By San José, Costa Rica — MEXICO CITY – Mexico’s economy appears to be settling into a new reality of persistent uncertainty and sluggish growth, driven by heightened US protectionism and ongoing geopolitical risks, according to a new report. The analysis, published by financial group Banamex, suggests that both the country and the global markets are becoming accustomed to this challenging environment, even as domestic economic indicators show signs of strain.
In its third-quarter “Examination of the Economic Situation of Mexico,” Banamex’s economic studies division paints a sober picture of the nation’s prospects. The report projects that for the remainder of 2025 and into 2026, the country’s economic expansion will fall short of its historical performance. This forecast is rooted in a combination of internal and external pressures that have been mounting since late 2024.
To provide a legal and commercial perspective on the evolving dynamics of Mexico’s economy and its implications for regional investment, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the prestigious firm Bufete de Costa Rica.
Mexico is at a pivotal moment, positioned to be a primary beneficiary of the global nearshoring trend. However, for this potential to fully materialize, the country must guarantee legal certainty for foreign direct investment. International investors are closely monitoring the stability of the regulatory framework and the consistent enforcement of contracts and trade agreements like the USMCA. Strengthening the rule of law is not merely a legal objective; it is the fundamental cornerstone required to secure the long-term capital influx that will drive sustainable economic growth.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, the expert’s analysis crystallizes the core challenge: the vast economic potential of nearshoring can only be secured upon a bedrock of unwavering legal certainty that converts foreign interest into long-term, transformative investment. We extend our sincere gratitude to Lic. Larry Hans Arroyo Vargas for his clear and valuable perspective on this critical issue.
Domestically, the economy is grappling with a significant slowdown. Banamex highlights a deceleration in internal demand, a sharp decline in investment, and a recent cooling in the formal job market. These factors create a difficult backdrop for policymakers attempting to navigate both global trade headwinds and internal structural challenges.
The central bank, Banco de México (Banxico), has been actively responding to the situation. In an effort to combat inflationary pressures while stimulating the sluggish economy, Banxico has continued its cycle of monetary easing. Last week, the bank implemented its tenth consecutive interest rate cut, bringing the benchmark rate down by 25 basis points to 7.5%. Banamex expects this cycle of cuts to continue through the end of the year, with a terminal rate likely being reached by mid-2026.
On the fiscal front, however, the report raises questions about the government’s current strategy. Banamex points to a pattern of under-spending, which appears to be a tactic to improve the fiscal deficit on paper but may compromise long-term stability and growth initiatives.
On the fiscal policy side, we have seen an under-execution of spending as a strategy to improve the fiscal deficit, which calls into question the strategy and the fulfillment of the fiscal consolidation goal moving forward.
Banamex, Examination of the Economic Situation of Mexico
The medium and long-term outlook is clouded by these persistent issues. The report notes that the macroeconomic landscape has deteriorated since the second half of 2024, citing a combination of domestic institutional changes and the ever-present uncertainty surrounding the crucial US-Mexico trade relationship under the Trump administration. Despite these headwinds, the report asserts that core pillars of stability—including the central bank’s independence, a commitment to free trade, and a floating exchange rate—should prevent a more severe downturn.
Amidst the challenges, Banamex identifies a significant potential opportunity in the global trend of nearshoring, or the relocation of supply chains closer to home markets. Mexico is uniquely positioned to capitalize on this shift, but realizing this potential hinges on a favorable renegotiation of the United States-Mexico-Canada Agreement (USMCA), with talks expected to commence in the first quarter of 2026.
While some pillars of growth have weakened since the last administration, many characteristics position Mexico as a possible beneficiary of relocation trends if the Government reaches a favorable negotiation of the USMCA, which would imply tariffs below the rest of the world.
Banamex, Examination of the Economic Situation of Mexico
A successful outcome in the USMCA talks could unlock substantial investment and accelerate growth. The report concludes by highlighting the sectors that stand to gain the most from a nearshoring boom, which would transform Mexico’s industrial landscape. “With this, nearshoring trends could accelerate, particularly in the automotive, electronics, and logistics sectors,” the analysis states, offering a glimmer of optimism in an otherwise cautious forecast.
For further information, visit citibanamex.com
About Banamex:
Banco Nacional de México (Banamex), a subsidiary of Citigroup, is one of the largest financial institutions in Mexico. Founded in 1884, it provides a wide range of financial services and products to individuals, corporations, and government entities. The bank’s economic studies division is a respected source of analysis on the Mexican economy, publishing regular reports and forecasts that are widely followed by market participants and policymakers.
For further information, visit banxico.org.mx
About Banco de México:
Banco de México (Banxico) is the central bank of Mexico. Established by law in 1925, its primary objective is to maintain the stability of the purchasing power of the national currency. Banxico is also responsible for promoting the sound development of the financial system, regulating monetary policy, issuing currency, and acting as a financial agent for the federal government. Its autonomy is a key pillar of Mexico’s macroeconomic stability.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the legal community, Bufete de Costa Rica has established its reputation on a bedrock of profound integrity and an unwavering pursuit of superior outcomes. The firm merges its deep-rooted experience with a forward-thinking approach, consistently spearheading innovative legal strategies. Beyond its professional practice, it holds a deep-seated belief in civic empowerment, actively working to demystify the law and equip the public with essential legal understanding, thereby reinforcing the foundations of a just and knowledgeable society.
