USMCA, Infrastructure Gaps Weigh on Mexico: World Bank

The World Bank expects Mexico’s economy to grow 1.3% in 2026, as USMCA uncertainty, infrastructure gaps, weak investment, and human capital shortages limit growth and nearshoring opportunities.

Mexico’s economy is expected to expand by only 1.3% in 2026 as uncertainty surrounding the USMCA review, weak investment and long-standing infrastructure and human capital gaps constrain the country’s growth potential, according to the World Bank.

The institution expects growth to gradually accelerate to 1.7% in 2027 and 1.9% in 2028. However, these rates would remain insufficient to significantly close Mexico’s income and productivity gaps with more advanced economies.

Weaker domestic and external demand, combined with uncertainty over trade policy, is affecting investment decisions, particularly as companies await greater clarity regarding the review of the USMCA. The World Bank projects that fixed investment will contract by 1.4% in 2026.

The USMCA review represents one of the main risks to Mexico’s near-term outlook because of the country’s close integration with the US economy. Prolonged negotiations or additional trade restrictions could delay corporate investment, weaken exports and reduce the economic benefits associated with nearshoring.

“Prolonged uncertainty surrounding the USMCA review and domestic policy uncertainty could further weigh on investment,” reads the World Bank’s April 2026 Macro Poverty Outlook for Mexico.

Investment and Industrial Demand Face Uncertainty

Mexico’s economic activity has also been affected by fiscal consolidation, high financing costs and the declining contribution of large public infrastructure projects completed or nearing completion.

Although nearshoring continues to generate interest in Mexico as a manufacturing and logistics hub, the World Bank warned that the country must address structural constraints to transform that interest into sustained economic growth.

The effects of trade uncertainty are already visible in Mexico’s industrial real estate market. The approaching USMCA review has led some developers, investors, and occupiers to adopt a more cautious approach toward new projects, even as leasing demand remains resilient, reports MBN.

Industrial activity continued expanding during 2Q26, supported by manufacturing, logistics, and companies seeking space close to major population and consumption centers. However, investors are increasingly evaluating potential changes to trade rules, tariffs, and regional content requirements before committing to speculative developments or major expansions.

A separate CBRE market analysis found that Mexico City’s industrial market registered strong leasing activity despite the uncertain trade environment, reports MBN. Logistics companies, technology users and foreign investment helped sustain demand, illustrating that USMCA concerns have not halted industrial activity but are reshaping the types of projects and locations companies prioritize.

Demand has increasingly favored facilities connected to domestic consumption, urban logistics, e-commerce, and data-related operations, which are generally less exposed to shifts in cross-border manufacturing policy. Companies dependent on exports to the United States are proceeding more cautiously as they assess possible changes arising from the USMCA review.

This divergence suggests that Mexico’s industrial market is not experiencing a generalized slowdown. Instead, uncertainty is producing a more selective environment in which projects with secured tenants, strong infrastructure, and access to major transport corridors are better positioned to move forward.

Infrastructure Constraints Limit Nearshoring

The World Bank identified reliable infrastructure and energy services, greater regulatory certainty. and improved access to financing as essential conditions for raising productivity and investment. Mexico’s infrastructure requirements extend across electricity generation and transmission, water systems, roads, ports, rail networks, and digital connectivity. Capacity limitations in these areas may prevent companies from expanding operations or establishing facilities in regions that would otherwise benefit from industrial relocation.

Water and electricity availability have become particularly important for industrial parks and manufacturing facilities, which require predictable access to essential services before committing long-term capital.

CBRE explains that even in markets where demand remains strong, the availability of serviced land, electricity, water, and transport infrastructure can determine whether industrial projects advance. Developers may be reluctant to begin speculative construction when essential services cannot be guaranteed or when trade uncertainty reduces visibility over future tenant demand. Infrastructure shortages can also increase development costs and extend construction timelines, weakening Mexico’s competitiveness compared with other destinations seeking to attract regionalized supply chains.

The World Bank says Mexico’s 2026-2030 investment strategy could support economic activity, but its success will depend on appropriate project selection, effective implementation, and adequate management of fiscal risks. Mobilizing private capital will also be necessary because budget constraints limit the federal government’s ability to independently finance Mexico’s infrastructure requirements. Strengthening public-private investment mechanisms could help expand transport, energy, water, and digital infrastructure while distributing project risks more effectively.

Human Capital Limits Productivity

Beyond physical infrastructure, Mexico continues to face challenges in education, workforce training, and labor productivity. 

The World Bank identified human capital development as a central requirement for capturing investment linked to nearshoring and changes in international supply chains. Companies considering expanding in Mexico increasingly require workers with technical, engineering, digital, and managerial skills. However, educational gaps and limited access to training prevent many workers and smaller companies from participating in higher-value economic activities.

These shortages are particularly relevant for advanced manufacturing, logistics technology, data centers, and automated industrial facilities. While Mexico can offer proximity to the United States and an established manufacturing base, companies may struggle to find sufficient specialized workers in the locations where industrial capacity is expanding.

Mexico’s high level of labor informality also affects productivity, limits workers’ access to social protection, and restricts the capacity of businesses to grow. Informal companies generally have less access to credit, technology, professional training, and international markets.

Small and medium-sized enterprises face particularly significant financing constraints despite representing a large share of employment. Improving access to capital could enable these companies to invest in equipment, digitalization, employee training, and integration into domestic and international supply chains.

The World Bank says improving the business environment will require greater regulatory predictability, stronger public services, improved security, and more effective competition policies.