Lawmakers Approve 2026 Federal Budget with Reallocations; Increased Funding for Education, Science, and the Environment
After a marathon session on the floor, the Chamber of Deputies approved the 2026 Federal Expenditure Budget (PEF) both generally and in detail, authorizing a total of 10.193 trillion pesos and reallocating 17.788 billion pesos. The bill passed with 355 votes in favor and 132 against, and was approved nine days ahead of the legal deadline. The package projects economic growth between 1.8% and 2.8% for 2026 and anticipates a deficit of 1.3 trillion pesos, in line with a gradual fiscal consolidation trajectory following the fiscal stimulus seen in previous years.
The approved changes redirect resources toward social and productive sectors. The Secretariat of Public Education will receive an additional 10.8426 billion pesos; Environment and Natural Resources, 1.5 billion; Science, Humanities, Technology, and Innovation, 2.5 billion; Culture, 1.9855 billion; Agriculture and Rural Development, 641 million; and Labor and Social Welfare, 319 million. According to the explanatory statement, the programmatic focus aims to bolster health, education, science, and environmental protection—areas linked to social welfare and long-term capacity building.
The reallocations come from cuts to autonomous branches totaling 17.7881 billion pesos: Judicial Branch (-15.805 billion), National Electoral Institute (-1 billion), Attorney General’s Office (-933 million), and National Human Rights Commission (-50 million). These adjustments keep an ongoing debate alive about balancing fiscal discipline with ensuring autonomous agencies have the operational resources they need. In recent years, these organs have resorted to legal tools to challenge budget cuts they believe threaten their autonomy or functional fulfillment.
From a macroeconomic perspective, the budget grows by a real 5.9% compared to 2025, and is based on assumptions of moderate economic activity and price stability. On the fiscal front, structural pressures remain—such as the financial cost of debt, pensions, and support for the energy sector—so execution will be key to sustaining consolidation without jeopardizing public investment or social spending. Revenue performance will depend on non-oil tax collection, tax efficiency, and oil price trends, while a declining interest rate environment could help ease financing costs if inflation continues converging on the Bank of Mexico’s target.
Sector-wise, the boost to education could translate into the maintenance and expansion of school infrastructure, teacher training, and scholarships—key factors for raising medium-term productivity. Increased funding for science and technology aligns with the nearshoring opportunity, where talent availability and technological adoption are central conditions for attracting investment and raising domestic content. For the environment, additional resources may be focused on water management and climate change adaptation, which are critical issues amid drought and water basin stress. In agriculture, the priority will be to improve resilience and productivity, supporting small and medium-sized producers.
Cuts to the INE will require administrative efficiencies and spending rescheduling amidst a calendar featuring local electoral processes and potential citizen participation exercises. For the Judicial Branch, adjustments will require prioritizing core operations and digitalization to avoid backlogs. Beyond the allocated amount, the key will be spending quality: clear operating rules, timely budget disbursements, and transparent public procurement, ensuring that reallocations result in effective goods and services.
Looking ahead to 2026, Mexico’s outlook will combine tailwinds—investment linked to nearshoring, logistics projects, and external demand—with risks such as the USMCA review, changes in US manufacturing, and energy security. Prudent budget execution, along with signals of regulatory certainty and rule of law, could strengthen trust among households and businesses, supporting the investment cycle that is already visible in several regions across the country.
In summary, the 2026 federal budget reinforces social and productive capacity sectors through reallocations from autonomous agencies, within a framework of gradual fiscal consolidation. The final balance will depend on execution: if resources arrive on time and are used efficiently, the impact on potential growth and wellbeing will be greater; if delays or underspending prevail, the effect will be limited. The market’s attention will focus on revenues, financial costs, and spending discipline throughout the year.
