Mexico's Fiscal Cracks: Tax Revenue Rises, Investment Falls

Mexico continues to face fiscal challenges, as limitations in public finances leave little room for spending, and especially for investment. In the first two months of the year, tax collection in Mexico amounted to 1,218 trillion pesos and, in real terms, grew by 2.6% compared to the comparable period of 2025. Additionally, it was 24.2 billion pesos above the programmed amount for those two months. The growth moderates to 1.7% without considering the federal IEPS on fuels, according to public finance information as of February from the Ministry of Finance. According to the report, “this result reflected the actions against smuggling and the use of digital tools in administrative and auditing processes”. By type of tax, collection from ISR increased by 4.9% in real terms and was 33.1 billion pesos above the programmed level. However, VAT collection, which is mainly associated with economic performance and consumption, contracted by 8.8% and was 9.1 billion pesos below forecast, affected by the appreciation of the peso. This means that for every peso gained from higher ISR revenues, 27 cents were lost from lower VAT entries. Collection from IEPS increased by 14.2% in real terms. In fiscal matters, the country is in a mixed situation. The Ministry of Finance detailed that this performance was mainly explained by a 16.6% increase in the gasoline and diesel component, in a context of lower fiscal stimuli compared to the first bimester of 2025. In turn, the non-fuel component contributed an 11.3% increase, driven by the revision of special taxes on the consumption of tobacco and sugary drinks. As recalled, as of January last year, tax increases on sugary drinks and tobacco came into effect, with the purpose of “promoting healthier consumption habits among Mexicans”. On the other side of the coin, total net spending accumulated in the first two months of the year grew by 2.5% and amounted to 1,519.2 trillion pesos, but contrasts with the programmed amount of 1,738.9 trillion pesos. This implied an over-exercise or delay of 219.7 trillion pesos in January-February of this year, which can be attributed to the seasonality of spending. Within it, programmable spending decreased by 0.1% against 2025 and was 210.8 trillion pesos below the programmed amount. Being destined to provide public goods and services to the population, this spending can affect the behavior of the Mexican economy, which is already fragile. There is a particularly worrying piece of data when analyzing public finance information, which is the largest drop in physical investment in 36 years, since 1990 when there is a record of this indicator. Indeed, one of the main items of programmable spending is physical investment or infrastructure, which in the first bimester of 2026 was 87.1 trillion pesos, which is 44.9% less in real terms than in the same period a year earlier. The Ministry of Finance pointed out in its report that, only in the second month of the year, physical investment plummeted by 53.8%, preceded by a decrease of 30.3% in January, both in real terms. As for its sectoral classification, investment in the energy sector plummeted by 75.3% until February, followed by a collapse of 65.7% in communications and transport in the same period. In the 2026 Economic Package, it is planned to give a boost to productive activity through public investment in strategic programs that will promote the Mexico Plan. However, no change is yet perceived in the federal government's plans regarding this type of investment. To all this, it must be added that spending on physical investment continues to be below the financial cost of the debt, which amounted to 157.2 trillion pesos, although it was 5.4 trillion below the programmed amount. This year, there is little fiscal space for public investment in projects that strengthen the country's productive capacity in the coming months. The cracks in public finances are visible and widening.