Debt in red flags

Perhaps you know someone who has experienced a situation like this, or perhaps you yourself have experienced something similar at some point in your life: the feeling of despair because your debts keep getting bigger and bigger, and no matter what sacrifices you make, the interest simply won't stop growing.

The critical situation I just described is not unfamiliar to many Mexicans. In fact, the vast majority of us have to learn about credit, interest, and the use of credit cards on the fly. We never had the financial education to learn how to properly use these instruments.

That's why we learn the hard way, by making mistakes. So much so that in Mexico, a significant number of people say they'd rather not have a credit card at all, for fear of having such an experience. In other words, our financial literacy is so poor that we immediately associate credit cards with problems.

I would propose a reform to the country's high school programs to include a financial education or personal finance course, so that all students learn the basics of using credit and money.

But that's another story.

I'm telling you about this desperate situation because it's exactly what President Sheinbaum's federal government is beginning to experience. Public debt has continued to rise since López Obrador took office in December 2018.

Of course, you'll remember that he always promised that he "hadn't increased the debt." Well, it turns out he lied to you. To you and to all Mexicans. You only had to look at the public debt data registered with the Ministry of Finance to see how total public debt was rising.

While López Obrador received it for around 11 trillion pesos or 11 million million pesos, by October 2024, when he handed over the presidential chair to his candidate, Claudia Sheinbaum, the debt had already reached 17 trillion pesos. With his rhetoric of "republican austerity," AMLO spent more than public revenues by an average of one trillion pesos per year.

In fact, although he began his term without relying much on debt because he had all the resources from the funds and trusts that were disappearing at hand, by the end of his term he did use his credit card without any regret.

The worst year was, do you think? 2024. A year in which AMLO's government spared no expense in order to reach the July elections with the appearance of a growing economy and money in circulation. Money was spent, people received their support, and "priority" projects continued to be built.

Meanwhile, the debt continued to grow.

Today, in 2025, President Sheinbaum knows that the card can no longer be used with the same irresponsibility as her protector, but that the time has come for her to pay off the debts and their interest.

Total public debt already exceeds 51% of Mexico's GDP, and in 2024, this limit is setting off alarm bells across all agencies, since, given its poor collection levels, it is assumed that Mexico has a debt limit close to 60% of GDP.

In 2024, total public spending was 27% of the country's GDP, while revenue barely reached 22% of GDP. This gap had to be covered by increased debt, a debt that grew by 5 percentage points of GDP and which Sheinbaum and the Treasury urgently need to reduce at all costs.

And the problem is that, even if they reduce credit card usage, the interest rates keep rising. This puts even greater pressure on public spending: I can no longer go into debt, but what I have to allocate to interest payments keeps growing.

That's why you see continued cuts in key areas of public services, such as health.

In this context, the only thing that could ease the pressure on the country's public finances would be for the economy to grow. When GDP grows, tax revenue increases because there is greater production and sales of goods and services. This also increases the creation of formal jobs and the opening of businesses and companies.

The bad news is that Mexico's economy won't grow this year. The fiscal time bomb is ticking, and we can already hear it ticking.