To begin with, during that year in the second half of the 1980s, the nation was suffering from a severe inflation crisis.
But that was the least of its problems. The Mexican economy had collapsed due to its dependence on oil, despite the warnings that had been given for decades in both prose and verse.
In 1921, Ramón López Velarde wrote in his poem Suave Patria: “…The Christ Child granted you a stable, and the devil granted you the oil springs…” The government did not understand the warning.
In addition, the country had lost room to maneuver in accessing international financing.
In 1986, 19.84% of the Mexican population lived in extreme poverty and 32.05% in non-extreme poverty, according to ECLAC data.
Now, having already crossed the first quarter of the 21st century, Mexico seeks to remind the world that it is a nation with more diversified sources of income, greater price stability, and significantly larger international reserves.
However, the indicators also reflect that it is a nation whose economy is practically not growing.
Furthermore, it is struggling to remove uncertainty surrounding the future of the United States-Mexico-Canada Agreement (USMCA), whose review began this week under the threat of U.S. President Donald Trump to replace it with bilateral agreements.
Some analysts describe Mexico’s current situation as a period of economic stagnation accompanied by redistributive policies.
In 2025, CONEVAL reported that, in 2022, 36.3% of the Mexican population was living in poverty and 7.1% in extreme poverty.
1986: Unsold Oil, Inflation, and Crisis
In 1986, just four years after Miguel de la Madrid Hurtado assumed the presidency of a country immersed in an unprecedented economic crisis, Mexico faced the most unfavorable external economic environment in at least 50 years, with public morale shattered by two traumatic events: the explosion of the San Juan Ixhuatepec gas storage and distribution plant in the State of Mexico on November 19, 1984, which killed around 800 people, and the September 19, 1985 earthquake that devastated Mexico City and killed thousands.
The decline in oil revenues and the scarcity of external credit resources worsened the difficulties the economy had already been facing in previous years.
The situation was catastrophic in terms of lost output and the collapse of the balance of payments and public finances within a context of crisis and adjustment.
While Japan was consolidating itself as the world’s second-largest economy, Mexico appeared to be the complete opposite.
If the major global news after April 26, 1986 was the disaster at the Chernobyl nuclear power plant in what was then the Soviet Union, in Mexico the main concern was the collapse of oil prices.
The global oil price war erupted in the spring of 1986.
The 1986 report from the Bank of Mexico states that the economic program originally formulated for that year assumed an average crude oil price of $23 per barrel, 9.3% lower than in 1985.
The average price of Mexican crude oil in 1986 was $11.8 per barrel.
As a consequence, along with the decline in the volume of crude oil and petroleum product exports, the value of those exports fell by $8.5 billion compared to 1985, when they totaled $14.7 billion.
The magnitude of that loss exceeded the contribution of the entire national agricultural sector to the Gross Domestic Product.
These were tense times, and cabinet disputes emerged among the Secretary of Energy, Mines and State Industry, Francisco Labastida Ochoa; PEMEX Director Mario Ramón Beteta; and the powerful Secretary of Programming and Budget, Carlos Salinas de Gortari.
The enormous problem was that the decline in oil revenues in 1986 had decisive effects on the economy. It dramatically worsened the difficulties experienced in recent years regarding the balance of payments and public finances, since the previous year revenues from oil and petroleum product exports had represented 48% of total current account revenues and 26.2% of total public sector revenues.
The decline in the value of oil sales alone in 1986 represented 6.7% of that year’s GDP and caused a severe contraction in income and aggregate demand.
Under those circumstances, it became necessary to modify the 1986 economic program in order to partially offset the effects of lost oil revenues and the lack of external financing, which, contrary to expectations, persisted for almost the entire year.
During that year, the process of opening foreign trade intensified, a key aspect of structural reform, and Mexico signed the Protocol of Accession to the General Agreement on Tariffs and Trade (GATT).
The greater openness allowed direct and indirect exporters continuous and secure access to foreign inputs.
Indicators Reflected a Critical Situation
Meanwhile, the National Consumer Price Index, which had increased by 63.7% in 1985, rose by 105.7% in 1986. Likewise, the controlled exchange rate, which had increased by 92.9% in 1985, rose by 148% in 1986, reaching 923.5 pesos per dollar by the end of the year.
