In the face of economic stagnation—already recognized even by some of the government’s most prominent defenders—it is often argued that “everything is very good,” citing two indicators that the government likes to boast about: the exchange rate and Foreign Direct Investment. While both don’t look too bad, using them as proof that the economy is strong is a straw man at best.
The exchange rate, to begin with, is and will continue to be an enigma. The one who was perhaps the best economics professor I had told us on the first day: “if an analyst tells you that he knows what is going to happen with exchange rates, he deserves a Nobel Prize or be considered a fraud.” Today that learning seems more relevant than ever. The reasons behind the “superweight” are several: the depreciation of the dollar against other currencies, the still attractive interest rate differential with the United States and other mature markets, and the inevitable comparison with “the neighborhood” —Mexico looks better than markets like Argentina, Brazil, Türkiye or Indonesia. But beyond the reasons, the most important thing is who benefits and who is harmed by an overvalued peso.
Although it serves to alleviate inflationary pressure, its negative effects outweigh the positive ones. An overvalued currency makes the economy less competitive. On the one hand, it weakens national producers vis-à-vis foreign countries; just ask the farmers. On the other hand, exporters are less competitive than the industries of the destination countries. This disadvantage has already begun to affect, along with tariffs, the automotive industry. In the people’s economy, remittances yield less: each dollar sent is converted into fewer pesos. Ultimately, an overvalued currency primarily benefits the highest income strata who go abroad and consume imported goods. If we were in an expansive stage of investment, it could mean cheaper machinery imports. But investment has been in decline for more than a year.
Another factor that the ruling party celebrates is Foreign Direct Investment. It is true that absolute record numbers have been recorded so far in 2025, but that should not be surprising: our economy is larger today. FDI, like all investment, should be measured in proportion to the size of the economy, not in absolute terms. For this year it is estimated that there will be between 2.5% and 3% of GDP. It is not a bad number, but it is far from the highest in history in relative terms; In 2013 it was 4% of GDP, largely due to the purchase of Modelo. And as engineer Slim said this week, to grow a country needs to invest at least 25% of its GDP per year. The average between 2018 and 2024 is 23%, and by 2025 it is estimated to be below 22%. Thus, despite the announcements made, we are far from the highest levels and below what is necessary to maintain a sustainable growth trajectory.
The Mexican economy is undoubtedly going through a period of stagnation. The reasons may be diverse, but lack of investment is the main burden. And we all know its origin: the legal uncertainty created by the judicial reform, the changes in the Amparo Law and the “fiscal tactics”—which resemble extortion—that have been used to increase collections in an unsustainable way. The sooner the government, and especially the president, recognize this, the sooner the course can be corrected and perhaps the six-year term can be saved in economic terms.
