Claudia Sheinbaum Takes the Helm: Opportunities and Challenges for Mexico’s Economy

On October 1, Claudia Sheinbaum officially took over the presidency of Mexico from Andrés Manuel López Obrador, who celebrated the transition with a triumphant display of unity. However, Sheinbaum’s ascent comes with the weight of an economy that is performing well in certain areas while grappling with significant challenges.

One of the most notable achievements of López Obrador’s administration has been Mexico’s strengthened trade relationship with the United States, where it has now surpassed China as the largest trading partner. This shift has been fueled by “nearshoring,” the trend of U.S. and Asian companies relocating operations from China to northern Mexico to avoid heavy tariffs. Former Mexican trade negotiator Juan Carlos Baker Pineda highlighted Mexico’s advantages, including its geographical proximity to the U.S., free trade agreements, and a skilled workforce. He stated that foreign companies increasingly recognize the necessity of establishing a presence in Mexico to engage effectively with the U.S. market.

This optimistic outlook is supported by significant investments, including Amazon’s announcement of a $5 billion investment over the next 15 years and a $1 billion commitment from German carmaker Volkswagen. Baker Pineda also mentioned interest from firms in South Africa, Japan, and China, suggesting a bright future for foreign direct investment.

However, critics argue that while these relocations may boost individual companies, the overall benefit to the Mexican economy remains uncertain. They emphasize the importance of creating favorable corporate and governmental conditions to ensure the sustainability of this trend over the long term.

Amid these positive developments, Sheinbaum faces immediate challenges, particularly concerning the state-run energy company Pemex, which is struggling under approximately $100 billion in debt—making it the most indebted oil company in the world. Fernanda Ballesteros, country manager for the Natural Resource Governance Institute, warned that Pemex’s financial struggles pose a risk not only to the company itself but to Mexico’s economy as a whole.

During his presidency, López Obrador significantly reduced Pemex’s tax burden, cutting it from 60% to 30%, while also injecting cash into the company to stabilize it. However, these measures have not reversed a steady decline in productivity at Pemex, which currently employs around 1.3 million people. Critics argue that López Obrador’s focus on fossil fuels and unconditional support for Pemex has hindered the company’s ability to transition to cleaner energy sources.

Environmental expert Eugenio Fernández Vázquez described Pemex as a “big challenge” for Sheinbaum. She must navigate the complex task of increasing Pemex’s output while simultaneously addressing Mexico’s climate commitments and local issues like air pollution. For a leader known for her environmental advocacy, this predicament is particularly contentious, especially when it involves allocating public funds to support a heavily polluting enterprise.

Sheinbaum’s administration also faces diplomatic complexities with the United States, particularly as the country prepares for a potentially historic election. The prospects of either Kamala Harris as the first female U.S. president or a return of Donald Trump bring different challenges in trade, immigration, and security. Additionally, the U.S.-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement in 2020, is due for renegotiation in 2026, adding another layer of complexity to cross-border relations.

Following her election, the peso experienced a decline against the dollar, influenced by López Obrador’s controversial judicial reform, which aims to select all judges and magistrates via popular vote. This plan has garnered criticism and concern from Washington, further straining diplomatic ties between the U.S. and Mexico.

Despite these challenges, Sheinbaum assumes office with considerable political capital. She enjoys substantial support from her party and has a clear mandate to extend López Obrador’s social programs, which include pensions, family stipends, and student grants. This commitment to continuity has resonated with millions of Mexicans and positions her to implement significant reforms.

Her election promises and potential control over Congress and the judiciary place her in a unique position to tackle Mexico’s economic hurdles head-on. While the path ahead is fraught with obstacles, both supporters and critics will be closely watching how Sheinbaum leverages her political power to address the pressing economic issues facing the nation. As she begins her term, the effectiveness of her policies and decisions will play a crucial role in shaping Mexico’s future.