Mexico faces a difficult set of economic challenges. Low oil prices have increased fiscal pressure on the government, whilst the election of President Trump and regional geopolitical uncertainty pose broader threats to its economy.
Within this context, the Mexican government is focused on its fiscal balance, which requires increasing the impact of limited public resources. This calls for a strategic approach to leverage private sector investment in economically sustainable projects.
At the same time, as a country highly vulnerable to climate impacts, Mexico must also deliver its ambitious emission reduction, clean energy targets, and adaptation plans. Despite having implemented major energy sector reforms, it remains unclear how the country will finance its Nationally Determined Contribution (NDC). Current policies, along with weak implementation of some of them, have generated questions about whether the scale and pace of investment needed to deliver the transition will be sufficient to deliver the NDC. Given the dynamic and long-term nature of these challenges, there is a strong case to bolster current ad hoc measures with a more enduring approach.
Institutional reforms are needed to bolster sustainable economic growth and ensure capital flows to investments that are resilient to a range of future climate and energy scenarios. Institutional innovation can provide Mexico with the financial expertise, risk mitigation instruments, patient capital and transaction enablers needed to successfully deliver its low carbon and climate resilient transition. This approach would unlock private investment in climate resilient infrastructure whilst lessening the burden on public resources.