Mexico Country Outlook 2026

This report was written collaboratively by experts from the Baker Institute Center for the U.S. and Mexico and other contributors. Learn more about the annual Mexico Country Outlook conference and accompanying report.

Download the full 2026 report here. 

Each year, the Center for the U.S. and Mexico at Rice University’s Baker Institute surveys experts affiliated with the institute to generate a “Mexico Country Outlook.” Experts discuss the opportunities and challenges in Mexico’s political, regulatory, economic, and social environment. The report is available to policymakers, business leaders, and the public to assist in decision-making.

This report is the Center for the U.S. and Mexico’s forecast for Mexico in 2026.^[1] It addresses themes, such as the political and diplomatic relationship between Washington, D.C. and Mexico City, the state of politics and democracy in Mexico, shifts in the regulatory environment, pending issues in the legislative and regulatory agenda, the expected performance of the country’s economy, public safety and security, and other relevant social issues.

Executive Summary

In 2026, Mexico’s democracy will continue to face extensive challenges.^[2] Next year, the government plans to enact a political and electoral reform to weaken citizen-organized elections, likely diminishing the country’s democratic process.^[3] If these reforms are ratified, the executive branch would be the most powerful and relevant branch of government, with expectedly compliant legislative and judiciary branches. 

The opposition’s influence will continue to dwindle, if they are unable to craft a coherent, alternative message that can appeal broadly to Mexican citizens who are dissatisfied with the current administration. Additionally, the opposition will become more vulnerable due to the governing coalition’s use of social programs to build an electoral clientele and the weakening of regulatory institutions, independent elections, and the judiciary, which collectively ensure fair, equal opportunities for all political parties and candidates.^[4] This comes on the heels of Mexico’s full implementation of legislation eliminating independent regulatory agencies and significantly reshaping the judicial system to function more fully under the executive branch.^[5] As an economic consequence, these changes are expected to bring more arbitrariness and uncertainty to the country’s business environment.^[6] Thus, the resulting highly speculative business environment will likely add to Mexico’s economic stagnation in 2026, as investors will be required to operate under uncertainty. 

Economically, the country’s growth is expected to remain slow. Alongside relatively flat rates of private investment, public investment on factors that could reverse the country’s low growth trend of the last years — infrastructure, human capital, and research and development — will be cut further in 2026.^[7] Given these reductions in sectors that encourage economic growth, Mexico’s fiscal policy is expected to result in growing public debt, a constricted tax base, and shrinking remittances. The government will seek to maintain some macroeconomic discipline, but the likelihood of fiscal success is not high, given the substantial costs of growing pensions and social programs, debt servicing expenditures, and significant subsidies to government-owned enterprises. Altogether, Mexico’s current economic policies suggest that 2026 is expected to be yet another low economic growth year, like the last seven years.^[8]

Other key issues to watch in 2026 are related to U.S. demands on the Mexican government. Three specific issues are of concern to Washington, with Mexico having relatively low leverage to challenge these requests:

• Continued immigration enforcement: Mexico has responded to pressure from the Trump administration to stem the flow of asylum seekers at the border by deploying tens of thousands of National Guard members against transmigrants and imposing additional travel restrictions on certain nationalities.^[9] This pressure will continue.
• U.S. enforcement against drug cartels: The Trump administration will continue to demand that Mexico establish a framework that will allow U.S. operatives to conduct law enforcement actions against drug cartels in Mexican territory, particularly those focused on fentanyl smuggling.^[10]
• Trade and tariff agreements: The U.S. is likely to press Mexico on approving a new version of the United States-Mexico-Canada Agreement (USMCA) that includes a tariff table on trade as well as restrictions of Chinese investment in and curtailment of Chinese imports to Mexico.^[11]

The Sheinbaum government, unlike the administration under former President Andrés Manuel López Obrador (AMLO), will likely be unable to offer alternative concessions to satisfy Washington or postpone action in favor of Washington’s positions. This will lead Sheinbaum to thread a fine line between quietly conceding to a number of the Trump administration’s mandates while intensifying her nationalistic rhetoric for domestic consumption.

