Public Spending in Mexico Ends Prolonged Fall in Fixed Investment

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(Bloomberg) — A key measure of investments in Mexico snapped back in April driven largely by government spending while private investment lagged, offering scant relief to President Claudia Sheinbaum’s push for stronger economic growth.

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Gross fixed investment rose 5.9% compared to the same month last year, according to non-seasonally adjusted data from the national statistics institute. The monthly figure breaks with a 19-month streak of declines, turning positive for the first time during Sheinbaum’s administration.

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The data gives her government a rare positive signal for investment trends central to the president’s Plan Mexico economic development strategy. But the the April print mostly shows that state coffers are cushioning an overall lackluster performance for Latin America’s second-biggest economy.

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During the first four months of this year, total fixed investment is down just 1% from the same period last year. But January-to-April private investment dipped further, down more than 2%, while public spending rose 7%, underscoring that the improvement relies on government outlays rather than a revival in business activity.

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The split screen was also clear across components. Public construction projects grew by nearly 8% in the four months period, compared with an almost 2% gain in private construction. In machinery and equipment the contrast was sharper; public purchases rose about 6%, while private procurement slid 6%.

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While Sheinbaum often favors state-led economic development strategies, particularly in the politically sensitive energy sector, she has lobbied business leaders for more investment to expand productive capacity.

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The leftist leader has sought more private capital to turn Mexico’s nearshoring potential into new factories and more jobs, though simmering trade tensions with the US have posed obstacles. Along with allied lawmakers, Sheinbaum has also pitched an April law as a way to foster mixed investment schemes for infrastructure projects. She forecasts more investment-fueled growth during the second half of this year, after GDP fell 0.6% in the first quarter.

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