With a gross domestic product (GDP) of USD 1,832.6 billion in 2025 and a population of almost 130 million, Mexico is Latin America’s second-largest economy after Brazil and ranks among the world’s largest economies. It is Germany’s most important trading partner in Latin America and an attractive production and investment location for German industry, particularly in machinery, vehicles, chemicals and electrical engineering.

Nearshoring: Opportunities Amid New Uncertainties

Mexico’s location next to the United States has made it a natural choice for companies seeking nearshoring opportunities. Many companies have relocated production or parts of their value chains to Mexico to reduce logistics costs, shorten delivery routes and strengthen supply chain resilience. However, recent U.S. tariff policy has created new uncertainties and reduced some of the advantages traditionally associated with Mexico as a manufacturing location.

The future of the USMCA is also subject to review: this year, the three member countries will assess whether the agreement should continue in its current form.

Economic Policy Under President Claudia Sheinbaum

Since Claudia Sheinbaum took office in 2024, Mexico’s economic policy direction has shifted in several areas, particularly regarding renewable energy. At the same time, the country continues to focus on key industries such as automotive, electrical engineering, aerospace, oil and chemicals. Beyond energy, mechanical engineering and healthcare are also considered promising growth sectors.

Improvements in manufacturing productivity, combined with relatively stable labor costs, continue to make Mexico attractive to investors. Moreover, Mexico is one of the world’s most open economies and is connected to more than 50 countries through a broad network of free trade agreements, including an agreement with the European Union that has been in place since 2000.

EU-Mexico Agreement: A Strategic Opportunity

After more than a quarter of a century, Mexico and the European Union are set to modernize their trade agreement in May 2026. The updated agreement is expected to provide greater legal certainty and predictability for German-Mexican trade, particularly in an increasingly disruptive international trade environment.

For German industry, extensive tariff-free trade, improved investment protection, easier access to public procurement and binding labour and environmental standards are of particular importance. The agreement also includes provisions on sustainable development, including the implementation of the Paris Climate Agreement.

Domestic Policy Challenges

Despite its strong economic potential, Mexico continues to face considerable domestic challenges. These include a high share of informal employment, persistent corruption and a deteriorating security situation. These factors remain important considerations for companies operating in or entering the Mexican market.

Prospects for German Companies

Overall, the size, potential and dynamism of the Mexican market continue to offer attractive business opportunities for German companies. At the same time, German investment makes an important contribution to Mexico’s economic and social development and supports the country’s long-term prosperity.

More than 2,000 German companies are already active in Mexico, many of them with a presence dating back more than a century. They have had a significant economic and cultural impact and continue to shape bilateral relations.

For this reason, Mexico has held a special place in the BDI’s country-specific work for many years. Since 2019, the BDI and LADW, together with leading Mexican business associations such as CCE, COPARMEX and CONCAMIN, have organized a CEO Roundtable that provides a platform for German and Mexican companies to discuss key bilateral issues, including digitalization, climate protection, the rule of law and transparency. In addition, the BDI supports the implementation of BMZ-funded projects that promote sustainability in Mexico and other countries of the Pacific Alliance.