Public Investment Declines 27.5% During Late 2025

Mexico’s federal government is prioritizing fiscal consolidation by reducing public investment, a move experts warn will constrain national economic growth through 2026. From January to November 2025, public investment spending fell to MX$685.35 billion, a 27.5% real annual decrease, according to the latest data from the Ministry of Finance and Public Credit (SHCP).

This contraction follows a historic decline in physical investment earlier in 2025. Between January and May, spending in this category dropped 29% in real annual terms, marking the sharpest reduction since 1995. Physical investment encompasses government expenditures on infrastructure, including the development and maintenance of trains, bridges, and highways, as well as the acquisition of capital goods.

Fiscal Strategy and Economic Risks

Fausto Hernández, an economic expert at the Center for Research and Teaching in Economics (CIDE), stated that reducing public investment effectively lowers the fiscal deficit but negatively impacts national growth. He noted that the current Minister of Finance, Edgar Amador, faces a rigid budget where constitutional obligations limit adjustments to most spending categories, leaving public investment as the primary variable for deficit reduction.

Hernández added that a comprehensive fiscal reform is now essential, as improved tax administration alone cannot sustain current spending demands.

“Productivity has dropped below 2005 levels, which discourages investment. And when the deficit is adjusted, physical investment is usually the first to be cut,” Ricardo Cantú, Revenue and Debt Researcher, Center for Economic and Budgetary Research (CIEP), told MBN.

According to Economic Analyst Enrique Covarrubias, “a tax reform requires stronger growth and the right political timing. Markets expect it later in the administration.” Instead, the government is adopting targeted tax measures, including higher IEPS on sugary drinks and tobacco, eliminating deductibility for 75% of banks’ IPAB contributions, and stricter rules for digital commerce and fintech platforms.

One other challenge mentioned for Mexico’s economic growth is security concerns. Despite this, Mexico’s Employers' Confederation (COPARMEX) maintains that Mexico can still attract investment in 2026. However, the organization stressed that sustainable growth requires clear regulations, solid institutions, and effective security.

José María Bastar Camelo, Head, COPARMEX Tabasco, identified three primary risks for the upcoming year, including low economic growth, persistent insecurity and extortion, and institutional weakening and fiscal pressures.

Economic growth projections for 2026 suggest moderate progress. The International Monetary Fund (IMF) and the OECD estimate GDP growth between 1.2% and 1.5%, while Banxico anticipates 1.1%. The federal government holds a more optimistic projection of 1.8% to 2.8%.

COPARMEX noted that 2026 will also be shaped by a complex labor environment. The national labor participation rate stands at 59.5%, with a significant 30-percentage-point gap between men and women. Furthermore, informal employment exceeds 55%, which limits tax revenue and social security coverage.

The business organization emphasized that the main challenge for 2026 is transforming macroeconomic stability into productive investment and sustained growth, particularly through the strengthening of SMEs.