Textbook populism fueled Mexico’s debt and now it’s near breaking point
by Macario Schettino.
Editor’s note: Mr. Schettino is an eminent Mexican economist and retired professor at Monterrey Tech’s School of Government.
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As the United States debates the One Big Beautiful Bill Act (OBBB), there may also be public discussion around that country’s fiscal sustainability. The US isn’t the only country struggling with the size of its debt — it's actually a very common issue among industrialized nations. But the issue is particularly important for Mexico.
Mexico has long been one of the countries with the lowest tax collection rates in the world, measured as a share of GDP. Prior to the 2013 tax reform, tax revenues were below 10% of GDP, supplemented by oil revenues and income from state-owned enterprises and agencies, bringing the total to about 18% of GDP. That was all the government had to fund its expenses — hence the poor coverage and quality of public services.
Although Mexico joined the global trend toward a welfare state starting in the 1960s, it never enacted a fiscal reform capable of funding its growing obligations. While many attempts were made, only one succeeded — in 1980, with the creation of a value-added tax. The next major reform came in 2013, raising tax revenue from 8% to 14% of GDP. With that, the government’s total revenues reached 22% of GDP.
Those revenues, along with a moderate deficit, allowed for spending close to 24% of GDP — still insufficient to fully meet the government's responsibilities at a reasonable level. However, under former President López Obrador’s administration, public spending increased significantly without a corresponding increase in revenues. As a result…
Mexico’s economy is declining & faces mounting threats
by Macario Schettino.
In my first column for The Mexico Brief, six weeks ago, I wrote that Mexico was in a recession. Now that we are nearing the end of the year’s first half, the evidence is even stronger. Although an unusual event in February has led many to think otherwise, the truth is that we are already seeing a generalized downward trend.
Consumption contracted year-over-year for the fourth consecutive month in March, and the preliminary indicator suggests no meaningful change in April and May. On average, the decline has been -0.5% compared to the previous year, starting from last October when the current administration took office.
In investment, the situation is worse. The decline began in September, and the following seven months have all shown negative numbers, averaging a yearly contraction of -4.4%, also since October.
In overall economic activity, growth since October is flat, with three out of those six months showing contraction. The impact is now noticeable in employment, with monthly declines and virtually zero annual growth. It’s worth remembering that — since the year 2000 — whenever employment grows at a rate below 1% annually, a recession is a certainty.
Except for employment data, which we have up to May, the rest of the indicators end in March and therefore do not yet reflect the full impact of global uncertainty caused by Donald Trump — especially since the “Liberation Day” event on the afternoon of April 2. We don’t know much about what has happened since then, except in the case of remittances, which saw one of the steepest drops on record in April: -12% compared to April 2024.
Claudia Sheinbaum faces adversity
by Luis Rubio.
Editor’s note: Mr. Rubio as a political analyst and chairman of México Evalua.
From the moment she was nominated as Morena's presidential candidate, speculation arose regarding her capacity and willingness to break with her predecessor, as has been the tradition in Mexican politics. Although speculation has not ceased, the evidence is overwhelming: the president sees herself as an operator or implementer of AMLO’s agenda. However, circumstances have changed, and the need to respond to a scenario infinitely more complex than the one her predecessor faced (in part due to the legacy he left behind) is forcing her to increasingly take actions that he clearly disapproves of. The question then is: what comes next?
In Mexican political tradition, it was said that the outgoing ruler did not choose a successor but rather an executioner. That clearly did not happen with AMLO, who carefully selected someone with the skills to manage a government, but not to undertake bold political initiatives. Which of these paths will prove true? So far, there is no doubt that AMLO’s logic dominates the landscape. At the same time, it’s not clear what the true profile of the government led by Sheinbaum actually is.
Boz, a publication focused on Latin American governments, conducted an interesting analysis of Claudia Sheinbaum.
Pride & Prejudice: Mexico’s flag becomes a flashpoint — again
by Arturo Sarukhán (Ambassador of Mexico to the United States, 2007 - 2013)
This was a domestic clash waiting to happen, largely concocted in the Oval Office but potentially exacerbated in Mexico City’s National Palace, risking spillover into bilateral ties with Mexico.
