Mexico is entering a decisive year, as midterm elections test its democratic institutions, persistent economic uncertainty threatens investment and employment, and mounting U.S. pressure over security and trade complicates its relationship with Washington. The latest edition of Mexico Country Outlook from Rice University’s Baker Institute for Public Policy examines these intersecting challenges and their implications for Mexico’s future.
Mexico Country Outlook 2027, published annually by the Baker Institute’s Claudio X. González Center for the U.S. and Mexico, provides an in-depth assessment of the political, regulatory, economic and social forces shaping the country. The report identifies key developments for policymakers, business leaders and the public to watch in the coming year, concluding that Mexico faces more complicated challenges in 2027 than it did in 2026.
“The challenges Mexico faces in 2027 will have significant implications for both sides of the U.S.-Mexico relationship, from democratic institutions and economic opportunity to security cooperation and trade. The Mexico Country Outlook provides a clear-eyed and data-driven assessment of the issues shaping Mexico’s future. The insights can help policymakers, businesses and the public navigate an increasingly complex binational landscape,” said Tony Payan, director of the Center for the U.S. and Mexico.
At the center of the report’s analysis is Mexico’s June 2027 midterm election, which could significantly influence the country’s democratic trajectory. The elections will test the ruling National Regeneration Movement’s (MORENA) ability to maintain its political influence and the opposition’s capacity to build momentum and strengthen political pluralism.
The report identifies five factors that could shape the electoral landscape: MORENA’s growing influence over electoral regulatory bodies; increasing public concerns about the country’s direction; potential interference from organized crime; shifting cohesion within the ruling coalition amid U.S. pressure over alleged organized crime affiliations; and media regulations that could weaken independent journalism and media pluralism.
The elections will unfold against a backdrop of institutional uncertainty following Mexico’s 2024 judicial reforms. The report finds that diminished judicial independence, persistent institutional turnover and a growing backlog of cases could make domestic dispute resolution increasingly unpredictable for businesses, even as international arbitration remains a reliable option.
Regulatory changes could further complicate Mexico’s investment climate. The Sheinbaum administration has proposed legislation requiring prior national security approval for foreign acquisitions exceeding 49% ownership in sensitive sectors, including energy and digital infrastructure. If enacted, the measure could increase regulatory friction, extend deal timelines and discourage cross-border investment. New audience-rights guidelines could also create challenges for editorial independence and media plurality.
Mexico’s economic outlook remains constrained by longstanding structural challenges. Since 2018, the country’s economy has grown by an average of approximately 0.9% annually. Judicial reforms, policy uncertainty, low investment and external U.S. trade pressures continue to weigh on growth.
The report projects economic growth of 1.2% in 2026 and approximately 1.8% in 2027, supported by strong exports and resilient remittances, which are expected to reach approximately $65 billion in each year. However, the report cautions that the government’s growth expectations may be difficult to achieve without meaningful changes to its current budget and spending approach.
Public finances will remain a significant concern. Mexico’s investment-grade credit rating could be at risk if the budget deficit is not reduced from its 2025 level of 4.8% of gross domestic product. The report anticipates continued fiscal pressures from rising social spending, pensions and subsidies to state-owned oil company Petróleos Mexicanos (Pemex), alongside stagnant revenue collection and increasing national debt.
These pressures could have broader consequences for the country’s economy and workforce. The report expects investment to remain subdued, limiting economic growth and formal employment, while informal employment continues to expand. Without structural changes to encourage investment and growth, Mexico’s fiscal outlook and attractiveness to international markets could face further strain.
The outlook for U.S.-Mexico relations adds another layer of uncertainty. The report anticipates continued pressure from the Trump administration to address drug trafficking and alleged connections between organized crime and Mexican political figures. While Mexican President Claudia Sheinbaum is expected to continue security cooperation with Washington, D.C. under the direction of Security and Citizen Protection Secretary Omar García Harfuch, the analysis suggests that cooperation alone may not ease U.S. pressure.
The report also concludes that a review and ratification of the United States-Mexico-Canada Agreement (USMCA) are unlikely to be completed in 2027. Complex trade and diplomatic negotiations involving all three countries are expected to remain unresolved, adding to uncertainty for businesses operating across North America.
Together, the report’s findings point to a year in which Mexico’s political, economic and diplomatic challenges will become increasingly intertwined. The outcome of the midterm elections, the government’s approach to structural economic reforms and the evolving relationship with Washington will help determine the country’s trajectory in the years ahead.
The Claudio X. González Center for the U.S. and Mexico at Rice seeks to have a meaningful, positive impact on the U.S.-Mexico relationship through original research, actionable policy solutions to binational issues and high-level convenings that bridge the worlds of ideas and action. The center’s research agenda focuses on several key areas of importance to both nations, including U.S.-Mexico diplomatic and political relations, politics and democracy in Mexico, security cooperation and rule of law in Mexico, trade and economic integration, immigration and labor markets, sustainability and the binational commons as well as AI policy and governance.