The roots and costs of Mexico’s vast informal economy
by Macario Schettino.
For some time now, there has been a belief that previous generations lived better than today's. Many young people, for example, complain that they cannot afford to buy a home in a central location, as their parents or grandparents did. In the United States, there is nostalgia for the 1950s — a nostalgia that, as always, erases the negative parts, such as racism and discrimination against women, among other things.
In Mexico’s case, this nostalgia was fed in classrooms when emphasis was placed on something called the “Mexican economic miracle,” or by its local name: desarrollo estabilizador (stabilizing development). The story goes that from 1946 to 1971, Mexico achieved very high growth rates (6% annually, 3% in per capita GDP), and nostalgia paints a picture of orderly, clean cities with abundant jobs.
As with all legends, there’s some truth — but not too much. In Mexico, during the time being referred to, the country was still essentially rural. It wasn’t until 1960 that half the population lived in cities, and it was precisely that process of urbanization that began to complicate everything. Cities could not expand their infrastructure at the same rate as the population was growing, and even less so when the demographic growth rate exceeded 3% annually. By the 1970s, medium and large cities in Mexico already had belts of poverty and “lost cities”: towns swallowed up by urban expansion.
If in the 1960s it seemed like there were jobs for everyone, it was because only half the population lived in urban areas. As that urban population grew, the myth of full employment began to fade. To prevent this urban growth from spinning out of control, Mexico took on excessive external debt in the 1970s — just as all Latin American countries did — taking advantage of abundant petrodollars and the end of restrictions on international capital flows. In 1981, with anti-inflationary programs in the US and UK, everything collapsed.
Since then…
There’s a lot more driving Mexico City’s gentrification than bad gringos
by David Agren.
The acerbic signs and graffiti criticizing gentrification in Mexico City’s fashionable neighbourhoods were certain to capture international attention.
“Spanish is spoken here,” “Mexico for Mexicans,” and, “Go home,” read three of the screeds.
Social media couldn’t get enough of the disorderly protests – with the familiar masked vandals infiltrating yet another march and smashing up storefronts. The Mexico City police were curiously absent. An easy narrative of Americans abroad wearing out their welcome, while ICE cruelly rounded up Mexican migrants in cities such as Los Angeles.
The Department of Homeland Security jumped in with its own snark, posting, “Oh,” above an X Post with protester graffitiing the words, “Not your home,” and a protester waving a sign in English admonishing, “Pay taxes, learn Spanish, respect my culture.
Much of the international media, meanwhile, focused on the core matter of gentrification, which has spread through leafy neighbourhoods such as Roma, Condesa and Juárez – among others – over the past 15 years, driving up rents and forcing some long-term residents to move as their homes became short-term rentals.
The easy hook for any story on gentrification are…
New rules: The 4T ushers in a new age of peak power
by David Agren.
Former PRI governor Fidel Herrera passed away recently. He was remembered for a sordid administration in the late 2000s, when Los Zetas took over the state. As the discovery of a clandestine refinery in Veracruz revealed, the state-crime nexus continues – even with Morena in power since 2018, having ousted Herrera’s Institutional Revolutionary Party.
Herrera scandalized Mexico throughout his term. He won the lottery twice while in office. And he coined the trademark phrase: “Estoy ahorita en plenitud del pinche poder” – roughly translated as “I’m at the height of my f*cking power.” A less polite translation would be a confession to being drunk with power.
The line encapsulated the impunity and abuse of authority during his term in Veracruz, which was followed by the thievery of fellow príista Javier Duarte – under whom Veracruz became a cemetery for journalists.
Morena and its allies in the so-called “Fourth Transformation” (4T) have channeled Herrera’s authoritarianism in recent weeks – even longer, according to critics – as they push as a series of reforms through congress, where they hold constitutional-proof majorities.
The 16 reforms range from changing wildlife laws to ban the use of captive marine mammals in theme parks to building platforms for boosting state surveillance capacities and a measure to allow National Guard members to seek public office (despite being under National Defence Secretariat command.)
Squatters, scaremongers, and the challenge of Mexico’s ghost homes
by Madeleine Wattenbarger.
A new housing program sparked indignation across Mexico’s mainstream media this week. With the initiative, the Institute for the National Housing Fund for Workers (Infonavit) will offer refinancing plans to people who have stopped paying off their Infonavit housing loans. It will also offer a rent-to-buy plan to squatters of abandoned Infonavit homes.
Establishment media figures in Mexico decried the program’s implications for private property in Mexico. El Heraldo radio host Luis Cárdenas insisted that the judicial reform would allow Morena to seize private dwellings. Speaking in a video posted to social, Cárdenas claimed, “The head of the Infonavit will turn over your house and mine to the criminals who squatted it.” The Infonavit has said that the measure only applies to homes that are not in dispute.
Speaking on Monday, Infonavit director Octavio Romero Oropeza explained that the program is an attempt for the government to recover social housing units without resorting to mass evictions. An ongoing Infonavit census has found 25,000 abandoned houses across the country. Local governments, concerned about them becoming a locus of crime, have long requested that the Mexican state do something about the empty developments.
According to Silvia Emanuelli, the Latin America regional director of the Habitat International Coalition, the UN’s housing organization, Mexico’s abandoned homes are a result of pro-market policies reproduced across the continent in the 1990s, with the logic first applied in Chile under the Pinochet dictatorship. Those policies mandated a reduction in the state’s role in the housing market. Private companies were put in charge of building housing, and homes became merchandise.
