2025: A High-Stakes Year for Political Risk in Mexico

Mexico is bracing for a year of heightened political risk, marked by challenges to its business environment, democratic governance, and bilateral relations with the United States. At the heart of this complex landscape lies an unsettling convergence of domestic power concentration and external geostrategic challenges—factors that will test the resilience of both Mexico’s economy and the North American free trade framework.

Concentration of Power and Weakening of Democratic Institutions

The victory of Morena and its allies in the 2024 elections has created a political hegemony that transcends federal and local levels. Opposition parties now occupy a nearly symbolic role in Congress, while independent regulatory bodies, such as the Federal Economic Competition Commission (Cofece), have been systematically dismantled. This concentration of power undermines checks and balances, enabling arbitrary decision-making that prioritizes political agendas over technical or economic considerations.

For businesses, the implications are significant: heightened uncertainty, a volatile regulatory environment, and diminished influence over policymaking. Strategic sectors such as energy and telecommunications are particularly vulnerable, as pending secondary legislation from recent constitutional reforms creates an environment of uncertainty for new investments.

USMCA at Risk: The Fragility of North American Integration

North American economic integration faces unprecedented strain in 2025, driven by rising protectionism and shifting political dynamics. Donald Trump’s return to the U.S. presidency raises the likelihood of tariffs and persistent pressure on migration and security policies, escalating diplomatic and trade tensions while potentially dampening nearshoring investments. At the same time, Canada’s upcoming elections could usher in a Conservative government—an administration likely less committed to the USMCA’s trilateral framework.

In Mexico, Claudia Sheinbaum’s administration has demonstrated a strong commitment to the USMCA as the cornerstone of North American economic development. Nonetheless, these external pressures risk triggering a nationalist response within the Morena coalition, potentially leading to a more protectionist stance and diplomatic tensions with Mexico’s North American partners. Such dynamics could complicate the 2026 USMCA review and slow down investment projects.

Challenges for Security Policy and Rule of Law

Public security remains another critical risk. Sheinbaum’s administration has shown positive signs in this regard, distancing itself from AMLO’s “hugs, not bullets” policy and designing a more strategic and focused approach to combating organized crime.

However, the emphasis on capturing cartel leaders, combined with potential U.S. unilateral actions, could inadvertently escalate violence. The fragmentation of criminal groups and territorial disputes may intensify, particularly in regions with high levels of cartel activity, affecting transport routes and the operations of small and medium-sized businesses.

Adding to these challenges is Mexico’s sweeping judicial reform, which includes the election of half the country’s federal judges in 2025. This process, marred by a lack of transparency and short implementation timelines, risks further politicizing the judiciary. Many of the anticipated judicial appointees are closely aligned with the ruling coalition, raising concerns about their independence and technical qualifications. 

For the business sector, this shift could undermine legal certainty, creating an environment where legal and political systems are increasingly intertwined. This may force businesses to rely on alternative mechanisms, such as international arbitration, further complicating Mexico’s business climate.

The Road Ahead: A Test for Mexico-U.S. Relations

The combination of these risks paints a complex picture for Mexico’s economic and political landscape in 2025. For U.S. businesses and stakeholders, this should serve as a wake-up call. Mexico is a vital partner in the North American economic ecosystem, and its challenges are intrinsically linked to the prosperity and security of the region.

Proactive engagement from U.S. businesses and non-governmental stakeholders, along with a steadfast commitment to preserving the USMCA, will be essential for navigating the challenges ahead. The stakes are immense—not just for Mexico, but for the entire trilateral relationship that underpins North America’s economic strength and global competitiveness. To gain deeper insight into these risks and Mexico’s political outlook, we invite readers to explore our full report, “Mexico’s Ten Political Risks for 2025.”