After handing the reins of power to Claudia Sheinbaum on 1 October, Mexico’s outgoing president, Andrés Manuel López Obrador, hoisted her arm aloft in a joint display of win.

López Obrador – a hugely popular but controversial figure in Mexico – bequeathed more than just the presidential sash to his political protégé.

She inherits a country, and an economy, that is performing well in some areas, and facing significant challenges in others.

The excellent information from her government’s perspective is that Mexico has strengthened its trade position with its neighbour to the north, displacing China as the US’s biggest buying and selling associate.

Mexico has benefitted from “nearshoring” – that is, the relocation of US and Asian firms from China to northern Mexico to bypass punitive US tariffs on Chinese exports.

“Mexico has always been attractive to startup distribution flows because of our geographical position, our free trade agreements with North America, our work force,” former Mexican trade negotiator Juan Carlos Baker Pineda told me before the election.

“But over the history few years, it increasingly seems that if you [a foreign firm] desire to do business with the US you require some benevolent of footing in Mexico.”

The outlook is optimistic, he believes, pointing to Amazon’s recent announcement that it will invest $5bn (£3.8bn) in Mexico over the next 15 years, and an additional $1bn property by German carmaker Volkswagen. Mr Baker Pineda also cites promising plans from South African, Japanese and Chinese firms.

Critics are less convinced that the relocation of manufacturing from Asia to northern Mexico benefits the Mexican economy rather than just bolstering the companies involved. The key, Mr Baker Pineda believes, lies in creating the correct “corporate and government decisions in this country to sustain this pattern in the long-term”.

When it comes to the immediate economic problems President Sheinbaum faces, the most pressing is state-run vigor firm Pemex. It has debts of around $100bn, making it the globe’s most indebted oil firm.

“The obligation is a issue not just for Pemex but for Mexico,” says Fernanda Ballesteros, Mexico country manager for the Natural Resource Governance Institute.

In recent years, the López Obrador administration has reduced the amount of levy Pemex has had to pay the government. This has been cut by 60% to 30%.

At the same period, the outgoing government gave Pemex a number of liquid assets injections, which López Obrador says he would like to view continue.

However, a steady decline in productivity at Pemex in recent years has further complicated the capitalization of the state-owned vigor giant, which employs around 1.3 million people according to the government’s own statistics.

“President López Obrador’s policies and priorities were to double down on fossil fuels and provide unconditional back to Pemex,” says Ms Ballesteros. The corporation is now poorly positioned, she argues, for the essential shift to cleaner and more efficient energies in the coming decades.

“Over the history six years, 90% of Pemex’s infrastructure investments have gone towards a recent refinery in Dos Bocas in Tabasco state, and the purchase of a refinery in Deer Park in Texas.”

The government says it is on course to achieve its objective of total self-sufficiency in fuels by the first quarter of 2025. However, Pemex’s ongoing economic difficulties cruel the Sheinbaum administration has its hands tied over servicing the colossal obligation.

Environmental specialist Eugenio Fernández Vázquez says that Pemex is a “large test” for Sheinbaum. “Not just in dealing with the oil industry, which is huge in terms of Mexico’s GDP, but also in taking Pemex’s massive obligation burden off the community’s shoulders,” he explains.

Sheinbaum must strike a challenging settlement, he adds, in getting Pemex to sell more of its products “which are obviously fossil fuels and oil-based, while at the same period addressing Mexico’s climate transformation responsibilities and dealing with urgent issues in our cities, like air pollution”.

For a president championed as Mexico’s most environmentally conscious chief – before entering politics, Sheinbaum was an accomplished environmental engineer – that must rankle. Especially while also spending billions in community money to prop up a greenhouse gas-emitting behemoth.

Back in the realm of Mexico’s complicated connection with its northern neighbour, President Sheinbaum faces two very different prospective partners in Washington – either the first female president of the US in Kamala Harris or a second Trump presidency.

Whoever wins in November, there are some tricky cross-border issues to address, whether on trade or undocumented immigration, the illegal traffic of guns into Mexico, or fentanyl into the US.

Furthermore, the United States-Mexico-Canada Agreement (USMCA) free trade deal is up for renegotiation in 2026, with everything from minor tweaks to major rewrites feasible.

USMCA was introduced in 2020, when it replaced the previous North American Free Trade Agreement between the three countries.

Sheinbaum also has to keep an eye on the peso. In the days after her election win in June, the liquid assets tumbled against the dollar.

This was largely in response to a selection by the outgoing president to press ahead with a wholesale reform of the country’s judicial structure under which all 7,000 judges and magistrates in Mexico will be chosen by popular vote. The schedule is also supported by Sheinbaum.

Washington’s disapproval of the assess, as publicly expressed by the US Ambassador to Mexico, Ken Salazar, suggested it could complicate, even jeopardise, parts of the USMCA renegotiation. Relations between Ambassador Salazar and the recent administration are already notably frostier.

Diplomatic spats aside, marrying the recent constitutional rules with the legal requirements of the free trade agreement could prove far thornier than first anticipated.

Still, these are the very first days of President Sheinbaum’s administration. As part of her predecessor’s legacy, she enjoys an almost unprecedented level of back with the ruling event in an unassailable position across the country.

Her key election commitment – to extend López Obrador’s social programmes in pensions, household stipends and learner grants, and construct what she calls the “second floor” of his political assignment – secured her the backing of millions of Mexicans.

She can also count on a faithful congress and, following the reform, potentially the control of the judiciary, too.

Taking office in such a powerful position is a luxury, one which supporters and critics alike expect her to use to properly address some of Mexico’s main economic obstacles.