Notes

^[1] This report was written and compiled based on information available up to mid-September 2025. 

^[2] Javier Martin-Reyes, “Democracy Dismantled: Mexico’s Constitutional Path to Autocracy,” in “Symposium — Mexico’s Constitutional Demise in Context,” edited by Mariana Velasco-Rivera, special feature, in Comparative Constitutional Studies 3, no. 1 (2025): 24–30, https://doi.org/10.4337/ccs.2025.01.04; “Constitutional Reforms in Mexico: Collection,” Wilson Center, accessed September 2025, https://www.wilsoncenter.org/collection/constitutional-reforms-mexico.

^[3] Elia Castillo Jiménez, “El INE levanta la mano para participar en la redacción de la reforma electoral de Sheinbaum,” El País, August 26, 2025, https://elpais.com/mexico/2025-08-27/el-ine-levanta-la-mano-para-participar-en-la-redaccion-de-la-reforma-electoral-de-sheinbaum.html.

^[4] Joy K. Langston, “La centralización del clientelismo en México en el sexenio de Andrés Manuel López Obrador,” Foro Internacional 65, no. 3 (2025): 575–616, https://doi.org/10.24201/fi.3124.

^[5] Luz Helena Orozco y Villa and Velasco-Rivera, “Unpacking the Rhetoric Behind Mexico’s Judicial Reform,” Rice University’s Baker Institute for Public Policy, April 30, 2025, https://doi.org/10.25613/82XT-A869; Miriam Grunstein, “From Market Guardians to Monopoly Keepers: Regulatory Capture in Mexico’s Energy Sector,” Rice University’s Baker Institute for Public Policy, December 10, 2024, https://doi.org/10.25613/N7HC-3R70. 

^[6] David A. Gantz, “What Does Mexico’s Impending Return to Single-Party Governance Mean for Attracting FDI?,” Rice University’s Baker Institute for Public Policy, June 25, 2024, https://doi.org/10.25613/EEPK-4A51. 

^[7] Adriana Alarcón, “Mexico’s Infrastructure Investment Falls 29.1% in Jan-May 2025,” Mexico Business News, July 22, 2025, https://mexicobusiness.news/infrastructure/news/mexicos-infrastructure-investment-falls-291-jan-may-2025; Diego Valverde, “Mexico Receives Lowest Science Budget Since 2008,” Mexico Business News, January 27, 2025, https://mexicobusiness.news/tech/news/mexico-receives-lowest-science-budget-2008. 

^[8] James Gerber, “Exploring Slow Growth in Mexico,” Rice University’s Baker Institute for Public Policy, August 27, 2024, https://doi.org/10.25613/8F6G-NY61. 

^[9] Megan Janetsky, “Mexico Deploys the First of 10,000 National Guard troops to US Border after Trump’s Tariff Threat,” Associated Press, February 5, 2025, https://apnews.com/article/national-guard-mexico-border-ciudad-juarez-sheinbaum-b26e9d359f4f17b60925bd3935d169d3.

^[10] Maggie Haberman, “Trump Says He Asked Mexico to Let U.S. Military In to Fight Cartels,” New York Times, May 4, 2025, https://www.nytimes.com/2025/05/04/us/politics/trump-mexico-sheinbaum-cartels.html; Helene Cooper et al., “Trump Directs Military to Target Foreign Drug Cartels,” New York Times, August 8, 2025, https://www.nytimes.com/2025/08/08/us/trump-military-drug-cartels.html.

^[11] David A. Gantz, “Mexico’s Economy Under US Tariffs and Trade Uncertainty,” Rice University’s Baker Institute for Public Policy, August 13, 2025, https://doi.org/10.25613/6ZWW-XZ77.

This publication was produced on behalf of Rice University’s Baker Institute for Public Policy. Wherever feasible, the material was reviewed by external experts prior to its release. Any errors are the responsibility of the author(s) alone.

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