Successfully investing in Mexico

In mid-2025, Mexico's economy is caught between resilience and ongoing challenges.

After a weak end to 2024, the country managed to avoid a technical recession, but growth in the first quarter of 2025 was fairly low at just 0.2 percent. Historically, such weak economic momentum after a change of government – as was the case in October 2024 – is the norm in Mexico. This picture is exacerbated by an increasingly complex international environment, shaped primarily by the tariff measures imposed by the United States. This is particularly significant given that the United States is Mexico's most important trading partner, with total trade volume amounting to approximately 840 billion US dollars in 2024.

Against this backdrop, the Mexican Ministry of Finance has revised its growth forecasts for 2025 downwards from 2.0 to 3.0 percent to between 1.5  and 2.3 percent. For 2026, the same authority forecasts growth of between 1.5  and 2.5 percent. However, it should be noted that independent assessments have come to different conclusions. For example, in its second quarterly report in May 2025, the Mexican central bank “Banco de México” revised its annual growth forecast downwards from 0.6 percent in its first quarterly report to 0.1 percent. Ultimately, the same analysts also expect growth of only 0.9 percent for 2026.

However, Mexico has institutional strengths that can cushion the risks of stagnation or even recession. Trade liberalisation, a flexible exchange rate and the independence of the central bank remain important pillars of macroeconomic stability. Furthermore, the review of the trilateral free trade agreement “USMCA” between the United States, Mexico and Canada, which is provided for in the treaty text for 2026 and may take place before the end of this year, offers the opportunity to ensure greater security in trade relations, enabling Mexico to strengthen its position in global supply chains.

Another ray of hope for Mexico's economy is the “Plan México”, developed by the current government under new President Claudia Sheinbaum, which outlines a comprehensive and forward-looking national strategy for industrialisation and shared prosperity. The initiatives to promote industrial development and infrastructure projects are intended in particular to reduce dependence on external markets, reduce regional inequalities and create 1.5 million jobs in strategic manufacturing industries by 2030.

In summary, the Mexican economy is on a path of cautious optimism in 2025. While macroeconomic fundamentals are relatively solid and nearshoring offers significant opportunities, addressing structural weaknesses and ensuring political stability will be crucial to sustaining growth and improving living standards across the country.

Mexico is increasingly establishing itself as a preferred location for international investors – and not just because of its geographical proximity to the United States. Rather, the country offers a compelling combination of competitive labour costs, a well-educated workforce, solid infrastructure and an increasingly skilled local supply industry.

Another key advantage is Mexico’s unique network of free trade agreements: with agreements in place with a total of 50 countries, the country enjoys privileged access to the world’s most important markets – a strategic advantage that attracts investors from all over the world.

In 2024, the country recorded foreign direct investment (“FDI”) of 36.87 billion US dollars, representing an increase of 2.3 percent over the previous year. The top investors came from the United States (16.1 billion US dollars), Japan (4.28 billion US dollars) and Germany (3.78 billion US dollars). A further increase to over 39 billion US dollars is expected for 2025 – a clear signal of international companies’ continued confidence in the Mexican market.

Particularly noteworthy: FDI accounted for 24.5 percent of gross domestic product in 2024 – an indicator of the central role that foreign capital plays in Mexican economic growth. Investments are concentrated primarily in strategic sectors such as the automotive, aviation, electronics, chemical and pharmaceutical industries and, increasingly, in semiconductor manufacturing, which further strengthens Mexico’s position as a production location within global supply chains. In this context, the largest investment commitments to date have come from the following companies: Mexico Pacific (LNG infrastructure), Woodside Energy (oil storage) and Amazon AWS (logistics and cloud infrastructure).

Furthermore, the European Union and Mexico concluded negotiations on a modernised free trade agreement in January 2025. Ratification by both sides is expected later this year. The modernised version of the agreement, which has been in place since 2000, provides for the exemption from customs duties of numerous agricultural goods and food products from the EU, some of which were previously subject to customs duties of more than 20 percent. In addition, among other things, it will facilitate access for EU companies to public procurement in Mexico. These changes open up significant market opportunities for European producers and at the same time strengthen the economic partnership between Mexico and the EU.

Despite Mexico’s growing attractiveness as an investment location, foreign companies and investors face a number of structural challenges that can make market entry and business operations difficult.

Those affected report in particular that regulatory unpredictability and legal uncertainty are stumbling blocks to business operations. Laws can change at short notice, which makes planning difficult. In addition, bureaucratic hurdles and lengthy approval procedures are a burden, especially for new entrants to the market.

Furthermore, the widespread high crime rate in connection with the challenges of doing business in the country should not go unmentioned. Among other things, this affects the internal operations of companies and the transport of goods. Several studies have estimated the negative economic impact of crime and violence in recent years at over 200 billion US dollars annually.

Another critical issue is the investment backlog in public infrastructure. While Mexico’s exports have risen significantly in recent years, there has been little expansion of transport and border infrastructure. This leads to congested transport routes and delays in the movement of goods. Energy supply also poses a risk: companies are often dependent on the state-owned energy supplier CFE, whose electricity supplies are not always reliable. Access to renewable energies is limited in many places. The water supply is similarly problematic – several states are experiencing water stress due to outdated infrastructure and increasing periods of drought.

The increasing competition for skilled workers, especially in technology-intensive industries, is also a sensitive issue. Companies must therefore invest more and more in training and further education in order to remain competitive in the long term.

Finally, Mexico’s tax and customs system can be challenging for German entrepreneurs. It is considered complex and difficult to understand. Customs clearance can be time-consuming and resource-intensive, especially for cross-border production models, such as nearshoring. Companies therefore rely on specialised advice to avoid legal and tax pitfalls.​