Mexico Problems 12-2-25

In December 2025, Mexico faces economic, political, and social challenges, including slowing economic growth and weak consumption, political uncertainty related to the new U.S. administration's policies, and ongoing security concerns. Key issues include potential trade policy shifts, a possible credit rating downgrade, and the erosion of institutional checks and balances, alongside persistent domestic problems like corruption and unreliable energy access.  

Economic challenges

Slowing growth: Mexico's economic growth has slowed due to weaker consumption and decreased government spending on infrastructure projects.

Weak consumption: Factors like slow formal-sector job creation, sluggish wage growth, and inflation are suppressing consumer spending.

Investment concerns: There are worries about a potential slowdown in foreign direct investment due to trade policy uncertainty and domestic issues like regulatory uncertainty and corruption.

Credit rating risk: A significant downgrade in its credit rating is a major risk if institutional deterioration continues.

Increased debt servicing: A credit rating downgrade would make it harder for Mexico to borrow money and increase the cost of servicing its debt.

Currency depreciation: The peso is expected to continue a slow decline due to capital flight and a relatively stronger dollar. 

Political and institutional challenges

Political risk: Mexico faces heightened political risk due to a concentration of power within the ruling party, which could undermine checks and balances.

U.S.-Mexico relations: A new Trump administration could lead to rocky political and diplomatic relations, with potential threats of tariffs and a more difficult stance on immigration and drug trafficking.

Institutional weakening: There is a concern that democratic institutions are weakening, including the potential loss of independence of the judiciary and the elimination of independent regulatory agencies.

Lack of transparency: Government institutions, particularly the military, are not transparent, and there are concerns about human rights abuses. 

Social and security challenges

Crime and corruption: High crime rates and corruption remain significant problems that impede investment and affect public safety.

Security concerns: The U.S. State Department has issued "do not travel" warnings for several states due to crime and terrorism, and authorities have not adequately investigated crimes against journalists and human rights defenders.

Weak labor conditions: Informal sector jobs, which generally pay lower wages and lack benefits, are growing, while formal-sector job creation is weak. 

In December 2025, Mexico faces significant challenges in security, the economy, and its political environment, many of which are interconnected. 

Security and Public Safety

The primary concern for Mexico is the high level of crime and insecurity, largely driven by organized criminal groups. 

Organized Crime and Violence: Mexico continues to be severely affected by cartel-related violence, including homicide, kidnapping, and extortion. The national homicide rate remains high, and the number of missing persons has increased.

Political Protests: In November 2025, the assassination of a mayor in Michoacán sparked a series of anti-government protests across the country. These demonstrations, organized by groups like "Generación Z Mexico," highlight public dissatisfaction with the federal government's security strategy and alleged corruption.

Judicial Reform Concerns: A controversial judicial reform, which includes the popular election of judges, is set to take effect. Critics, including human rights organizations, warn this could undermine the judiciary's independence and worsen the existing rule-of-law deficits.

Torture and Abuse: There are ongoing issues with the criminal justice system, including reports of widespread torture and arbitrary detention used by security forces to obtain confessions. 

Economic Issues

Mexico's economy is expected to slow down, with some forecasts predicting a potential recession in 2025-2026. 

Slowed Growth and Recession Risk: The consensus forecast points to weak real GDP growth for 2025, implying an economic slowdown. This is influenced by factors like high inflation, elevated interest rates, and declining private investment.

Fiscal Challenges: The government faces pressure to manage a gaping budget deficit and unsustainable liabilities from state-owned enterprises like PEMEX (the state oil company). This is leading to spending cuts in critical areas such as healthcare, education, and infrastructure, which could set the country back in competitiveness.

Investment Uncertainty: Foreign direct investment may slow due to concerns over regulatory uncertainty, a perceived hostile environment for private energy companies, and potential trade tensions with the U.S..

Employment and Poverty: While poverty rates have fallen in recent years, this is largely attributed to increased minimum wages and remittances, not strong internal growth. The labor market faces challenges, including high informality and recent job losses in key sectors. 

Political and Foreign Relations Challenges

The concentration of power under the ruling Morena party has led to concerns about democratic backsliding and an erosion of checks and balances. 

USMCA and Trade Tensions: The upcoming review of the United States-Mexico-Canada Agreement (USMCA) in 2026 is a source of pressure. Potential U.S. tariffs and a mass deportation program proposed by the Trump administration could strain diplomatic relations and impact the Mexican economy.

Migration: Migration flows remain high, and Mexico faces challenges managing the situation at the U.S. border, with migrants often vulnerable to abuse by criminal groups and officials. 

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Norb Leahy, Dunwoody GA Tea Party Leader