Infrastructure Investment in Mexico Faces Historic Decline

Mexico’s public investment is set to record its steepest decline in modern history in 2025, as the federal government tightens spending to curb debt and achieve fiscal consolidation. The contraction underscores a major shift in budget priorities, with significant implications for infrastructure, education, and social development.

From January to August 2025, public investment totaled MX$509.7 billion (US$27.77 billion), a 33.7% annual decline in real terms, according to the Ministry of Finance and Public Credit (SHCP). 

This marks the sharpest drop for the same period since the 1990s. The downturn was particularly severe in August, when spending on public works fell 15.9% year-on-year, and the most affected sector was water supply and sanitation, which suffered a 75.5% cut, dropping to just MX$8.3 billion (US$452.3 million).

By comparison, during the same period in 2024, the government invested MX$768.4 billion (US$41.88 billion), meaning this year’s execution fell by over MX$258 billion (US$14.06 billion) in real terms. While most sectors experienced deep cuts, communications and transportation stood out as the only category with growth, reporting a 71.8% annual increase to MX$64.5 billion (US$3.51 billion), reflecting ongoing strategic infrastructure projects in logistics and transport connectivity.

Within total physical investment, direct investment, which includes construction, expansion, and equipment acquisition, contracted 28.6% annually, reaching MX$273.9 billion (US$14.93 billion). Meanwhile, indirect investment, tied to budgetary transfers, plummeted 38.7% to MX$235.9 billion (US$12.85 billion).

The fiscal deficit came in below programmed levels, mainly because both revenues and public spending remained under expectations during the January-August period. According to SHCP data, revenues grew 2.6% in real annual terms, while public spending contracted 3.6%, led by a 34% real annual drop in public investment, says Banamex.

The contraction aligns with the federal government’s goal to reduce the fiscal deficit from 4.3% of GDP in 2024 to 4.1% in 2025, as outlined by SHCP. The government achieved a primary surplus of MX$239.7 billion, significantly above the MX$58.2 billion projected, largely due to reduced spending in programmable areas.

Experts Warn of Structural Risks

According to Jorge Cano, Coordinator of Public Spending and Accountability, México Evalúa, the cutback reflects the fiscal adjustment implemented between 2024 and 2025, coinciding with the federal transition of power. “Unfortunately, there were no significant cuts to current expenditure, the main adjustment came from public investment,” Cano tells El Sol de México.

Cano adds that PEMEX, education, and transportation are among the hardest hit, limiting both economic development and the fulfillment of social rights due to lower investment in essential infrastructure.

Cano also highlights that Plan México, the government’s flagship strategy for economic growth, is not supported by increased public investment but rather assumes that the private sector will drive growth independently.

“The current approach prioritizes universal cash transfers that provide short-term relief but do not build long-term capacity. Meanwhile, pension obligations and financial costs continue to rise, reducing fiscal flexibility across all sectors,” says Cano.