Economics: Fiscal consolidation sees no progress: the deficit isn't easing, and Pemex's problems are worsening despite support
Fiscal consolidation is not advancing toward its targets: through September, public sector borrowing requirements (PSBR) totaled MXN 959 billion (up 3% in real terms), and the primary balance plunged from a MXN 190 billion surplus to just MXN 4 billion. Budgetary revenue fell -2.8% in real annual terms, oil revenue fell -21.5%, and tax revenue grew just 0.7% (value-added tax up 11.9% and income tax down -5.3%). The adjustment comes from containing spending, not from collecting more, and the MXN 245 billion in support of Pemex distorts the figures.
Pemex and the CFE explain the narrow margin. Pemex produced 1.642 million barrels per day of liquids in the third quarter (1.319 million excluding partners and condensates, 3% less than a year earlier), and its crude oil exports fell 33%, to their lowest level in 20 years; only natural gas (up 9.8%) and refining (crude processing, up 13.3%) are advancing. Its net loss for January–September narrowed to MXN 38.8 billion, within a framework of transfer prices that reduce the payment of duties and of increasingly opaque information, with MXN 414 billion owed to suppliers. At the CFE, net income fell -81% on rising compensation and pension costs.
Risks heading into year-end are growing. If the MXN 81 billion in support that the Expenditure Budget provides for Pemex materializes, the public finance figures will be distorted once again, and the claim that Pemex and the CFE have already been rescued is far from reality: the oil company flared almost 20% of its natural gas in January–August (more than 900 million cubic feet per day, versus 4% in 2018, according to the Citizen Energy Observatory) while its industrial safety and environmental indicators deteriorated, and the CFE's long-term obligations for pensions and employee benefits rose 25% YoY.
Regarding last week's indicators, Banxico cut its interest rate to 6.25% by a majority vote. In its analysis, it noted that while inflation had picked up: headline inflation rose from 3.42% to 3.62% between the first half of September and the first half of October, driven by the non-core component, core inflation was virtually unchanged at 3.78%, which partly motivated its decision. Banxico also expects higher inflation in 4Q26: in its projections, headline inflation rises from 3.5% to 3.7% and core inflation from 3.6% to 3.7%, yet, without further justification, it considers that convergence to the 3% target in 4Q27 remains on track. Banxico again overlooks that the interest rate differential with the Fed is at a historic low, at a time when the risks of low economic growth and fiscal deterioration persist and, above all, when the Fed's rate hikes will very likely continue.
In addition, it was reported that the consumer confidence indicator for October 2026 fell 0.6 points from the same month a year earlier, after 20 consecutive months of declines or stagnation, leaving it at very low levels. The weakening of employment and the decline in remittances in real terms will be among the main factors contributing to consumer distrust in the coming months, in a context in which room to save has narrowed. This implies that the recovery of consumption will be limited through year-end. Indeed, it was reported that private consumption grew 1.4% YoY, seasonally adjusted, in August, maintaining low and similar growth rates over the last three months and slowing from the January–August average (1.9%).
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