Foundations for Growth and Competitiveness 2026

Mexico

Mexico has made no progress in closing the large gap in GDP per capita with the most advanced OECD economies. Productivity has remained stagnant, with significant disparities between highly productive northern states and less productive southern regions. The unemployment rate is at a historically low level. Labour force participation remains below that of advanced OECD economies, particularly for women. Investment picked up from 2021 to 2024, supported by public infrastructure projects in the south.

Improving human capital is essential to reignite productivity. Expanding access to early childhood education and care would enable more women to take up paid jobs and improve education outcomes, thereby supporting both employment and productivity. Reducing informality would raise productivity, lower inequalities and strengthen public finances through higher tax revenues. Addressing infrastructure and logistics gaps would facilitate investment and help reduce regional disparities. Expanding renewable energy generation would support the decarbonisation of the economy while also enhancing the country’s attractiveness to foreign direct investment.

Economic performance

Gaps to the average of the upper half of the OECD countries

Source: Panel A: OECD, Economic Outlook database; Panel B: OECD, Labour Force Statistics database; Panel C: OECD, Economic Outlook and Productivity databases; Panel D: OECD, Economic Outlook and Annual National accounts, GFCF by assets databases.

Selected policy gaps

Note: Other Latin American countries refers to the unweighted average of Argentina, Brazil, Chile, Colombia, Costa Rica and Peru.

Source: OECD calculations based on the Foundations for Growth and Competitiveness database.

Education: Boost investment in human capital

Access to education is nearly universal but a large share of students leaves the education system without completing secondary education. Education quality has remained stagnant, well below OECD averages and with significant regional disparities. Some 75% of employers report difficulties filling jobs due to lack of the appropriate skills, a proportion that is increasing.

Recommendations

✓ Identify students in need of support, provide them with targeted tutoring and assess and resolve teachers training needs.

✓ Use skill anticipation assessments and consult systematically businesses at state level to align university and vocational education and training with labour market demand.

✓ Identify which training programmes are most effective in equipping workers with relevant skills and strengthen them.

Labour participation: Facilitate women’s take-up of paid jobs

Female labour force participation, at 50%, remains well below other OECD and Latin American countries. Domestic and care responsibilities fall disproportionally on women, relative to other OECD countries, hampering women’s prospects to complete education or participate in the labour market. Short school schedules also limit women ability to work full-time.

Recommendations

✓ Establish a federal network of affordable, good-quality early childhood education and care facilities, covering informal households and giving priority to low-income ones.

✓ Increase the number of primary schools providing full-day schedules.

✓ Expand elderly formal care services, including home-and community-based care.

Labour market: Reduce informality

About 55% of workers are informal, one of the highest rates among OECD countries. This hampers productivity, weakens the tax base, and contributes to Mexico having the lowest tax-to-GDP ratio in the OECD. The regulatory environment is complex and burdensome, particularly in areas related to the establishment of formal companies.

Recommendations

✓ Pursue a comprehensive strategy to reduce informality, including by providing income support to low-income households through the personal income tax or simplifying and digitalising firms’ registration and licensing procedures at the state and municipal levels.

✓ Deploy e-government platforms at federal, state and municipal levels, to allow firms to submit and track all regulatory requirements online.

Infrastructure: Improve the quality of infrastructure and logistics

Infrastructure gaps increase the cost of exporting and importing, limiting the participation of firms, particularly SMEs from remote regions, in international trade. Major infrastructure projects launched in recent years have often lacked transparent cost-benefit analysis. There is also significant scope to improve the quality of logistics services, including trucking, freight forwarding, and customs brokerage.

Recommendations

✓ Run more rigorous and transparent cost-benefit analysis of infrastructure projects.

✓ Remove foreign direct investment restrictions in logistics-related services, such as customs brokerage, road transportation, cargo handling or storage.

✓ Improve trade facilitation by making a greater use of advanced rulings and improving the availability of information, including by digital means, and appeal procedures.

Energy: Unlock private investment in renewable energy

Mexico has a substantial and well-distributed renewable energy potential, much of which remains untapped. Scaling up renewables generation would enhance energy security and affordability, bolstering the country’s competitiveness and its ability to attract foreign investment, particularly in the manufacturing sector. Regulatory uncertainty has hindered private investment in renewables, contributing to a decline in the share of electricity generated from clean sources. The electricity transmission and distribution networks suffer from chronic underinvestment, with saturation and congestion worsening in several key corridors.

Recommendations

✓ Adopt regulations that promote private sector participation in renewables generation.

✓ Prioritise public investment in electricity transmission and distribution infrastructure.

Recent progress on structural reforms

Mexico has been advancing labour and pension reforms over the past two years, building on earlier legislative changes. Labour reforms have progressively enhanced conflict resolution mechanisms, workers’ representation and collective bargaining. New independent and specialized courts, known as centres for labour conciliation and registration, have been gradually rolled out across the country to expedite the resolution of disputes between workers and employers. Mexico has also reformed its contributory pension system to increase coverage and raise replacement rates. To mitigate a detrimental impact on formal job creation for low-wage workers, the reform will be funded with a gradual increase in employers’ contributions, to be gradually phased in by 2030, following a progressive scale.