Investing in Uncertainty: Mexico's Energy and Infrastructure Sectors Under U.S. Pressure and Cartel Threats

In 2025, Mexico's energy and infrastructure sectors stand at a crossroads, buffeted by U.S. geopolitical pressures and the persistent shadow of cartel-related instability. For investors, the interplay of these forces creates a complex risk landscape that demands careful navigation. The United States-Mexico-Canada Agreement (USMCA), U.S. sanctions targeting Mexican cartels, and Mexico's own energy reforms all converge to shape a volatile environment where policy shifts, security threats, and regulatory uncertainty collide.

U.S. Policies and the USMCA Framework: A Double-Edged Sword

The USMCA, with its 2036 expiration date and 2026 review looming, remains a critical linchpin for Mexico's energy sector. The agreement's provisions on market access and zero tariffs have historically underpinned U.S. natural gas exports to Mexico, which account for nearly all of the country's electricity generation fuel. However, recent U.S. policy shifts—such as higher tariffs on Chinese imports—have indirectly impacted the global energy storage market, creating ripple effects for Mexico's energy transition.

While the U.S. Embassy in Mexico has publicly endorsed Mexico's need for clear legislation to attract investment, the Trump administration's 2025 actions against cartels have introduced new tensions. For instance, the Treasury Department's sanctions on crude oil smuggling networks linked to the Cartel Jalisco Nueva Generación (CJNG) and Sinaloa Cartel have disrupted illicit fuel flows but also highlighted vulnerabilities in Mexico's state-owned energy infrastructure. These actions, while aimed at curbing cartel revenue, risk exacerbating Mexico's reliance on U.S. energy imports and could strain bilateral relations if perceived as overreach.

Cartel-Driven Chaos: Fuel Theft and Infrastructure Vulnerabilities

Mexico's energy sector faces a dual threat from organized crime and governance failures. Fuel theft, or huachicol, remains rampant, with cartels exploiting pipeline taps and hijacked tanker trucks to siphon billions of dollars' worth of crude oil and refined fuels. The 2024 Corruption Perceptions Index (CPI) ranked Mexico 140th out of 180 countries, underscoring systemic corruption that enables cartel infiltration of public institutions, including Petróleos Mexicanos (Pemex).

The U.S. Treasury's 2025 sanctions on Mexican financial institutions complicit in opioid trafficking further illustrate the entanglement of cartels with Mexico's economy. These actions, while targeting drug cartels, have also disrupted legitimate energy supply chains. For example, the Financial Crimes Enforcement Network (FinCEN) identified U.S. importers who facilitated the sale of stolen Mexican crude oil, masking it as “waste oil” to evade detection. Such activities not only destabilize Pemex's operations but also erode investor confidence in Mexico's ability to secure its infrastructure.

Mexico's Energy Reforms: State Control vs. Investor Confidence

President Claudia Sheinbaum's 2025 constitutional reforms have intensified the debate over Mexico's energy future. By centralizing control under state-owned entities like Pemex and Comisión Federal de Electricidad (CFE), the government has signaled a retreat from market liberalization. While this approach aligns with Mexico's push for energy sovereignty, it raises red flags for foreign investors.

The dissolution of independent regulatory bodies, such as the Energy Regulatory Commission (CRE), and the creation of the National Energy Commission (CNE) have introduced regulatory ambiguity. Investors now face a landscape where policy shifts could abruptly alter the terms of long-term contracts. For example, the CNE's delayed implementation of permitting processes has already caused project delays for renewable energy developers, who are critical to Mexico's 45% clean energy by 2030 target.

Investor Responses: Caution and Hedging Strategies

The combination of U.S. sanctions, cartel activities, and Mexico's regulatory overhauls has prompted a risk-averse stance among investors. According to Mexico City-based political risk firm Integralia, energy projects in hydrocarbons and renewables are being paused or delayed in 2025. Multinational firms like Iberdrola and Enel, which had previously committed to expanding Mexico's solar capacity, are now reassessing their exposure due to the uncertain legal environment.

Meanwhile, infrastructure developers are prioritizing urban projects with strong federal oversight, such as the $2.3 billion Pacific Coastal Highway and cross-border logistics hubs in Mexicali. These projects, located in regions with reduced cartel influence, offer a safer bet for capital. Investors are also hedging against currency risks, with many shifting funds into U.S. dollar-denominated assets as Mexico's peso remains volatile amid fiscal deficits and credit rating concerns.

The Path Forward: Balancing Risks and Opportunities

For investors, the key to navigating this landscape lies in strategic diversification and due diligence. While the short-term risks are undeniable, long-term opportunities exist in Mexico's energy transition and infrastructure modernization. The government's $100 billion National Infrastructure Plan through 2027, for example, could attract capital if paired with clearer regulatory frameworks and anti-corruption measures.

However, success hinges on Mexico's ability to address its governance challenges. Strengthening judicial independence, enforcing anti-corruption laws, and fostering public-private partnerships will be critical. For now, investors should remain selective, focusing on projects with robust security measures, transparent governance, and proximity to U.S. markets.

In the end, Mexico's energy and infrastructure sectors will remain a high-stakes arena, where geopolitical tensions and cartel dynamics continue to shape the investment calculus. Those who can weather the volatility and adapt to the evolving landscape may yet find opportunities in this pivotal North American economy.