** 5/21/26 - A Simple Chart Explains Mexico’s Desperate Need for Investment ...........
Buzz Sawyer
Can Sheinbaum engineer a similar turnaround? Follow this chart closely.
JP Spinetto is a Bloomberg Opinion columnist covering Latin American business, economic affairs and politics. He was previously Bloomberg News’ managing editor for economics and government in the region.
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Explaining why Mexico has grown a paltry 2% per year on average over the past three decades has become something of an obsession for economists. Some argue that widespread informality has condemned the country to structurally low productivity; others point to extortion as a fundamental reason, since it discourages small businesses from expanding. Still others blame weak state tax capacity, insecurity and the chronic absence of rule of law. Hypotheses abound and, as is often the case, the answer is probably some combination of all of them.
Explaining why Mexico has grown even less than that mediocre rate recently, however, is much simpler. All you need to do is look at the chart below:
That’s Mexico’s gross fixed capital formation: a measure of investment by businesses and government in assets such as machinery, factories and buildings. In practice, it’s one of the clearest indicators of investor confidence and willingness to commit capital for long-term projects.
As you can see, the peak in this seasonally adjusted trend came in July 2024, right after Mexicans overwhelmingly elected Claudia Sheinbaum as the country’s first female president and handed her party and allies a surprising congressional supermajority powerful enough to rewrite the constitution. Those sweeping political changes, compounded by the damaging judicial overhaul approved just months later and the elimination of several autonomous regulatory bodies, appear to have dealt a devastating blow to Mexico’s investment climate.
“The congressional supermajority, and the changes it enabled, were not expected,” economist Sofía Ramírez, director of the think tank México ¿Cómo Vamos?, told me. “If you change the terms of that institutional arrangement, you hurt investments that had already been planned. You undermine certainty, and that’s why you begin to see negative private investment growth starting in mid-2024.”
True, part of the decline reflects the government’s own pullback in capital spending. Faced with the largest fiscal deficit in decades, Sheinbaum’s administration prioritized social spending while slashing investment budgets. But that hardly obscures the broader picture: The private sector, which represent 86% of total investment, has become deeply reluctant to bet on the country. The central bank’s latest survey of economists showed that only 2% — yes, 2% — believe it’s a good time to invest in Mexico. And that was an improvement from the previous month, when the figure stood at zero. The return of Donald Trump’s tariffs policy last year and the uncertainty surrounding the revision of the North America free trade agreement have also weighed heavily on Mexico’s business.
Unsurprisingly, GDP growth has underperformed. Mexico expanded just 1.4% in 2024, slowed to 0.6% in 2025 and is expected to grow another meager 1.4% this year. Overall, since the leftist Morena party took power in late 2018 under Andrés Manuel López Obrador, the Mexican economy has averaged annual growth of barely 0.9%. Pathetic. And that’s despite macroeconomic stability, booming exports and a reasonably strong US economy next door.
This tells us something is going deeply wrong with Mexico’s economy. If growth does not recover meaningfully soon to rates of, say, 3% plus, the consequences will become increasingly difficult to contain, starting with the possibility of losing the country’s investment grade as debt levels continue to rise and credit agencies downgrade their ratings.
To be fair, Sheinbaum has made improving the investment climate a stated priority. She regularly meets with business leaders and foreign investors, and her administration has announced a series of measures aimed at attracting capital, including major infrastructure and energy plans. Her landmark “Plan México” combines import substitution attempts, industrial policy and relocation incentives aimed at boosting the investment-to-GDP ratio above 28% by 2030 (it stood at just 22.9% in late 2025).
But the government remains trapped in a fundamental contradiction: Rhetorically, it welcomes private investment; operationally, it often defaults to state interventionism, price controls and regulatory uncertainty, because those reflect the ruling party’ ethos. For every major investment announced during the president’s morning press conference, another project gets canned on environmental grounds or a gas station chain is threatened with tax inspections for selling fuel above the government’s preferred price.
If the administration truly wants to unleash investment, it will have to do something much harder than holding friendly meetings: Convince the private sector that the rules of the game will remain stable and that investors won’t be treated with suspicion simply for being unapologetic capitalists.
The silver lining for Sheinbaum can also be found in this chart. López Obrador triggered a similarly sharp collapse in fixed investment early in his presidency after his ill-fated decision to cancel Mexico City’s massive new airport project. Investment then cratered during the pandemic, only to rebound steadily from 2021 onward as nearshoring opportunities accelerated and the business environment stabilized.
Can Sheinbaum engineer a similar turnaround? Follow this chart closely. It may tell the story before the rest of us fully realize it.