Mexico Investment Falls a 19th Month as Capex Confidence Cracks

Mexico · Markets

Two numbers tell opposite stories about Mexico’s economy — and the gap between them is the real story. Foreign investment inflows keep setting records, while the money that builds factories and buys machinery has been falling for a year and a half.

Mexico investment falls for a 19th straight month

Mexico’s gross fixed investment — the broad gauge of money spent on machinery, equipment and construction — contracted 3.1% in March 2026 against the same month a year earlier, according to seasonally adjusted figures published by the national statistics institute, INEGI. The reading followed a 3.5% fall in February and extended a streak that now runs to 19 consecutive months of annual decline, one of the longest stretches of contraction in roughly four decades.

On a month-on-month basis the indicator edged up 0.4%, but that small gain did little to alter the trajectory.

The composition underscored how uneven the picture is. Spending on machinery and equipment, both domestic and imported, rose 3.1% on the month, while construction fell 2.4%, dragged down by a 5.4% drop in residential building.

The non-residential segment — the kind tied to industrial and manufacturing expansion — managed only a marginal 0.4% advance. In unadjusted terms, fixed investment fell 2.6% on the year in March, and the first-quarter accumulated decline reached 3.3% compared with the same period of 2025.

Gabriela Siller, director of economic analysis at Banco Base, put the trend in blunt terms. “These declines are nothing but a lack of confidence in investing in Mexico,” she said, attributing the weakness to a perceived deterioration in the rule of law and to uncertainty over the trade relationship with the United States, the country’s main commercial partner.

She added that the persistent shortfall has pushed Mexico’s potential GDP — the maximum rate at which the economy can grow without overheating — down to just 1.4%.

Record FDI, weak domestic capex: two different gauges

The numbers can look contradictory at first glance, because Mexico has also been posting record foreign direct investment. In the first quarter of 2026 the country drew $23.591 billion in FDI, a record for any first quarter since tracking began in 1999, and full-year 2025 inflows reached an all-time high of $40.9 billion.

Those headlines have fuelled a nearshoring narrative in which Mexico is the obvious winner from companies relocating supply chains out of Asia.

But the two measures track different things. Foreign direct investment counts capital flowing in from abroad, and the bulk of Mexico’s recent total has come from reinvested earnings — multinationals plowing existing profits back into operations they already run — rather than from genuinely new projects.

New investment in the first quarter was just $1.705 billion. Gross fixed investment, by contrast, captures the total domestic effort to build productive capacity, and it is dominated by private Mexican firms whose appetite for spending has been falling.

Even the Economy Ministry, in announcing the record FDI figure, warned that domestic private investment remains weak, with business confidence below its 2024 level.

In short, foreign investment helps but does not substitute for domestic confidence. For the moment is masking a weaker underlying trend rather than reversing it.

Reduced public spending on infrastructure has compounded the private-sector caution: Banco Base has noted that government capital outlays were cut sharply at the start of the year, removing a source of demand that had previously cushioned the figures.

Why the capex slump matters for growth

Investment is how an economy expands its capacity to produce. When it stalls, the ceiling on future growth comes down with it — the mechanism behind Siller’s 1.4% potential-growth estimate.

Mexico grew just 0.8% in 2025, the fourth consecutive year of deceleration, and the economy contracted 0.8% in the first quarter of 2026 on a quarterly basis. Banco Base has described the combination of weak institutions, rising informality and falling investment as a “stagnation trap.”

The backdrop for foreign investors is a July 1 review of the North American trade pact, the outcome of which will shape decisions worth hundreds of billions of dollars over the next decade. Until that uncertainty clears — and until domestic firms regain the confidence to commit their own capital — the record-FDI headlines and the 19-month investment slump are likely to keep coexisting, two true facts pointing in opposite directions.