Economic activity in southern Mexico continues in crisis

During the first three months of 2025, the economy in the south of the country fell 1.3% quarterly, marking three consecutive quarters of negative economic activity, placing the region in a crisis situation.

"This performance is linked to the downward trend in mining, which is precisely related to a reduction in oil production platforms and also the corresponding reduction in gas production," Alejandrina Salcedo Cisneros, general director of Economic Research at the Bank of Mexico (Banxico), explained at a press conference.

According to the Report on Regional Economies, January-March 2025, published by Banxico, this contraction compared to the previous quarter was also reflected in the northern regions, with 0.6%, and the central regions, with 0.9%, while the north-central zone was the only region with growth, at 2.1%; these results translate into a national growth of 0.2% in economic activity.

"The Mexican economy is going through a period of weakness. We have seen a slowdown since 2023, and this environment is compounded by the complex external context with widespread uncertainty that is influencing investment and consumption decisions," the expert added.

The southern region includes Chiapas, Guerrero, Oaxaca, Quintana Roo, Yucatán, Veracruz, Campeche, and Tabasco, the latter two with economies strongly linked to the hydrocarbon sector; "in the January-March period, oil and gas production, which was already at historically low levels, continued to decline significantly compared to the previous quarter," the report states.

Southern business leaders surveyed by Banxico attribute this drop to the natural decline of mature wells, operational failures in fields such as Ayatsil (Campeche) and Xanab (Tabasco), and weather conditions that interrupted offshore operations.

Petróleos Mexicanos (Pemex) played a central role in this dynamic, reducing its exploration and development spending, which reduced active drilling and demand for services; delays in payments to its suppliers generated a liquidity crisis in the sector; this was compounded by the cancellation of contracts already authorized by the state-owned company and the lack of regulatory clarity for private investment.

The mining sector contracted 3.4% nationwide, with the largest decline seen in the northern region at 4.2%; construction in the south saw a quarterly decline of 19.9%.

In addition to the completion of sections 6 and 7 of the Mayan Train, executives identified rising material costs, political and economic uncertainty, lengthy construction permitting deadlines, and delays in the allocation of public funds due to administrative changes and budget adjustments in Campeche and Chiapas as the main obstacles. Nationally, the sector grew 0.7% quarterly.

Manufacturing strength.

The growth of the north-central region is "linked to the recovery of the agricultural sector and external demand for manufacturing," which grew 1.6% and 2.0% respectively; mining grew 6.2%; construction grew 2.0%; trade grew 1.1%; and tourism grew 0.2%; making this region the only one that did not experience declines in any of the sectors evaluated by Banxico.

This region includes Aguascalientes, Baja California Sur, Colima, Durango, Jalisco, Michoacán, Nayarit, San Luis Potosí, Sinaloa, and Zacatecas, which saw expansions in the tequila, food, confectionery, and tuna industries.

In addition, the electronics industry benefited from increased exports of telecommunications equipment for artificial intelligence to the United States, and the automotive industry maintained its production, driven by demand for SUVs and sedans.

Expectations

External uncertainty, such as potential changes in U.S. policies and domestic challenges related to security, climate change, and fiscal consolidation, pose risks to the recovery, which would harm regions with strong trade or remittance ties abroad.

In this scenario, Banxico points out, it is necessary to strengthen domestic sources of growth. The USMCA offers a window to integrate regional value chains, while investment in infrastructure, such as the Mayan Train or the Interoceanic Corridor, can improve connectivity and attract capital.

It's also important to prioritize human capital development, and technological adoption will be essential to increasing productivity and competitiveness, especially in strategic sectors such as advanced manufacturing and agribusiness.