduction oversight and tax avoidance loop closure. Tax enforcement will prioritize deduction controls, Income Tax (ISR) loss monitoring, and Special Tax on Production and Services (IEPS) surveillance over domestic fuel distribution. 

"We are convinced that before proposing structural changes, we are obligated to do our homework regarding the fight against tax avoidance and evasion," Amador stated. He emphasized that the administration has achieved a cumulative 1.8 percentage point reduction in the expanded public deficit since 2024.

Public Debt Remains Concern for Ratings Agencies

Despite proposed deficit reductions, total public debt is projected to increase from 54% of GDP in 2026 to 55% in 2027, reaching MX$21.67 trillion. SHCP maintains that narrowing the broad deficit will decrease net federal borrowing needs and keep public debt on a sustainable trajectory over the medium term. 

This debt trajectory arrives as rating agencies closely monitor Mexico's fiscal consolidation pace, driven by mounting structural rigidity and contingent liabilities. In May 2026, Moody's Ratings downgraded Mexico's sovereign credit rating to Baa3 — placing the country one notch above speculative status — projecting that public debt could reach 55% of GDP by 2028 due to persistent deficits, rising interest burdens, and sustained financial transfers to PEMEX. 

Concurrently, S&P Global Ratings revised Mexico's credit outlook to negative, warning of potential downgrade risks amid widening public sector borrowing requirements and elevated debt-servicing costs. Further compounding market scrutiny, HR Ratings raised doubts in Aug. 2026 about SHCP's fiscal consolidation targets, citing decelerating tax revenues, weaker-than-projected GDP growth, and persistent spending pressures that threaten to keep the broad public deficit above 4.0% of GDP.

Addressing the performance of Mexican sovereign bonds and risk premiums in secondary markets, Undersecretary of Finance María del Carmen Bonilla stated that yield curve movements reflect global macroeconomic conditions and developed market interest rate differentials rather than domestic fiscal strain. "We believe that the risk premium paid by Mexican bonds is consistent with CDS levels, the exchange rate, and the economic cycle," Bonilla noted, explaining that secondary market pricing remains aligned with macroeconomic fundamentals.