Mexico's fiscal improvement driven by spending cuts, not revenue strength: Valmex

Mexico's public finances demonstrated a better performance in the first half of 2026, but this improvement is largely attributed to underspending rather than robust revenue growth, according to Valmex Casa de Bolsa. The financial institution's analysis suggests that while fiscal results exceeded expectations, the primary driver was a reduction in government expenditure.

Valmex's chief economist, Víctor Gómez Ayala, noted that public sector revenues actually fell below the programmed targets. The resulting lower deficit, therefore, reflects a "structural weakness" in income generation, masked by a significant decrease in spending. This underspending was particularly concentrated in capital investment and the energy sector.

Specifically, government revenues missed their targets by 141 billion pesos. Concurrently, 499 billion pesos allocated for spending were not utilized according to the calendar. Within capital expenditure, physical investment saw a real contraction of 7.9% during the semester. Direct federal government investment and Pemex's investment also declined substantially, by 50.6% and 27.3% in real terms, respectively.

Despite these concerns about the quality of the fiscal adjustment, Valmex concluded that Mexico's fiscal trajectory remains sustainable. However, the analysis underscores that the composition of the fiscal improvement, driven by reduced investment, warrants attention. Tax collection, particularly Value Added Tax (VAT), showed strength, increasing by 10.6% in real terms, reaching its highest first semester since 2014. Conversely, Income Tax (ISR) collection fell by 6.2% in real terms, impacted by lower payments from corporations.

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En tanto que no se ejercieron 499 mil millones de pesos respecto a lo programado, con el faltante concentrado en la inversión física y el sector energético.