Sheinbaum Isn’t Tempering Her Ambitions for Mexico’s Economy
Last month, President Claudia Sheinbaum unveiled “Plan Mexico,” an economic and development roadmap that aims to boost the Mexican economy through new public and private investments in a range of sectors, and new development-friendly policies. Among its principal aims are to create 1.5 million jobs in advanced manufacturing, increase investment as a proportion of GDP by 4 percent and grow Mexico’s economy from the 13th largest in the world currently to 10th by 2030.
The plan is undoubtedly ambitious and comes at a time when the Mexican economy faces significant headwinds and uncertainty amid the threat of tariffs from the United States, as well as an overall deceleration of the economy, which grew at a modest pace of 1.8 percent in 2024, below the average of 2.4 percent for Latin America. Sheinbaum’s Plan Mexico has been positively received by Mexico’s business community and elites, who see it as a key differentiator between her administration and that of her predecessor, Andres Manuel Lopez Obrador, or AMLO. However, the plan’s implementation will face serious challenges, both internal and external, and its results are likely to fall short of its stated goals.
To achieve its objectives, Plan Mexico consists of three pillars. First, there are public investments in strategic areas such as energy, water infrastructure, transport, education and housing. Second, the plan includes business-friendly policies such as reducing red tape for new businesses, creating tax incentives for companies investing in value-added sectors and boosting access to credit. Finally, the plan calls for government to work together with the private sector in strategic sectors including textiles, pharmaceuticals, semiconductors, agribusiness, automobiles, energy and consumer goods.
For the first pillar, Sheinbaum’s plan envisages increasing electricity generation through 100 priority projects, investing in over a dozen water infrastructure projects to benefit more than 31 million people, building or renovating more than 3,000 kilometers of railways for cargo and passenger traffic, investing in higher education (particularly for technical careers), and building and renovating over one million houses. It’s not yet clear how these huge projects will be financed.
The second pillar includes tax deductions on new nearshoring investments by Mexican and foreign companies, as well as partial deductions for companies investing in training and personnel development. Furthermore, it will provide fiscal incentives and expedited access to government and customs agencies for specific sectors in certain regions. The plan also includes the revamp of a program designed to simplify bureaucratic procedures and increase financing opportunities for small and medium-sized businesses.
Finally, the third pillar involves immediate government action to strengthen the private sector. The three key goals of the pillar are to expand and strengthen existing businesses, develop new industrial activities and substitute industrial imports. This pillar is perhaps the most noteworthy of the three, as it marks a true departure from the often-confrontational stance that the AMLO administration took with Mexico’s business community. Among the stated aims are to reform higher education curricula to better suit the needs of private businesses as well as facilitate dialogue and find synergies between Mexican and foreign companies. The plan also commits to ongoing dialogue with the business community to assess their needs.
Unless the government attracts significant private investments, especially in sectors where the AMLO administration adopted a more protectionist approach, such as infrastructure and energy, the stated goals are unlikely to be achieved.
For the past three decades, Mexico has been open to foreign investment and trade, which have transformed the country into a manufacturing powerhouse, becoming the United States’ main trading partner and Latin America’s largest exporter. Nonetheless, this open-door policy has not been accompanied by a clear government strategy to encourage investment where needed, incentivize specific sectors, or invest in human and infrastructure development.
The plan inevitably draws comparisons to China’s five-year development plans, which have guided that country’s industrial policy. But Mexico and China are two very different countries and the needs and interests of their public and private sectors diverge strongly. While China has invested in and strengthened state-owned companies for decades, Mexico has opted for a free-market development approach that is heavily dependent on foreign investment. Most of the primary innovators and creators of value-added jobs in Mexico are foreign businesses whose interests change constantly and have the ability to move their operations to other jurisdictions, creating economic volatility.
The plan ignores some issues of paramount importance to prospective investors, such as public security and a reliable legal system. The country’s decades-long domestic security problem has acted as an investment deterrent in various sectors and regions, from agribusiness in Mexico’s fertile south, mining in states like Chihuahua and Guerrero that have a strong cartel presence, and manufacturing in the important drug trafficking cities of Reynosa, Tijuana and Ciudad Juarez. Meanwhile, AMLO’s 2024 judicial reform shook investors’ confidence in the country’s legal system, as judges will now be elected and thus potentially more prone to influence-peddling and political manipulation. In addition, tense trade relations with the U.S. could diminish Mexico’s attractiveness as a nearshoring destination in the short term.
The country’s economic situation also cast doubts on the viability of the plan. Mexico ended 2024 with an annual budget deficit of 5 percent of GDP, up from 3.4 percent only a year prior. Cumulative national debt is expected to increase to 58 percent of GDP, which although still low compared to similar-sized economies, has been on an upward trajectory for the past three years. Financing the plan’s ambitious projects will therefore prove difficult if the country is to maintain manageable levels of debt. Unless the government attracts significant private investments, especially in sectors where the AMLO administration adopted a more protectionist approach, such as infrastructure and energy, the stated goals are unlikely to be achieved. Restoring private interest in these sectors will take time, as Sheinbaum has been regarded as AMLO’s political and ideological successor.
The plan’s ambitious target of turning Mexico into one of the 10 largest economies by 2030 will, almost certainly, be missed. Mexico currently stands as the 13th largest economy in the world based on purchasing power parity. Its growth prospects for the next two years are modest at 1.4 and 2 percent for 2025 and 2026, respectively. This level of growth will be insufficient to overtake in five years the next three economies larger than Mexico: Turkey, Italy and the United Kingdom.
Despite these obstacles, the plan sends a clear message: In the face of major uncertainty about U.S. policy, Mexico will seek to strengthen its economy from within, adopting techniques used successfully by China and other developing nations. The plan might not be entirely successful, and its results might fall below expectations, but with it Sheinbaum has proven that she is willing to do things differently than both her ideological opponents and her predecessor.
Eduardo Arcos is a senior political and security analyst for the Americas, based in London. His research focuses on international political economy, organized crime and Latin American affairs.