Mexico’s federalism is under pressure - again
Mexico’s President Claudia Sheinbaum (Morena), next to Governor of Querétaro Mauricio Kuri (PAN) at a recent event for the México - Querétaro trainline. Image credit: Presidency of Mexico.
by Gerónimo Gutiérrez.
Andres Manuel López Obrador and to large extent his successor, President Claudia Sheinbaum, are criticized for concentrating political power – even to the detriment of democratic principles and norms. This criticism essentially stems from a tendency to overlook – if not undermine – the separation of powers, from dismantling of autonomous regulatory agencies or placing them under direct control of the Executive, and from an explicit decision not to interact or negotiate with opposition parties unless absolutely necessary.
To be fair, these power-concentrating actions have been possible thanks to the fact that, since 2018, Mexico’s ruling party (Morena) and its satellites have enjoyed strong voter support which granted Mr. López Obrador and President Sheinbaum comfortable legislative majorities including the supermajority needed to reform the constitution. In sum, where the current regime appreciates a historic democratic transformation of Mexico supported by the “will of the people”, its critics see the dismantling of democracy from within the regime.
Be that as it may, one development that has received less attention is the centralization of power and the public purse at the federal level of government, something that is not new to Mexico but that had gradually receded over several decades.
During the better part of the last century, political power in Mexico was centralized at federal level. Under the PRI regime the president exercised significant influence if not control over candidate designation and state and local administrations. It is also a well-documented fact that political alteration and, in many ways, democracy in Mexico gradually began to take roots precisely at those levels of government.
The first opposition governor, Ernesto Ruffo from the PAN, was not elected until 1989 in the State of Baja California. This important milestone in Mexico’s long democratic transition not only broke the PRI’s monopoly, but it also prompted a debate in public opinion and in political circles about the autonomy of state and municipal governments and the concentration of budget resources at the central level. Gradually, opposition governors and mayors began to reclaim their constitutional autonomy and demand a bigger piece of the revenues and expenditures of the highly centralized tax system.
By the time Vicente Fox - the first opposition president - took office, his party (the PAN) governed 8 states while the opposition claimed 24 (19 from the PRI and 5 from the PRD). For the first time, the federal executive had to co-govern with state executives. A National Governors Conference (CONAGO) was created in 2001 and became the primary forum for negotiations of issues of national relevance, serving to balance central political power with that of the states. At the same time, governors began lobbying for policies and federal money not only with the president and his cabinet, but directly at the federal congress. Presidents Calderón and Peña Nieto had to deal with a significant counterweight from state governors.
As a result of the election that took Mr. López Obrador to the presidency in 2018, Morena took 5 states governments and, by the mid term election of 2021, that number grew to 17, giving the president hand his party a majority of the 32 states.
Today, President Sheinbaum enjoys strong support from 23 highly disciplined governors from Morena and its allies accounting for roughly 70% of total population, and the decades-long push strengthened the role of states in the country’s governance and public expenditures has faded almost completely for now. However, this might very well probe unsustainable and affect Mexico’s political environment in the future.
Although the data is scant, some estimates suggest that on average federal transfers are used to cover 85% of the states’ budgets. The federal government is now running a fiscal deficit of around 5% of GDP and facing a scenario of lower economic growth and possibly a recession in the coming years. With most analysis projecting greater fiscal pressures at the central level in the near future, we are likely to see increased tensions between states – especially those governed by opposition parties – and the federal government. Indeed, federal transfers to state and local governments which accounted for about 36% in the federal budget in 2017 dropped to 29% in 2024. It is worth noting that, in 2020, during the López Obrador administration, ten states left CONAGO and threatened to abandon the current tax revenue system, arguing in part that rich states –mostly in the north and center of Mexico, were over-subsidizing poor states on the south.
In this same vein, so far states have all but welcomed the large iconic infrastructure projects built by the López Obrador administration and continued under Sheinbaum, such as the Mayan Train (in the Yucatan Peninsula) the new oil refinery (in Tabasco) or the Felipe Ángeles airport (in the State of Mexico). These projects undoubtedly boosted economic activity and employment but absorbed a significant amount of the budget in past years and are now under increased public scrutiny due to severe cost overruns and for falling quite short in generating enough revenue to pay for them.
In Mexico, control over states by the federal government has been possible because the former heavily depend on large grants and tax revenue transfers to cover their day-to-day expenditures. This tendency, rather diminishing over the last years, has been reinforced by Morena administrations. In the foreseeable future, however, this is likely to strain the county’s political environment.
Editor’s Note: Mr. Gutiérrez served as Mexico’s Ambassador to the United States (2017-18), Undersecretary for Governance (2009-10), and Undersecretary for North America (2003-06).