A synchronized downward industry
According to Gerónimo Ugarte Bedwell, chief economist of Valmex, the country faces a phase of profound underutilization, although not yet irreversible.
It points out that the drop in plant utilization responds to a demand shock encouraged by an appreciated exchange rate, lower external dynamism, weak public investment and still restrictive interest rates. In this phase, companies adjust shifts, reduce hours and postpone investments, but the machinery is still there, with the potential to return to operation as soon as conditions improve. However, Ugarte points out that there is a risk in the medium term.
When this situation continues, this idle capacity stops being potential and begins to become an effective loss, with suppliers closing, plants being dismantled and specialized talent migrating to other sectors or countries.
Gerónimo Ugarte, Chief Economist of Valmex Casa de Bolsa
The synchronicity of the deterioration is worrying, since 17 of 21 subsectors with simultaneous falls at a monthly rate. Which is “unusual” and typical of episodes where external shocks and financial restrictions converge. This not only affects the main factories, he explains, but entire ecosystems such as auto parts, metals, plastics, logistics, engineering and maintenance.
“Something similar may be happening in chemicals, plastics, textile-clothing and in inputs linked to construction (non-metallic, basic metal products) where the weakness of public works and housing can lead to the obsolescence or dismantling of equipment, the closure of medium and small suppliers and the destruction of specialized technical employment. That is where the lost capacity is difficult to rebuild, even if the macroeconomic scenario becomes more favorable,” warns the expert.
Alejandro Saldaña, chief economist at B×+, agrees that the drop reflects internal economic weakness—lower investment, moderate consumption and mixed exports—but does not see, for now, a net destruction of capacity.
In his opinion, manufacturing is going through a process of adaptation driven by global megatrends, such as automotive electrification, the reorganization of supply chains and changes in US trade policy.
“The decrease in plant utilization does not necessarily imply loss of capacity. It is a lower use in an environment of low dynamism,” says Saldaña, and recalls that exports, especially non-automotive exports, continue to show relative strength.
Warning signs to monitor closely
Specialists agree that the current slowdown in the Mexican industry remains a cyclical moment, still reversible. But they warn about the risks that must be closely monitored in the coming quarters.
Ugarte identifies five critical indicators that could confirm structural deterioration if they deepen in the coming months and summarizes them as follows:
- Duration of industrial contraction. If the monthly indicator of industrial activity and the number of falling branches extend for more than six quarters, “the structural risk increases.”
- Fixed investment in machinery and equipment. If physical investment indicators do not recover, it means that companies are reducing their capital stock.
- Imports of capital goods and intermediate inputs. A collapse usually anticipates a loss of future capacity.
- Specialized employment. Layoffs of technicians, engineers and plant closures would be an unmistakable signal.
- Business financial stress. Increase in past due loans, bankruptcies or forced disinvestments.
In parallel, the decline in manufacturing FDI (-26% annually) reveals that the relocation narrative (nearshoring) is not converting into real investment due to six brakes:
- Uncertainty about the review of the T-MEC
- Volatile trade policy in the United States
- Doubts about energy supply
- Logistical bottlenecks
- Safety problems in industrial corridors
- Perception of a changing regulatory environment
“Labor costs remain competitive, but the availability of qualified labor is already beginning to be a relevant bottleneck,” says Ugarte.
What can improve
Despite the year’s industrial deterioration, economists see a real possibility of correction if 2026 marks a turning point. For Valmex, next year must focus on structural changes, not just a cyclical rebound:
- Commercial certainty, with an orderly review of the T-MEC.
- A credible energy investment plan, focused on generation, transmission and competitive rates.
- Priority logistics infrastructure in corridors with potential nearshoring demand.
- Security and rule of law in industrial regions.
- Investment in human capital, especially engineering and dual technical training.
Alejandro Saldaña suggests that the resolution of trade disputes and the updating of the T-MEC could open new incentives for more links in the supply chain to move to Mexico. The financial group itself adds that the outcome of the North American review will be decisive in redefining the horizon of industrial investment in the region.
