Mexico Country Risk Rating

 The critical issue for 2026 is the renegotiation of the USMCA agreement with the U.S.  With the Trump administration deploying threats ahead of the July 1 kick-off of negotiations.  With growth remaining sluggish due to existing tariffs and Iran-war-driven energy price uncertainty, a renewed trade war would delay the projected 2026 economic recovery. On balance, president Sheinbaum will likely concede in the USMCA trade battle to win the wider war of keeping most Mexican exports going to the U.S. In the end, we see a trade deal by late 2026/early 2027. This could be an addendum to the USMCA that sets different terms for Mexico than for Canada – Trump still has a good relationship with Sheinbaum, but Trump is verbally at war with Canada. Even so, Sheinbaum’s Morena party is a traditional supporter of Cuba (which the U.S. is trying to destabilise) and is opposed to Trump calls for present and former Mexican politicians to be prosecuted by the DOJ.  This could mean intermittent tension with the U.S. Meanwhile, Sheinbaum’s average approval rating has modestly fallen from 70%, reflecting concerns over the weak economy and the high level of violence (amplified by the cartels). Political violence risk in Mexico therefore remains high. Legal and regulatory risk is also high, as the left-wing coalition led by MORENA controls both houses and could potentially lead to regulatory changes in an anti-market manner. Sovereign non-payment risk is medium, as the government debt level is projected to be 62.7% in 2026 according to the IMF, and the government is currently undergoing a fiscal consolidation process to stabilize the debt/GDP ratio. The inability of the government to provide stimulus remains at a medium rating, reflecting the fiscal consolidation. Exchange transfer risk is medium, as the country holds an adequate level of foreign currency reserves alongside a current account that is in broad balance.