Election Countdown: Mexico's economic destiny

© From left to right, up and down: Latinus; Xochitl Gálvez Photo: Bloomberg en Español, Claudia Sheinbaum Photo: Capital 21, Jorge Maynez Photo: Carl de Souza/AFP; iStockPhoto; Photo: zhengzaishuru/Getty Images/iStockphoto

Mexico is at a historic economic juncture, driven by the growth of nearshoring, a phenomenon that has gained momentum in recent years. Despite a 5% decrease in Foreign Direct Investment (FDI) at the national level in 2023 compared to the previous year, FDI linked to nearshoring has shown an impressive 310% growth in the first nine months of 2022, reflecting a confidence in Mexico's economic potential. This growth has been supported by a strength of the peso not seen in years.  

However, this optimistic outlook is not without its challenges. Among them is the urgency of addressing delays in energy reform, the delay of which could lead to a re-carbonization of the country's energy model and a near-term dependence on less sustainable models, such as fracking. These challenges raise the need for careful economic management and strategic planning to ensure sustainable and balanced development in the future, what do the presidential candidates propose? 

A moral economy

The representative of Sigamos Haciendo Historia, Claudia Sheinabum, proposes to continue with the “moral economy” model of the current government, in which she highlights the economic achievements reached, such as the rise in the ranking of the largest economies in the world and the strengthening of the Mexican peso. He pledges that the GDP will grow by 3% annually, while the GDP per capita will increase by 2.4% annually, in addition, he proposes to modernize, expand the country's main ports and continue with the current policy of financial austerity, tax collection and independence of the Bank of Mexico to face the inflation that closed 2023 with a figure of 4.66% annually.

One of the most outstanding aspects of his plan is the creation of development poles throughout the national territory, with the goal of establishing up to 100 industrial parks distributed in 13 Corridors of Poles for Wellbeing, prioritizing the wellbeing of the population and the responsible management of resources such as water. Likewise, his focus on the promotion of nearshoring and the promotion of fair jobs seeks to boost the southeast of the country to receive more investment, as well as to foster the transition towards a more sustainable economy with energy sovereignty through the promotion of renewable energies and energy efficiency, which he promises will be a feature of his six-year term should he win the next presidential elections.

Nearshoring as an economic driver

Xóchitl Gálvez, candidate of the Fuerza y Corazón por México coalition, has focused her speech and proposals on promoting nearshoring as an engine of development for Mexico. In this sense, she suggests the implementation of tax incentives and infrastructure improvements to attract foreign investment, strengthening the rule of law to provide legal certainty to current and future investors, in order to combat practices such as extortion and extortion.

In this way, his proposal contemplates the creation of investment cluster policies, with the objective of converting certain cities into investment centers for specific industries; facilitating the establishment of micro, small and medium-sized enterprises (MSMEs) and expediting access to credit for them. In addition, he mentioned the promotion of the digitalization of municipal procedures and the promotion of investment through tax facilities and tax payments.

On the energy front, Gálvez advocates a transition to cleaner energy sources and suggests the participation of Petróleos Mexicanos (Pemex) in the private sector for the generation of renewable energy. This promotes greater collaboration between government and private companies in the fight against climate change. A constant concern is the privatization of Pemex, something that has been used as an argument against his proposal. However, in recent speeches, Gálvez has clarified that her intention is to allow the participation of the private sector, without considering the privatization of Pemex. According to the candidate, the priority should be exploration in deep and shallow waters, instead of focusing solely on refining, as well as modernizing the energy infrastructure.

Public-Private Models

The representative of Movimiento Ciudadano, Jorge Álvarez Máynez, highlights the importance of nearshoring and advocates promoting public-private investment models that guarantee energy, water and legal certainty for companies. In this sense, he proposes a gradual increase in the collection of taxes on companies that produce soft drinks, ultra-processed foods and tobacco products, commonly known as green tax.

In addition, should he win the presidency, his focus would be on clean energy by closing refineries in order to relocate production chains. He highlights the opportunity offered by nearshoring and the potential of the northern states for the transfer of services, products and production from other countries to the national territory, as long as it is carried out under principles of environmental sustainability and with the promise of better wages.

His economic proposal is closely linked to his educational proposals, as he seeks to combat the brain drain due to lack of opportunities by creating quality jobs with living wages linked to university education. His plan includes partnerships with universities to strengthen education and research. He also proposes to provide support to young micro-entrepreneurs and promote the formalization of the economy, although he does not offer clear proposals on how he would carry out this last measure.

What can we expect?

Despite the varied political platforms and visions competing in the electoral arena, there is a growing consensus on the need to address the issue of renewable energies. This discussion, although uncomfortable for some, is becoming increasingly necessary in the context of energy reforms that must consider the transition to cleaner and more sustainable sources. Likewise, the push for nearshoring emerges as an immediate priority that cannot be ignored for much longer. 

In an ever-evolving global economic environment, taking advantage of nearshoring opportunities becomes crucial while there is still significant room for effective implementation. Each candidate presents a unique vision for Mexico's economic future, addressing various aspects of the country's economic and social development. Fostering nearshoring, investment promotion and sustainability are common themes in the proposals, reflecting the importance of adapting to global trends and meeting the Sustainable Development Goals by 2030. 

In this sense, the next government will have to adopt policies that promote energy diversification and reduce dependence on fossil fuels, thus ensuring long-term sustainable economic development. Mexico is at a crucial crossroads, where the decisions made in these elections will mark the course of the country in the coming years. It is time to seek a balance between economic growth, international competitiveness and environmental preservation to ensure a prosperous and sustainable future for all Mexicans.