Life after Obrador: the key challenges facing Mexico’s first woman president

As López Obrador passes the torch, the country faces significant challenges, from navigating the lingering effects of the COVID-19 pandemic to addressing entrenched issues like crime, corruption, and inequality. At the same time, Mexico has tremendous opportunities, especially with the rise of nearshoring, increasing levels of FDI, and potential economic reforms.

The Economic Legacy of AMLO’s Presidency

AMLO’s presidency was marked by efforts to create a more socially inclusive economic system while maintaining fiscal discipline. However, his tenure also saw mixed economic growth, with affairs interrupted by the pandemic, and a cautious approach to international business. While his administration implemented ambitious infrastructure projects and expanded social programs, the economy experienced low growth for much of the period, with brief surges fueled by public spending.

By the end of 2023, Mexico’s GDP grew by 3.2%, a significant improvement from the previous years, with Deloitte predicting a more moderate growth of 2.2% in 2024, followed by an average annual growth of 2.1% from 2025 to 2030. Despite these optimistic projections, growth in eight out of the 10 largest economic sectors ran contrary to long-running, positive trends, reflecting the broader challenges of the Mexican economy.

Of the key sectors, financial services and construction were the standout performers. Financial services accelerated from 4.3% growth in 2022 to an impressive 6.1% in 2023, driven by a boom in fintech and new financial products spurred by high interest rates. Construction, boosted by infrastructure megaprojects like the Tren Maya railway and the Dos Bocas Refinery, surged by 15.6% in 2023, far above its usual 1% annual growth. This sector’s outperformance was pivotal; without it, overall GDP growth in 2023 would have been closer to 2.4% instead of 3.2%. However, as these megaprojects near completion, construction growth may taper off, with early 2024 data already indicating a slowdown.

FDI: A Key Driver of Growth

Despite broader economic challenges, FDI into Mexico remained strong under López Obrador. In the first half of 2024 alone, FDI reached USD13.7 billion from the US, USD4.17 billion from Germany, and USD3.08 billion from Japan. Mexico’s geographic proximity to the US, its participation in the United States-Mexico-Canada Agreement (USMCA), and the rise of nearshoring—where companies seek to relocate operations closer to North America—have made Mexico an attractive investment destination.

The OECD’s 2024 Review praised Mexico’s ability to navigate a difficult global environment, citing the government’s fiscal prudence and low public debt. Mexico’s substantial potential to attract more investment from companies relocating operations further bolsters its long-term economic outlook.

However, the OECD also pointed out the need for higher tax revenues to maintain fiscal discipline and meet public spending needs in crucial areas like education, infrastructure, digital transitions, and green energy. This, combined with Mexico’s efforts to address corruption and crime, will be critical in sustaining long-term economic growth.

The Social Impact of AMLO’s Presidency

Beyond economics, López Obrador’s presidency sought to create a more equitable society through a combination of social programs and anti-corruption initiatives. AMLO’s administration expanded social welfare programs, focusing on universal pensions, youth employment initiatives, and support for marginalized communities.

However, the administration’s emphasis on austerity measures and its struggle to curb corruption has drawn criticism. Despite reforms, crime and corruption continue to plague Mexico. Efforts to reduce the influence of drug cartels and improve public security have seen limited success, and these issues remain a key challenge for the incoming administration.

The Promises & Challenges of Nearshoring

One of the most promising opportunities for Mexico’s future growth is the rise of nearshoring, a global trend in which companies seek to relocate manufacturing and supply chains closer to North American markets, particularly as tensions with China and disruptions in global supply chains persist. Mexico, due to its proximity to the US and strong industrial base, is well positioned to capture a significant portion of this investment.

This trend could drive major growth in industries like automotive, electronics, and renewable energy, helping Mexico transition from a middle-income to a higher-income economy. Mexico’s competitive advantage in the USMCA bloc and its favorable labor costs have already begun attracting multinational companies.

Key Challenges for Claudia Sheinbaum’s Presidency

As Claudia Sheinbaum prepares to take office, she inherits both the progress and challenges of AMLO’s presidency. Her administration will face several pressing issues that will define Mexico’s future trajectory. While Mexico’s economic growth has rebounded in 2023, it remains uneven across sectors. The financial services and construction booms may not be sustainable long term, and Sheinbaum will need to find ways to diversify the economy and foster growth in other sectors, particularly those hit hardest during the pandemic. She will also need to address the structural challenges of low productivity and informal labor markets that limit Mexico’s long-term growth potential.

One of the most significant challenges facing Sheinbaum is the ongoing issue of crime and public security. Organized crime, fueled by powerful drug cartels, continues to destabilize regions of the country and undermine investor confidence. While AMLO focused on social programs to address the root causes of crime, Sheinbaum will need to implement more effective security measures while maintaining a focus on social justice.

Corruption has been a persistent issue in Mexico for decades, and while AMLO made anti-corruption efforts a cornerstone of his administration, many believe more substantial reforms are needed. Sheinbaum will have to build on these efforts, ensuring greater transparency in government contracts, strengthening judicial systems, and reducing the influence of corrupt officials.

On public investment and fiscal responsibility, the OECD has recommended that Mexico increase tax revenues to maintain fiscal discipline and fund important investments in education, infrastructure, and the green energy. Sheinbaum will need to balance fiscal prudence with the demands for more robust public spending, particularly in productivity-enhancing areas. Her administration will also face the challenge of maintaining fiscal responsibility in the face of ongoing public debt concerns.

Elsewhere, AMLO’s administration expanded social programs to address poverty and inequality, but substantial gaps remain. As Mexico’s first female president, Sheinbaum will face pressure to expand opportunities for women, indigenous communities, and marginalized groups. She will also need to address the education system’s shortcomings, which continue to hold back productivity and social mobility.

With the world transitioning toward green energy, Sheinbaum’s administration will need to prioritize sustainable development. This includes investments in renewable energy and transitioning away from fossil fuels while balancing economic growth needs. Given Mexico’s rich natural resources and growing interest in green technologies, this could be an area where Mexico makes significant advancements.

As Claudia Sheinbaum takes the reins of the Mexican presidency, she inherits a complex but promising legacy from Andrés Manuel López Obrador. The challenges of security, corruption, and inequality are significant, but the opportunities presented by nearshoring and FDI provide a unique opportunity for Mexico to grow its economy and enhance its global standing. The next six years will be pivotal in determining whether Mexico can fulfill its potential as a rising economic power while addressing the deep-rooted social and security challenges that persist.