Mexico’s First Female President Faces Economic Challenges

Mexico is gearing up for the historic inauguration of its first female president, Claudia Sheinbaum, on October 1. Riding on the coalition of parties’ momentum that secured her victory, she will begin her term with a majority in both houses of Congress.

One of Sheinbaum’s immediate challenges is to set the budget for 2025, with a crucial focus on reducing the country’s mounting debt, which is projected to reach 5.8% of GDP in 2024. This move is essential to assure investors of Mexico’s fiscal sustainability.

Despite Andrés Manuel López Obrador’s presidency, Mexico’s economic growth stagnated, averaging a mere 1.1% annually, lagging behind its neighbors. With the US demonstrating a faster growth rate during the same period, Sheinbaum faces the pressing task of revitalizing Mexico’s economy.

Amid global trends of near-shoring supply chains away from China, Mexico stands to attract more foreign investments. To leverage this opportunity, Sheinbaum must strengthen the rule of law, enhancing judicial independence and ensuring reliable energy supply across the nation.

Energy remains a critical sector for Mexico’s growth, with an urgent need to transition to renewables for sustainability. Sheinbaum’s commitment to expanding renewable energy sources while keeping a significant portion of electricity generation under state control poses operational challenges that demand strategic decisions.

Mexico’s state-owned oil and gas company, Pemex, faces hurdles in ramping up production to meet the country’s natural gas demand. Sheinbaum’s stance on either maintaining Pemex’s monopoly or reversing policies inherited from her predecessors will shape the energy landscape.

Despite the potential boon of near-shoring and foreign investments, Mexico’s growth hinges on addressing fundamental institutional flaws that foster inequality. Sheinbaum must confront the informal sector’s dominance, overhaul the tax system to incentivize formal businesses, and bolster lending mechanisms for small enterprises.

Productivity challenges rooted in Mexico’s institutional framework call for comprehensive reforms under Sheinbaum’s leadership. Tackling informality and nurturing productivity will be central to her goal of promoting inclusive growth and transforming Mexico’s economic landscape.