During the first seven months of the year, the Bank of Mexico’s international reserves fell by $1.879 billion.
However, beginning in September, the trend reversed and a reserve accumulation process began, bringing reserves to $6.79 billion by December 31.
Starting in July, a new stage in the negotiation of external debt began with international financial institutions, official foreign trade banks from various countries, and foreign commercial banks.
In September, during the first phase of negotiations with international financial institutions, an agreement in principle was reached with the IMF, under which the organization would support the Government of the Republic’s program with a $1.7 billion loan. If oil prices fell below $9 per barrel, the IMF would provide an additional $720 million in loans.
Furthermore, it would become possible to obtain approximately $12 billion from various sources.
The Face of the Economy in 2026
The Mexican economy began 2026 with virtually no growth, in an international environment characterized by a high level of uncertainty associated with trade tensions and various geopolitical conflicts.
In the last quarter of 2025, global economic activity expanded at a slightly slower pace than in the previous quarter.
Considering Mexico’s economic growth figures for the first quarter of 2026, the economy grew by 0.1% compared with the same period of the previous year.
This implies that, following the stagnation observed during the first year of President Claudia Sheinbaum’s administration, Mexico will likely face a second year of very low growth, as expectations are around 1.3%.
Lower Oil Dependence
While oil revenues represented 43.3% of government income in 1985 and 36.8% in 1986, in 2025 they accounted for less than 15%.
According to data from the Ministry of Finance, public sector budget revenues totaled 1.22 trillion pesos in 2025, representing 14.8% of total budget revenues of 8.23 trillion pesos.
The Public Accounts Report indicates that the share of oil revenues increased from 12.8% in 2024 to 14.8% in 2025.
Despite expectations of higher oil prices due to conflict in the Middle East, the Mexican government forecasts lower oil revenues and support for Petróleos Mexicanos (PEMEX) in 2026 because of the peso’s appreciation against the dollar, according to the 2027 General Economic Policy Pre-Criteria.
The government expects oil revenues of 1.156 trillion pesos, lower than the 1.204 trillion pesos approved in the 2026 Federal Revenue Law, a difference of 47.322 billion pesos.
Current Account Deficit
Meanwhile, in 2026 the current account posted a deficit of $15.878 billion during the first quarter of the year, equivalent to 3.1% of GDP, according to information from the Bank of Mexico.
With this result, the country’s external balance returned to deficit territory after two consecutive quarters of surplus.
GDP Contraction
The National Institute of Statistics and Geography (INEGI) confirmed a contraction in Gross Domestic Product (GDP) during the first quarter of 2026 of 0.6% in real terms and seasonally adjusted figures.
This decline was less severe than the preliminary estimate issued by INEGI itself, which projected a contraction of 0.8%, and exceeded the expectations of private-sector specialists surveyed by the Bank of Mexico in May, who anticipated a decline of 0.35%.
Inflation Below 5%
Regarding inflation, the consensus forecast for this indicator stands at 4.23%, incorporating a third biweekly upward adjustment, according to the results of Citi’s survey of 38 specialists.
Furthermore, this is the highest forecast collected for annual general price growth so far this year (through April) and is well above the 4% projected in the first survey of 2026.
As of May 15, 2026, the Bank of Mexico’s international reserves stood at $255.758 billion.
Activity by Sector
According to an analysis conducted by BBVA and published last March, economic activity showed dynamism in the fourth quarter of 2025 (0.9% quarter-over-quarter) and points toward improvement in 2026, supported by the prolonged resilience of the service sector and recovery in industry.
According to INEGI data, the commerce and services sector as a whole grew by 1.5% in 2025, while industry contracted by 1.1% during the same period due to declines in construction and manufacturing.
BBVA analysts expect manufacturing to show signs of recovery going forward, driven by sectors associated with the development of artificial intelligence in the United States (computer equipment, communications, and electronic accessories).
On the demand side, the document notes that consumption remains the strongest component of economic activity, with growth of 1.2% through December, supported by increased spending on services and imported goods (1.4% and 3.5%, respectively).
Investment, meanwhile, showed a significant contraction in 2025, with an annual variation of -6.6% through December (cumulative).
Source: eleconomista
