Federal transfers to states are expected to grow by 3.0% next year.

For next year, states and municipalities are expected to receive more federal resources, a projection supported by the country's more dynamic economic activity.

The 2026 Federal Expenditure Budget Project (PPEF) shows that federal transfers to federal entities, known as federalized spending, amount to 2.8 trillion pesos.

This amount represents a 3.0% increase in real terms compared to the approved 2025 budget, equivalent to an increase of 174.5 billion pesos; these funds are comprised of participations, contributions, and other items.

The importance of federalized spending lies in the fact that it represents approximately 85% of the total income of the federal entities, prior to the pandemic and not including financing resources or Mexico City (56%).

Within the projected federalized spending, the most important item corresponds to federal shares, which are part of non-programmable spending (resources freely available to local governments) and their allocation depends on shareable federal revenue, economic activity, and population.

This branch is expected to total 1.5 trillion pesos next year, 51.8% of the total, representing a real increase of 5.0% (115.8 billion pesos). This increase in federal contributions is in line with Mexico's estimated Gross Domestic Product (GDP).

The 2026 PPEF estimates GDP growth of 2.3%, higher than the 1.0% forecast in the 2025 Economic Package, meaning increased economic activity would benefit federal revenues.

"In 2026, the Mexican economy will return to a more solid growth path, driven by sustained domestic demand and a more favorable international environment, with less uncertainty regarding trade policies. Mexico will leverage its strategic position in foreign trade, supported by its geographic location, its network of international treaties, its integration into global value chains, and a better relative position vis-à-vis tariff and non-tariff measures by the United States," the 2026 General Economic Policy Criteria state.

The importance of Plan Mexico

Furthermore, the document states, Plan Mexico will be consolidated as the federal government's primary instrument for promoting equitable and sustainable economic growth and development, articulating public policies aimed at increasing production for the domestic market and import substitution.

As well as regional development, productive innovation, and the transition toward a more inclusive, resilient, and environmentally responsible economy.

“On the spending side, improved performance is expected for the main components of aggregate demand: domestic investment and private consumption. Private investment, although affected by volatility and uncertainty surrounding trade policy, will begin to normalize as there is greater clarity regarding tariff treatment and the terms of trade agreements.

“Regarding public investment, the development of strategic projects stands out, such as the progress in the construction of passenger trains—the AIFA-Pachuca and Querétaro-Irapuato lines, which began this year—and the start of construction on the Ciudad Valles-Tampico and Saltillo-Monclova highways, among others.”

"The modernization of the Atizapán-Atlacomulco and Uruapan-Nueva Italia highways, among others; progress in the national agricultural technology program; strategic water infrastructure projects such as the El Novillo dam in Baja California Sur; and the Solís-León aqueduct in Guanajuato," explains the General Criteria for Economic Policy 2026 document.

Federal contributions

Meanwhile, for the federal contributions branch, which refers to programmable spending (which is earmarked) and addresses various state issues in education, health, social infrastructure, security, and financial strengthening, the amount is 1.1 trillion pesos.

This would represent a 2.6% increase in real terms compared to last year's PEF. Other items (particularly subsidies) would reach 227.7 billion pesos in 2026, representing a real decrease of 6.2%.

The importance of federalized spending lies in the fact that it represents around 85% of the total income of the federative entities.