Mexico’s week in review: A new trade deal with the EU offsets a sluggish domestic economy
The week of May 18 in Mexico began with the news that two former Sinaloa state officials — ex-Security Minister Gerardo Mérida Sánchez and ex-Finance Minister Enrique Díaz Vega — had turned themselves in to U.S. authorities. They are the first to face a federal drug trafficking indictment naming 10 current and former Sinaloa-linked officials, including Governor Rubén Rocha Moya, who remains on leave.
At her Monday press conference, President Claudia Sheinbaum dismissed any “risk” from their U.S. depositions and rejected the notion that Washington could designate her Morena political party as a terrorist organization. By Friday, the week had brought a historic trade deal signing, major environmental wins and worrisome economic data.
Didn’t have time to catch this week’s top stories? Here’s what you missed.
Mexico and the EU sign a landmark trade deal
The week’s most consequential diplomatic event arrived on Friday, May 22, when Mexico and the European Union formally signed the Modernized Global Agreement (MGA) at an EU-Mexico Summit in Mexico City — the first such summit in more than a decade. European Commission President Ursula von der Leyen and European Council President António Costa were welcomed by Sheinbaum at the National Palace’s Courtyard of Honor before the ceremony.
The deal, a decade in the making, eliminates tariffs on 99% of products traded between the two sides — including mutual tariffs on electric vehicles and batteries — and broadens the original 2000 pact to include services, digital trade, government procurement, investment and agricultural products. It opens the door to duty-free access for Mexican chicken and asparagus, and European cheese, pork and milk powder.
A key feature reported earlier in the week is a new Investment Dispute Resolution Tribunal to replace the existing patchwork of bilateral mechanisms. It guarantees European companies operating in Mexico — and Mexican companies in Europe — the same treatment as local firms, with panels required to issue final rulings within 120 days. Two-way trade in goods between Mexico and the EU totaled €86.8 billion in 2025, with Europe serving as Mexico’s second-largest export market after the U.S.
Morelos mayor arrested in Operation Swarm
Federal security forces struck close to Mexico City on Wednesday when Security Minister Omar García Harfuch announced the arrest of Atlatlahucan Mayor Agustín Toledano Amaro and five other officials from the central state of Morelos as part of Operación Enjambre (Operation Swarm) — an ongoing anti-corruption strategy that has now netted more than 140 officials since its launch in November 2024.
Also detained were the former mayor of Yecapixtla and several officials from Cuautla’s municipal government. Federal prosecutors said at least eight Morelos municipalities had been infiltrated by the Sinaloa Cartel, whose alleged regional operator, known as “El Barbas,” reportedly helped fund candidates’ campaigns in exchange for protection. The government’s Financial Intelligence Unit moved to freeze bank accounts of 22 individuals and 10 companies linked to the corruption network, and authorities said they were continuing efforts to arrest Cuautla Mayor Jesús Corona Damián.
Judicial reform: A broader do-over is in the works
On Monday, Sheinbaum signaled plans to push the second round of judicial elections from 2027 to 2028, and on Wednesday, the president submitted a full constitutional reform bill to Congress that proposes sweeping changes to the 2024 overhaul itself.
The bill was drafted in part by presidential legal adviser Luisa María Alcalde and effectively acknowledges the deficiencies of last year’s elections, in which just 13% of eligible voters participated, ballots were notoriously unwieldy and cheat sheets — some circulated by Morena affiliates — became widespread.
Among the key changes proposed: each judgeship race would be capped at two candidates, selected through merit evaluation and sortition; candidates would need to demonstrate genuine legal knowledge rather than simply holding a degree and presenting neighbors’ letters of recommendation; sitting judges seeking a new post would have to resign first; and all judges would face performance reviews from year one. The bill also restores the Supreme Court to a dual-chamber structure and requires judicial campaigns to be conducted without involvement from political parties.
The proposal drew a sharp rebuke from the National Association of Federal Circuit Magistrates and District Judges, which called the postponement “the clearest confession” of the original design’s failures and warned that trimming candidate lists, without addressing deeper structural problems, risked causing the justice system to “collapse.”
World Cup countdown
With the 2026 FIFA World Cup less than three weeks away, Mexico’s co-hosting preparations dominated the news. The national teachers’ union announced a strike to coincide with the tournament’s opening, while Mexican air traffic controllers threatened a work stoppage that could disrupt the surge in international arrivals expected in June. Mexico City’s Benito Juárez International Airport (AICM) is also racing the clock, with 2,000 workers on site to finish a year-long renovation before the June 11 kickoff.
Away from the worries, Spain’s King Felipe VI accepted an invitation to attend the Spain-Uruguay match in Guadalajara on June 26. The Bank of Mexico began minting 12 commemorative coins to mark the occasion. Analysts projected that more than half of Mexico’s World Cup economic windfall would come from beer sales alone. And while Mexico will host six national teams, a survey found that the majority have chosen to base themselves in the United States rather than Mexico during the group stage.