Mexico’s economy is declining & faces mounting threats
by Macario Schettino.
In my first column for The Mexico Brief, six weeks ago, I wrote that Mexico was in a recession. Now that we are nearing the end of the year’s first half, the evidence is even stronger. Although an unusual event in February has led many to think otherwise, the truth is that we are already seeing a generalized downward trend.
Consumption contracted year-over-year for the fourth consecutive month in March, and the preliminary indicator suggests no meaningful change in April and May. On average, the decline has been -0.5% compared to the previous year, starting from last October when the current administration took office.
In investment, the situation is worse. The decline began in September, and the following seven months have all shown negative numbers, averaging a yearly contraction of -4.4%, also since October.
In overall economic activity, growth since October is flat, with three out of those six months showing contraction. The impact is now noticeable in employment, with monthly declines and virtually zero annual growth. It’s worth remembering that — since the year 2000 — whenever employment grows at a rate below 1% annually, a recession is a certainty.
Except for employment data, which we have up to May, the rest of the indicators end in March and therefore do not yet reflect the full impact of global uncertainty caused by Donald Trump — especially since the “Liberation Day” event on the afternoon of April 2. We don’t know much about what has happened since then, except in the case of remittances, which saw one of the steepest drops on record in April: -12% compared to April 2024.
Crony capitalism
by Macario Schettino.
In the 20th century, the Mexican economy - like the rest of Latin America - chose a policy known as Import Substitution Industrialization. The goal was to produce in Mexico what would be consumed domestically, and to achieve that, tariffs were imposed on imported goods. In theory, infant industries would be able to survive, become competitive, and tariffs could then be eliminated. The opposite happened: tariffs had to be increased because domestic industry never became competitive. Eventually, the economy was completely closed off and suffered its worst peacetime crisis in 1982.
In 1986, an attempt was made to reverse course. Mexico joined the GATT, implemented an anti-inflationary plan, renegotiated its external debt, and even signed a trade agreement with the United States and Canada. After a deep but brief crisis, the benefits of NAFTA became evident. In the final years of the 20th century, Mexico grew at rates it hadn’t seen in decades.
In 2001, China joined the WTO (GATT’s successor), and the dot-com recession hit the United States. This derailed the Mexican economy, which was unable to resume strong growth, instead remaining at an average annual rate of around 2%. During those years, many studies - by Mexican and foreign academics, agencies, and institutions - tried to identify the reasons why Mexico could not grow faster.
A risky combination
by Macario Schettino.
I greatly appreciate the invitation to contribute biweekly to Mexico Brief. Since this is my first piece, I’d like to dedicate it to reviewing the current state of Mexico’s economy. Virtually all of the data we have predates Donald Trump’s arrival at the White House, though some indicators are more recent and may already reflect part of the impact of the decisions he has made.
From 1980 to 2018, the Mexican economy grew at an average annual rate of 2.2%, despite the domestic and foreign crises experienced during those 38 years. However, beginning in 2018, there is a clear shift in trend. The cancellation of the construction of Mexico City’s new airport had an immediate effect on market confidence, which was reflected in a depreciation of the peso and a rise in interest rates. During 2019, that decision was compounded by the obstruction of the ongoing energy reform, and investment steadily declined throughout the year. Before COVID and the lockdown arrived, there was already a contraction—reaching -1% in the last quarter of 2019 and -2% in the first quarter of 2020, although the final days of that period can already be considered part of the pandemic’s impact.
Claudia Sheinbaum’s stoic diplomacy faces its limits
by Andrés Rozental.
Much has been written and said about how Mexico’s President, Claudia Sheinbaum, has managed to avoid the kind of treatment Donald Trump has often reserved for countries with which he has grievances. Some analysts have compared her approach to that of former Canadian Prime Minister Justin Trudeau, who took a more combative stance. Trudeau responded to Trump’s provocations - like his comments about making Canada the 51st state and imposing tariffs on Canadian exports - with reciprocal actions and direct criticism. In contrast, Sheinbaum has never explicitly threatened retaliation. Nor has she directly confronted Trump on major bilateral issues such as migration and drug trafficking - topics Trump campaigned on and has made central to his administration.
Her relatively low-key approach to dealing with Trump, calling for patience and delay before responding to the US President’s constant assaults on Mexico, was seen by a majority of Mexicans, and many international pundits, as a model for how to “manage” a relationship with the author of The Art of the Deal.
Notwithstanding generalized applause for her stoicism and her high popularity, I believe it important to judge whether Sheinbaum’s strategy of accommodation has actually benefitted Mexico more than Chinese, European or Canadian reactions in dealing with Trump.
Editor’s Note: No cause for celebration
by Andrew Law.
Did Mexico dodge Trump’s tariffs? President Claudia Sheinbaum says yes. She told supporters this week that USMCA survived, that Mexico’s economy is strong, and that they should celebrate.
Mexico may have avoided new tariffs. But unlike various peer nations, it was already under heavy ones. Trump’s 25% tariff on non-USMCA auto imports kicked in Wednesday night. That hits over 40% of Mexico’s car exports. Steel and aluminum tariffs remain. And there’s the 25% general tariff on non-USMCA goods - about half of Mexico’s exports. These are already having impacts.
According to Sheinbaum, this week’s events shows the US “respects” Mexico and has a “good relationship” with it. If this is good, I’d hate to see bad.