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Country Risk Report

Mexico

Last update – January 2026

Country rating 


MEDIUM RISK FOR ENTERPRISE
Economic risk

Slight risk of payments disruption
Business environment risk
Slight risk of payments disruption
Political risk

Low risk of payments disruption
Commercial risk
Moderate risk of payments disruption
Financing risk
Moderate risk of payments disruption
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Form of state
 Federal Republic
Head of government
 Claudia Sheinbaum Pardo (President)
Next elections
 2030, General Election

Strengths & weaknesses

  • Second-largest market in Latin America, with deep integration into global value chains and 14 FTAs
  • Solid fiscal track record, robust reserves and a growing focus on renewable energy and industrialization
  • Strategic location and nearshoring momentum, supporting foreign investment and manufacturing
  • High dependence on the US market, exposing several sectors to shifts in US trade and industrial policy 
  • Persistent fiscal challenges, including reliance on oil revenues and narrow tax base 
  • Structural inefficiencies, high informality and elevated security risks

Economic overview

Cyclical risks

Mexico’s economy is projected to grow by +1.2% in 2026, following a period of stagnation in 2025. While resilient domestic demand and remittances continue to support consumption, private investment remains subdued amid policy uncertainty and regulatory changes. The central bank’s monetary easing is expected to bring the policy rate down to 6% by year-end, but inflation is likely to hover around the 4% target, limiting real wage gains. External risks are heightened by ongoing USMCA renegotiations and the persistence of US tariffs on key exports, particularly in automotive and electronics. The risk of further trade disruptions remains high, especially as US political dynamics shift toward greater protectionism. Meanwhile, weak industrial output and a slow recovery in public investment constrain growth prospects. Mexico’s nearshoring advantage is tempered by infrastructure bottlenecks and energy sector rigidities, requiring targeted reforms to sustain momentum in the face of global economic headwinds. 

Financing risks

Fiscal pressures are mounting as pension, subsidy and social program costs rise, while tax revenues remain low at around 17% of GDP. The government’s fiscal consolidation efforts have led to cuts in infrastructure and R&D spending, potentially undermining long-term growth. Public debt remains manageable, but contingent liabilities from state-owned enterprises and the broader oil sector pose ongoing risks. The banking sector is stable, with adequate capitalization and liquidity, but credit growth is cooling down due to weak investment demand. We expect business insolvencies to peak in 2026, particularly in sectors exposed to US demand and tariff volatility, and reduce in 2027. The peso is supported by a narrower interest rate differential with the US, while any sharp deterioration in investor sentiment or escalation in trade disputes could trigger currency volatility and capital outflows. Maintaining access to external financing will depend on policy credibility and the ability to navigate USMCA-related uncertainties.

Structural business environment risks

Mexico’s business environment has not improved substantially despite recent institutional reforms that have increased executive control over the judiciary. These changes have heightened legal uncertainty and raised concerns about contract enforcement and property rights, particularly in strategic sectors such as energy and telecommunications. High informality (over 50% of the workforce), regional disparities and persistent corruption continue to undermine competitiveness. While nearshoring offers opportunities for industrial upgrading, bottlenecks in infrastructure, energy supply and skilled labor constrain the full realization of these benefits. Digitalization and regulatory streamlining are needed to foster entrepreneurship and attract investment, but progress has been slow. The government’s focus on renewable energy and public-private partnerships could help address some gaps, but regulatory unpredictability remains a key deterrent for investors.

Political risks

The political landscape in 2026 is marked by the consolidation of executive power under President Sheinbaum, who retains strong consensus across the electorate. The opposition remains fragmented and faces structural disadvantages, as the ruling coalition leverages social programs and institutional control to maintain dominance. Proposed electoral reforms could increase the risk of arbitrary policymaking. Security remains a major concern, with cartel violence and regional instability affecting both business operations and public safety amid increasing pressure and interference from abroad. Diplomatic relations with the US are strained by trade, migration and security issues, although industrial ties, unique logistical advantages and the presence of a vast Mexican community in the US help smooth out the rough edges of the relationship. The risk of social unrest persists amid slow progress on income distribution and economic inclusion, while the outcome of USMCA renegotiations will be pivotal for Mexico’s medium-term outlook.

Trade structure by destination/origin

(% of total, 2024)

Trade structure by product

(% of total, 2024)

Contact 

Luca Moneta
Allianz Trade
+33 (0) 6 70 27 40 16
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