Environment Ministry kills Royal Caribbean’s Perfect Day Mexico project
Mexico’s Environment Ministry (Semarnat) put a definitive end to Royal Caribbean’s Perfect Day Mexico megaproject in Mahahual, Quintana Roo, blocking a cruise-ship entertainment complex that environmental groups said would have damaged mangroves, coral reefs and the region’s fragile aquifer. Semarnat head Alicia Bárcena declared Tuesday that the project “will not be approved” — one day after President Sheinbaum ordered a fresh environmental review.
The proposed complex had drawn enormous opposition. Plans called for more than 30 waterslides, the world’s longest “lazy river” and a standalone “Tipsy Sombrero Bar” topped by the world’s largest sombrero, spread across roughly 90 hectares of jungle and mangrove next to the Mesoamerican Reef — the largest reef system in the Western Hemisphere — in a coastal community of fewer than 3,000 people. A Change.org petition against the project gathered more than 4.8 million signatures, with opposition ranging from local residents to the international fan bases of BTS and Taylor Swift. Greenpeace hailed the cancellation as a victory for public pressure, calling on the government to extend formal protections to the wider Maya jungle and its aquifer. Royal Caribbean said it respected the decision but still hoped to discuss future community and environmental investment in Mexico.
Mexican food shines — and stumbles — on the world stage
It was a mixed week for Mexican cuisine on the international scene. On the high note, National Geographic named Sonora one of the best food destinations in the world, recognizing the northwestern state not just for its iconic carne asada but for its agave-based spirits — a category that earned it the coveted slot on Nat Geo’s “Best of the World” list.
However, the 2026 Michelin Guide Mexico — presented at a ceremony in Guadalajara on Wednesday — revealed that El Califa de León, the modest Mexico City taquería that had made history as the world’s only taco stand with a Michelin star, has lost that distinction two years after earning it. The guide did not give a reason for the downgrade. However, Mexico’s taco culture retained its place on the coveted list: La Once Mil, an upscale taquería in Lomas de Chapultepec where a single taco can run 335 pesos, picked up the star. The 2026 edition also expanded to new states, awarding stars to restaurants in Jalisco and Yucatán for the first time.
GM moves Groove and Aveo assembly from China to Mexico
General Motors announced it will relocate assembly of the Chevrolet Groove and Aveo from China to its Ramos Arizpe plant in Coahuila, starting in 2027. The move aligns with Mexico’s nearshoring push and is part of GM’s broader North American supply-chain reshuffling amid ongoing U.S.-China trade tensions.
Economic signals: A difficult week for the numbers
A string of reports this week painted a sobering, if slightly more hopeful than expected, picture of Mexico’s economy.
On Friday, INEGI confirmed that Mexico’s GDP contracted 0.6% in the first quarter of 2026 compared to the previous three months — the worst quarterly drop since late 2014, though the final figure beat earlier estimates. Year-on-year, the economy grew 0.4% versus the same period in 2025. The government maintained its annual growth forecast of 1.8%-2.8%, banking on World Cup revenues and the federal Infrastructure Plan.
On Wednesday, Moody’s cut Mexico’s sovereign credit rating to Baa3 — the lowest investment-grade level, one notch above junk — while upgrading Mexico’s outlook from negative to stable. The agency cited weak growth and the ongoing drain from Pemex subsidies. The downgrade leaves all three major agencies — Moody’s, Fitch and S&P — giving Mexico a near-floor investment-grade score. Offering a partial counterweight, manufacturing activity rose 1.3% year-on-year in April, breaking a three-month decline.
MND’s inaugural economy index
Mexico News Daily launched the MND Economy Index™ for March 2026 — a new monthly tool designed to cut through competing narratives about economic performance. The index draws on a broad basket of indicators to produce a composite, data-backed snapshot of conditions each month, building on MND’s growing suite of intelligence products.
Also this week
🏥 The Health Ministry announced a goal of 9,000 new hospital beds across the country by 2030, part of the Sheinbaum administration’s push to expand public healthcare infrastructure.
☮️ A new Institute for Economics & Peace report found that Mexico recorded its most significant improvement in peacefulness in at least a decade in 2025.
🌊 Researchers from Mexico and Japan launched a joint study on earthquake and tsunami risks along the Oaxacan Pacific coast, aiming to improve early warning systems in one of Mexico’s most seismically active zones.
⚓ The governor of Baja California Sur pledged to formally ask President Sheinbaum to repeal a decree that opened the Pueblo Mágico town of Loreto to heavy maritime traffic, a move welcomed by residents and conservation advocates seeking to protect the Gulf of California.
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