This paper applies Loïc Wacquant’s work on penal statecraft to analyze the growing punitiveness of urban politics in contemporary Mexico City. It demonstrates that the intersection of the urbanization of neoliberalism and the democratization of local politics contributed to the emergence of a punitive regime of governing urban marginality in the city. This indicates the consolidation of a punitive urban democracy in which despite the formal legal empowerment of the city’s residents during the last two decades, those at the urban margins face a reverse process of punitive exclusion that takes the form of a criminalization of poverty. In taking a closer look at the situation within the local penal apparatus, the paper furthermore shows that these exclusionary tendencies are reinforced by informal institutional practices inside the local law enforcement bureaucracies.