Economics: Public investment outlook for 2026

MEXICO - Report 22 Sep 2025 by Mauricio González and Francisco González

The 2026 Expenditure Budget Proposal (PPEF) anticipates a slight recovery in public investment following a deep contraction in 2025. Physical investment could increase by nearly 10% in real terms (from 888.9 billion to 975.5 billion pesos, ((US$48.30 billion to US$53 billion)), while investment in other categories (financial) is expected to rise by 80%, with the latter corresponding to transfers to state-owned enterprises (Pemex and CFE).

For Pemex, it is proposed that the company generate an operating surplus equivalent to the support provided by the Federal Government (263.5 billion pesos equivalent to US$14,32 billion). This is anticipated to be a major challenge due to recurring losses in industrial transformation, so it is very likely that budgeted investment will be cut in order to achieve this surplus balance. In relation to public investment in other sectors, the PPEF indicates that 62% of the total excluding Pemex/CFE (228.5 billion pesos equivalent to US$12.42 billion) will be earmarked for passenger trains—projects of questionable economic profitability—while only 9% and 12% of the total will be allocated to priority areas such as water and highways, respectively. This edition of the Economic Outlook reviews in greater detail the current situation and the 2026 investment prospects both for state-owned companies (Pemex and CFE) as well as for the government’s administrative branches.

In relation to last week’s indicators, it was reported that manufacturing employment in July posted a -2.3% annual decline. So far in 2025 (January to July), manufacturing employment has fallen by an annual -1.5%. This correlates with the stagnation in manufacturing output during the first months of the year (growing only an annual 0.3% from January to May) and a decline since the end of the first half of 2025 (-1.0% drop in June-July). A detailed analysis shows that manufacturing employment in the automotive industry, as well as in the textile and machinery and equipment related sectors, fell during the month. In addition, figures for aggregate supply and demand in the second quarter of 2025 were released, indicating that the latter increased an annual seasonally adjusted 1.4%, driven by 12.0% growth in exports, while private consumption grew by a very weak 0.5%, and gross fixed capital formation contracted by -5.9%.

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