Sheinbaum's social budget could hinder public infrastructure spending

A rise in social spending in Mexico under the government of president-elect Claudia Sheinbaum could leave other areas of the economy short of funding, including infrastructure and public works, the construction industry claims.  

Funds allocated for social spending in the 2024 budget topped 3.75 trillion pesos (US$203 billion), accounting for 41% of the federal budget, according to a report from news outlet Animal Político.

These investments reached an all-time high under President Andrés Manuel López Obrador (AMLO) and Sheinbaum has vowed to increase them further, reinforcing social benefits and even expanding the coverage.

This rise, along with problems in Mexico's public finances, could lead to funds being diverted from spending on infrastructure and other areas, according to Mexican construction chamber CMIC. 

“By the end of 2024, the public deficit will be at 5.9% of GDP, which is high and will force the new government to make adjustments toward 3% of GDP,” CMIC president Luis Méndez Jaled told BNamericas.

This comes in “a scenario where spending for pensions, the debt repayments and social programs are increasing. There's a possibility that the spending in infrastructure will be limited,” he added.

CMIC and other entities like local think tank IMCO have insisted on the need to strengthen public-private partnership schemes, which have not been backed by AMLO's administration. 

“It's essential to open spaces for public-private investment projects,” said Méndez Jaled. “There's not enough money to invest in infrastructure, that is why CMIC has proposed several mechanisms to boost those projects including implementing concessions, taking advantage of assets, contracts for service delivery, and Fibras [real estate investment trusts], among others.”

Sheinbaum promised to unveil a national infrastructure plan in the week starting July 15, but no details have yet been published. Nevertheless, rail seems likely to be one of the cornerstones of Sheinbaum’s government program, as she has stated that she intends to build 3,000km of lines, double the amount laid by AMLO.

However, public spending on rail projects has suffered cuts due to the pressure on Mexico's public finances, with a 14.2% reduction in the 2024 budget, which could also make Sheinbaum’s targets difficult to achieve, newspaper El Sol de México reported.

“They are very ambitious plans and we are obviously asking ourselves where the funds will come from. Lately, we have seen a deficit in public funds and the debt ceiling hasn't been raised, and these are very costly projects,” rail expert Ramón Ortiz was reported as saying by the daily.

Sheinbaum will take office on October 1.