Last Friday, after the US Department of Homeland Security conducted workplace raids in Los Angeles’ garment district targeting undocumented immigrants, protests erupted against ICE. President Donald Trump then took an unprecedented step, commandeering California’s National Guard to crack down on protesters. Demonstrations had been mostly peaceful, but tensions flared significantly after Trump deployed troops, intentionally confronting a Democratic mayor and governor. By sidestepping Gov. Gavin Newsom’s authority, Trump pushed presidential boundaries and fueled criticism of inflaming the situation for political gain. Undoubtedly, it has all the elements the president seeks: a showdown with a top political rival in a deep blue state over an issue core to his agenda and appealing to key voter segments.
Yet, as with everything in this polarized, social media-driven era, where immigration policy and immigrants themselves are weaponized, the events unfolding in Los Angeles resonate far beyond civil rights and constitutional debates, or authoritarianism versus liberal democracy, or even red versus blue America.
Editor’s note: Trump’s LA crackdown pushes Sheinbaum into a corner
by Andrew Law.
The surreal events this week in my old hometown of Los Angeles are spiraling from a local crisis into an international fiasco. Mexico’s former Ambassador to the United States, Martha Bárcena, tells me in stark terms that the relationship is trapped, “Like a hostage, in the middle of a very, very extreme fight for power in the US.”
It all started with ICE raids targeting Home Depots across LA and the detention of people in the basement of ICE’s downtown office. Protesters gathered spontaneously outside ICE headquarters, prompting White House aide Stephen Miller to engineer an unprecedented and aggressive response: President Trump federalized California’s National Guard, a move Governor Gavin Newsom says has no legal grounds. It was, Newsom insists, designed to incite anger and provoke more demonstrations.
And provoke it did.
We’re now inundated with incendiary visuals of protesters waving Mexican flags amidst flames and debris — images eagerly pounced on by Miller and Trump’s MAGA followers as supposed proof of a “foreign insurrection.”
On Mexico’s imminent risk
by Macario Schettino.
Last Sunday, elections were held in Mexico—very unusual elections that are virtually unheard of in any other country in the world. Judges, magistrates, and justices were elected in order to completely replace the Supreme Court, to create a new Judicial Discipline Tribunal, and to fill the federal and local electoral courts, which had been incomplete. Not only that—more than eight hundred circuit magistrates and judges were elected, for a total of 881 positions.
With this election, and the law that made it possible, the Judicial Branch in Mexico ceases to be autonomous and becomes subordinated to the Executive Branch, which also controls the Legislative Branch thanks to the qualified majorities it obtained illegally just days after last year’s presidential election. Put more simply, Mexico ceases to be a republic and becomes an authoritarian system. The new judges will take office in September.
This new distribution of power—or rather, concentration of power—is a major change from just a few years ago, when the USMCA was signed, and it actually contradicts that agreement. It adds to changes in energy policy, which are also incompatible, and I don't think it will make negotiations for a new deal with the United States and Canada any easier. Even more concerning, the risk for existing investments in Mexico has increased, as the mechanisms previously available for dispute resolution have disappeared.
Baja California’s Governor loses US visa
by David Agren.
When US President Donald Trump alleged an “intolerable alliance” between drug cartels and the government of Mexico - made as he first unveiled tariffs on the country in January - Mexican President Claudia Sheinbaum bitterly objected.
She branded the claims “slander,” and shone a spotlight back on the US. “If there’s a place that such an alliance exists it’s with US gunmakers, which sell high-power weapons to these criminal groups,” she said.
Sheinbaum later showed White House evidence for its narco-alliance claim, which featured a news story on former public security secretary Genaro García Luna – a common foil for Sheinbaum and her ruling Morena Party – being convicted in a US court of taking bribes from the Sinaloa Cartel. She used the White House including his case as proof that drug-cartel collusion was a thing of the past.
Mexico has become a strategic pawn without a voice
In the global game of power, some nations move, and others are moved.
Mexico, the world’s 13th largest economy and the United States’ top trading partner, should be a strategic powerhouse. It has all the credentials: geographic proximity to the world’s leading economy, rich natural resources, a youthful population, and an essential role in global supply chains. And yet, it remains politically paralyzed, its voice barely audible in global decision-making.
Why?
Because Mexico is not a player. It is being played.
While the United States and China engage in trade wars and strategic decoupling, Mexico tightens labor rules and enforces stricter origin standards — not by sovereign design, but to comply with demands from above. While fentanyl ravages U.S. cities, Mexico absorbs the blame, while the weapons that fuel its internal wars flow south from Texas and Arizona. And while the global South begins to awaken — through the expansion of BRICS, new development banks, and climate justice diplomacy — Mexico watches from the sidelines, reluctant to step beyond its assigned role.