Challenges in the 2025 Budget for Nearshoring

The public spending allocated for infrastructure next year will not be sufficient to attract nearshoring investments and to enable the economy to grow at the levels expected by the Ministry of Finance and Public Credit (SHCP), according to experts. In the 2025 Federal Expenditure Budget (PEF), recently approved by Congress, physical investment will be set at 847.3 billion pesos, which will only represent 2.3% of GDP, the lowest percentage since 2019, which was 2.2%, and less than the 2.7% projected for the end of 2024, according to analysis from Mexico Evalúa. Compared to 2024, and after adjustments made in the Chamber of Deputies to the PEF 2025, this indicates an 11.6% cut, totaling about 111.3 billion pesos, focusing on energy, road, and water infrastructure. Analysts from Mexico Evalúa warn that this could restrict future income generation, Mexico's development, and its ability to attract nearshoring investments.

“Investment requirements for infrastructure are very critical, and the economic package for 2025 is even reducing support for public works projects. The big challenge for the country is to maintain its competitiveness, which requires solid infrastructure; however, we are quite behind in our capacity to generate electricity, especially clean energy. During the previous six-year term, there was practically no investment in expanding the road network, and there is a huge backlog in maintaining that network,” said José Domingo Figueroa Palacios, national president of the Mexican Institute of Finance Executives (IMEF). Figueroa Palacios added that all these areas are crucial for attracting companies that wish to supply the U.S. market from Mexico. Reviewing the government’s investment plan, it is observed that despite announcements of major passenger train projects, investment in land transportation is reduced by 27 billion pesos compared to what was approved for 2024. Similarly, significant cuts in hydrocarbon-related infrastructure amount to 49 billion pesos, and 19.5 billion pesos less for agricultural water infrastructure, as detailed by Mexico Evalúa. "The positive aspect is that the Ministry of Infrastructure, Communications, and Transport (SICT) is regaining its role in developing public works in front of the Armed Forces," emphasizes Jorge Cano, researcher from the Public Spending and Accountability Program at Mexico Evalúa. According to the Organisation for Economic Co-operation and Development (OECD), the ideal proportion of infrastructure investment relative to GDP should not be less than 5%; the closest level reached was 4.5% in 2010 and 2014, according to SHCP records. Regarding the proportion of total public spending, a decline will also be seen, falling from 10.1% in 2024 to 9.1%, indicating a lesser relevance of physical investment in public expenditure.

In light of the cuts in physical investment and the decline in oil revenues, both Mexico Evalúa and IMEF express concern over the government’s refusal to allow private sector participation in public investment. The Economic Package does not include new public-private partnership (PPP) projects for the coming year, and no new initiatives have been presented since 2019. According to Cano, there were 18 projects inherited from previous administrations under this scheme in 2024, while only 13 are considered for 2025. “This further limits economic growth opportunities for the country,” emphasized the Mexico Evalúa researcher. “From IMEF, we have insisted that collaboration between the federal government and private investment is vital, returning to PPP schemes to make significant investments in infrastructure and maintain the country’s competitiveness,” added the institute’s president. Carlos Ramírez, partner and co-director of Integralia, pointed out that during Andrés Manuel López Obrador's administration, PPPs were shut down, and investment focused on priority projects, mainly in the south, neglecting the north, which holds the largest nearshoring investments. “Now the big question is whether the Sheinbaum administration will change its approach to private investment. Private investment can help fill the gaps left by public investment, as long as the government is pragmatic and allows private sector participation in the energy sector and infrastructure in general; so far, what we’ve seen are some hopeful signs, but there is still resistance from the new government to open the door to real private participation in these areas,” commented Ramírez.

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In summary, the outlook for the 2025 budget reflects a significant challenge for the Mexican economy. If the government does not adopt a more open approach toward private investment, it could hinder growth in key sectors like nearshoring. Collaboration between the public and private sectors is essential to drive economic development and ensure the country's competitiveness in a constantly changing global economy.