By Ricardo Balderas
Some numbers scream. The Economic Commission for Latin America and the Caribbean (ECLAC) just confirmed it: the ratio between tax revenue and Gross Domestic Product (GDP) in Latin America and the Caribbean dropped to 21.3% in 2023. In other words, we’re collecting fewer taxes than before the pandemic. And not only that — in more than half of the countries analyzed (14 out of 26), the situation worsened. Behind that decimal point lies something more serious: the state is ceasing to finance itself, and the one who ends up footing the bill isn’t big capital, but the average citizen.
In the latest report from ECLAC, a pattern is revealed that, if it weren’t so tragic, would be predictable, The countries rich in natural resources (such as Chile, Peru, or Mexico) are the same ones now experiencing steep declines in revenues from income taxes. Why? Because the economic model of exporting raw materials as if there were no tomorrow — without planning for the ups and downs of international markets — ends up taking a toll on tax collection. And what is most alarming isn’t the figure, but the institutional silence surrounding it.
While in countries like Brazil, the tax-to-GDP ratio remains at 32%, in Guyana — a nation with oil — it barely reaches 11.6%. To understand the contrast: OECD countries, the ones we call developed, collect on average 33.9% of GDP. The gap isn’t just economic, it’s structural and deeply political.
History repeats itself, with names and surnames. In 2023, Chile and Peru reported the largest declines in this fiscal ratio. What happened there wasn’t an accident. The drop in international prices of copper and other minerals, combined with generous tax credits and refunds for large companies, led to a brutal reduction in state revenues. According to ECLAC’s report, revenues from mining in the region fell from 0.74% to 0.59% of GDP. But who’s held accountable for that?
While states give up their ability to collect, the official narrative continues to blame informality, tax evasion, or — even worse — the lack of tax culture among ordinary citizens. The truth is that Latin America’s fiscal architecture is designed to benefit big capital. That’s why social security contributions rise timidly (by 0.1 percentage points), but income and natural resource taxes plummet.
Take the case of Mexico. President López Obrador had insisted that his government wouldn’t raise taxes or create new ones. But in practice, that means large fortunes don’t pay more, and the state increasingly depends on VAT — a regressive tax paid equally by millionaires and day laborers. And although ECLAC’s report doesn’t prominently highlight Mexico, the pattern applies: those who have the least are taxed the most. Non-tax revenues, which include items such as fees, profits from state-owned companies, or public sector earnings, are also plummeting. They averaged just 3.1% of GDP in 2023, and in countries such as Peru barely reached 0.4%. Where is the revenue from lithium, oil, and gas? Where is that money going?
Perhaps the most cynical part of all this is the attempt to mask the crisis with relative figures. When it’s said that “revenue fell by 0.2 points of GDP,” it sounds manageable. But in real terms, that represents billions of dollars that no longer go to healthcare, education, infrastructure, or security. And that, in a region where over 30% of the population lives in poverty.
And in Mexico?
The Mexican government has projected record tax revenue of 5.3 trillion pesos (US$276 billion) for 2025, a 2.8% increase from the previous year. This figure equals 14.6% of national GDP — the highest proportion reached in the country’s recent history. This increase is achieved without creating new taxes or raising existing ones, highlighting efforts to improve collection efficiency and broaden the tax base.
In January 2025, the Tax Administration Service (SAT) reported revenue of 517.4 billion pesos (US$26.40 billion), exceeding its target for the month by 5.1%. Income tax (ISR) and value-added tax (VAT) were the main drivers of this growth, with real increases of 2.4% and 12.7%, respectively. This performance reflects a recovery in real wages and strong domestic demand.
Despite the increase in collection, Mexico faces significant fiscal challenges. The projected fiscal deficit for 2025 is 1.6 trillion pesos (US$81.63 billion), which could raise public debt to nearly 20 trillion pesos (US$1.02 trillion). Interest payments on the debt will reach 1.25 trillion pesos (US$63.78 billion), representing roughly 73% of tax revenues — severely limiting the government’s ability to fund other priority sectors.
The current fiscal model, centered on indirect taxes such as the VAT, has shown limitations in terms of equity and sufficiency. High labor informality and reliance on oil revenues have made progressive and stable tax collection difficult. Although the government has ruled out deep tax reform, it has implemented measures to improve efficiency in collection, such as digitizing procedures and simplifying tax processes.
Meanwhile, the Ministry of Finance and Public Credit (SHCP) estimates that the financial cost of debt will reach 3.8% of GDP in 2025 — the highest level since 2000. This rise in financial costs, coupled with a globally uncertain economic environment, poses risks to the country’s fiscal stability. Implementing prudent fiscal policies and seeking more sustainable sources of revenue will be essential to ensure public finance sustainability in the medium and long term.
So now it must be clearly said: Latin America’s fiscal model is broken. It is designed to punish small taxpayers, informal merchants, and wage earners. At the same time, it offers a sea of tax exemptions, waivers, and “incentives” to large national and transnational companies. ECLAC warns that oil revenues dropped to 3.9% of GDP among the ten main producing countries. And the projections for 2024 are worse: 3.2% for hydrocarbons and 0.5% for mining. Without serious, progressive tax reform oriented toward fiscal justice, the region will continue falling into the trap of financing public spending through debt or indirect taxes that deepen inequality.
What today seems like a technical tax collection problem is, in reality, a political signal. And the question is as old as it is uncomfortable: who does the state serve when it stops taxing those who have the most? Because when the state doesn’t collect, someone pays. And almost always, that someone is you.
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Mexican Press Agency is part of ALMA, which is dedicated to news and information about Mexico and Mexicans in the United States and is a fiscally sponsored project of Social Focus, a 501(c)(3) nonprofit organization based in Redwood City, California.
