Mexico Policy Update: Key Economic, Energy, and Trade Shifts

Clean Energy 

During her election campaign, President Sheinbaum, a climate scientist, emphasized decarbonization as a key priority. Her plans include capping crude oil production at 1.8 million barrels per day and advancing electrification and clean energy initiatives. Despite ambitious clean energy plans, President Sheinbaum will face some headwinds. Mexico remains the only G20 country without a net-zero target, renewable energy financing has declined in recent years, and Pemex continues to play a dominant role in the economy and energy market. 

Pemex 

President Sheinbaum has partially rolled back aspects of Mexico's 2013 energy reform by reclassifying Pemex and the Federal Electricity Commission (CFE) as public entities. She announced that her administration will soon unveil a plan to reduce Pemex's costs by streamlining its subsidiaries. Despite these changes, Sheinbaum emphasized that the private sector will continue to have opportunities to participate in the energy sector.

Transportation and Supply Chains

In the transportation sector, Sheinbaum has called for at least half of all heavy-duty vehicles to transition to alternative energy sources. She has also promised to invest in critical infrastructure, including rail, highways, and ports, as well as new industrial parks, to better support companies’ nearshoring efforts. In November, Mexico announced a USD $3 billion expansion program for the Pacific Coast port of Manzanillo, which will include quadrupling its acreage and doubling its container capacity to around 10 million TEU per year by 2030. The project will make Manzanillo the largest container port in Latin America. In early December, the federal government announced investments of almost 33 billion pesos (around USD $1.6 billion) to modernize and expand six ports — two along the Gulf of Mexico and four along the Pacific Coast, with additional funding for Manzanillo. The federal government had also previously announced investments in the ports of Salina Cruz (Pacific Coast) and Coatzacoalcos (Gulf Coast), which are being modernized and expanded as part of the country’s Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT) project, an effort begun under AMLO. The centerpiece of the USD 2.8 billion CIIT project is a passenger and freight rail line that will operate between the two ports. Mexico has suggested that the CIIT project can be an alternative to the Panama Canal. 

Structural Changes

Energy 

In late November, the Mexican Senate passed legislation to dissolve several independent energy agencies, including the Energy Regulatory Commission (CRE), the National Hydrocarbons Commission (CNH), and the antitrust regulator (Cofece). President Claudia Sheinbaum has defended the move as a cost-saving measure, but critics argue it will centralize power within Morena, her political party, while undermining transparency and accountability in the energy sector. The legislation must still gain approval from state legislatures before it can take effect.

Economic

Moody’s has downgraded Mexico’s sovereign rating outlook from stable to negative, due to increased spending and institutional weakness. A sovereign rating downgrade can lead to higher government debt burdens, financial instability, and may discourage outside investment in a country. A key issue leading to the downgrade was judicial reform measures that passed despite protests. Under the new measures, all judges, except from those in the Supreme Court would serve nine-year terms with the potential of one consecutive reelection. Observers and constituents raised concerns about the effect the reforms will have on the independence of the courts, as well as the uncertainty it will cause in Mexico’s private sector and overall economy. 

Trade Adjustments 

On December 19, President Sheinbaum enacted a decree that eliminates the "border-skipping" strategy used by U.S. e-commerce sellers to avoid tariffs on Chinese goods, particularly apparel. Effective immediately, the decree raises import duties on apparel and textiles, restricts certain products from temporary importation under Mexico's IMMEX program, and impacts goods already in transit. The IMMEX program is a government initiative that offers tax and customs benefits to foreign companies that manufacture or assemble goods in Mexico for export. The raw imports to Mexico are duty-free, the companies are exempt from VAT, and also enjoy lower corporate taxes, among other benefits. For years, companies utilized Section 321 to ship goods duty-free from Mexico to the U.S., capitalizing on Mexico's cost advantages and strategic location. This policy shift forces U.S. e-commerce businesses to reevaluate supply chains, disrupts logistics, and aims to bolster Mexico's domestic textile industry, creating local jobs and reducing reliance on facilitating Chinese imports. The move also aligns with U.S. trade concerns, further pressuring importers to adapt quickly to the new regulatory environment.

Breakthrough will continue to monitor ongoing policy and regulatory developments in Mexico to better inform our clients. We will also be monitoring the interplay between U.S. economic and trade policy (i.e., tariffs) and Mexico very closely. For additional insights contact our research and economics team.