LONDON, United Kingdom — Under Andrés Manuel López Obrador’s Fourth Transformation project, Mexico’s poverty rate fell from 41.9% in 2018 to 29.6% in 2024, according to the country’s national statistics agency INEGI — lifting an estimated 13.4 million people above the poverty line in six years, a historic decline in poverty. President Claudia Sheinbaum has inherited that momentum and aims to build on it with a second lever: Plan México, a $277 billion industrialization and reshoring strategy launched in January 2025 that targets 1.5 million new manufacturing jobs. If its investment and job targets are met, Plan México could mark Mexico’s next major attempt to close the gap for the roughly 38.5 million people still living in poverty.
How the Reduction Happened
Much of the progress made under López Obrador can be traced to his Fourth Transformation project. This economic and social program implemented policies that doubled Mexico’s minimum wage and expanded the country’s welfare and social programs. These wage increases alone are credited with lifting an estimated 6.64 million people out of poverty between 2018 and 2024, roughly half of the overall decline. According to Étienne Von Bertrab, a specialist in Latin American development at University College London’s Bartlett School, the shift runs deeper than wage growth. “I believe it is a genuine shift of the political economy and the role of the state,” he told The Borgen Project, pointing to social programs now written into Mexico’s Constitution, a change, he noted, that “limits their political use” and makes the social and economic gains harder for future governments to undo.
That constitutional resilience also shows up geographically, complicating the usual narrative that López Obrador-era policy favored cities and formal workers. Von Bertrab pointed instead to the country’s south, where poverty has historically been the highest, as a major site of progress, driven in part by Sembrando Vida, an agroforestry and income-support program he called “the largest agroecological project in the world.” As of 2023 the program “benefits around 450,000 smallholder farmers directly and their families (so, indirectly, around 2 million people benefit).” Von Bertrab’s research shows the farmers were mostly concentrated in Mexico’s southern and southeastern states, which are among Mexico’s poorest.
These factors altogether suggest that poverty reduction in Mexico was not driven by a single intervention, but by a combination of higher incomes, social protection and public investment reaching communities that have historically benefited less from Mexico’s economic growth. The challenge for Sheinbaum is therefore not simply to maintain those gains, but to build an economy capable of generating them more independently over the long term.
Plan México’s bid to build on this progress
Sheinbaum’s government is now testing whether industrial policy can extend the López Obrador-era improvement in workers’ material conditions. Unveiled on Jan. 13, 2025, Plan México sets a goal of becoming a top 10 economy in the world. It also aims to attract $100 billion a year in foreign investment and raise domestic production across several strategic sectors — automotive, aerospace, semiconductors, pharmaceuticals and chemicals — while cutting the time it takes to approve new investments from 2.6 years to one. A companion initiative, the Kutsari Project, aims to build out Mexico’s semiconductor capacity, from chip design hubs in Puebla, Jalisco and Sonora that will eventually meet demand from the automotive, electronics and medical device industries, showcasing an approach to developing domestic manufacturing capacity from the ground up.
Unlike the cash-transfer model that defined López Obrador’s presidency, Von Bertrab highlighted the more geographic and targeted approach, stating that “…the potential to reach poor regions is there and there are industrial poles being developed in Oaxaca, Campeche, Yucatan.” These are attempts to route industrial development and job creation into the same southern states that benefited from Sembrando Vida, rather than concentrating it in Mexico’s wealthier and more urban central and northern states.
From income support to productive employment
While social programs have helped raise household incomes directly, new investment could create jobs, skills and local supply chains that continue to benefit workers beyond the initial investment. This gives Plan México the potential to extend poverty reduction in Mexico beyond wage growth and welfare alone, if that investment reaches workers as intended. Mexico’s existing manufacturing base gives Sheinbaum’s plan a strong starting point. Its proximity to the United States, alongside established automotive and electronics industries, means that new investment could create opportunities for Mexican workers to move into higher-value areas of production. If this investment materializes as planned, the benefits could extend beyond individual factories, creating new opportunities for local businesses and workers.
Vietnam offers one illustration of how manufacturing and trade can drive this kind of progress. Following the country’s late-1980s Doi Moi economic reforms, the expansion of manufacturing and service industries attracted major foreign investment and generated substantial labor income growth for Vietnamese workers. According to the World Bank, that labor income growth from manufacturing and services accounted for nearly all of Vietnam’s poverty reduction between 2010 and 2020. Mexico is starting from a far more established manufacturing base than Vietnam did in the 1990s, but the comparison illustrates how domestic industrial expansion, when it reaches workers directly through wages, can become a significant driver of poverty reduction in Mexico.
What to watch
Von Bertrab is most confident about where the job growth itself is likely to land. He sees real potential in sectors “both traditional — e.g., automotive and electronics — and newer ones, such as aerospace and those data-related.” Though he noted that nearshoring is not happening “at the pace expected before Trumpism.” If that investment materializes as planned, it could offer Mexican workers a second, more durable source of income growth beyond the wage and welfare gains of the past six years.
Von Bertrab’s caution centers less on the job and growth figures than on what sustains these numbers. When asked which indicator would tell him Plan México is truly improving living standards rather than delivering headline growth figures, he pointed to natural resources: whether the well-being poles can expand “without further degrading lands, rivers, aquifers,” a concern sharpened by the fact that Mexico’s poorer states also hold its most abundant water reserves. It is a trade-off, he noted, that “hasn’t been cracked anywhere in the world.” With poverty reduction in Mexico already at a historic low, the real test for Plan México over the next several years will be whether it can convert industrial growth and investment into material gains for Mexican workers, without undercutting the resources these communities depend on.
– Gonzalo Rodriguez Da Fonte Martins
Gonzalo is based in London, UK and focuses on Global Health and Politics for The Borgen Project.
Photo: Unsplash