Episode IV- The northern region
The states in context
Nine states constitute the northern region of Mexico; such states are Baja California Sur, Coahuila, Chihuahua, Durango, Nuevo Leon, Sinaloa, Sonora, and Tamaulipas. This geographical and cultural macroregion divides into two, the north-west region integrated by Baja California, Baja California Sur, Chihuahua, Durango, Sinaloa, and Sonora, while in the north-east the states of Tamaulipas, Coahuila, and Nuevo Leon are to be found (SEDATU, 2018).
The Regional Development Program of the North, made by the Secretary of Territorial and Urban Agrarian Development (SEDATU), establishes that the region has 338 municipalities and 103,916 localities. Its surface represents 53.5% of the national territory and limits the frontier line (3,152 kilometers) with the United States, having a total population of 24.9 million.
The region experienced growth in the agricultural, industrial, commercial, and service sectors since the end of the war with the United States (1846-1848) and the appearance of the railroad in Mexican territory until 1880. The economic activities were modified and intertwined, which led to immigration from other regions to the north due to the demand for labor power; the result was the consolidation of the region (Ceballos, 2001).
Further in history, as consequence of the alliances between Mexico, United States, and Canada agreed to open trade and formalize the North American Free Trade Agreement (NAFTA) that came into force in 1994, the region underwent an economic expansion and development of infrastructure characterized by the grand opening of four cross-border corridors connecting the center of the country to the main economic regions of the U.S. and Canada (SEDATU, 2018).
An updated version of the North American Free Trade Agreement (NAFTA) came into force on July 1st, 2020. The T-MEC is the new trade agreement between Mexico, the United States and Canada; the treaty promotes investment, free trade, employment generation and the economic and social development of the three countries (Forbes, 2020).
Economy and business
The Regional Economy Report from January until March 2022 made by BANXICO points out that the expansion of the northern economic activity during that specific quarter reflects a positive performance of manufacturing, mining, trade, tourism, and agricultural activities. Along with the evolution of the national manufacturing activity, the automotive industry in the north recovered from the pandemic to a greater extent.
Among many factors that contributed to the impulse of regional economic activity, it is worth mentioning that the metal industry had an area of opportunity provoked by the war between Russia and Ukraine; particularly the producers of the region increased their market share in the USA (BANXICO, 2022). This report states that business executives from the automotive, machinery and equipment manufacturing industries were interviewed, and highlighted that the cause of the boost to their activity derived from the rules of origin of the T-MEC.
According to the quarterly indicator of state economic activity (ITAEE), the northern region contributed 26.9% during the first quarter of 2019, surpassing the central region Cabrera (2020.) Espinosa Cabrera (2020) establishes that the primary economical activities had a growth of 13.1%, the secondary ones 3.2% and the tertiary activities 2.4% of the national total, plus the state of Nuevo Leon was the state that contributed the most.
The United States boosted semiconductor production in the northern states of Mexico (El Financiero, 2022). Reported by the article of El Financiero (2022), in the first half of 2022, 34.3% of foreign investment inflows were caused by the manufacturing industry in the northern border.
Variety of Industries
The northern regions possess a diverse offer of industries, huge agricultural zones, farming areas, and big industrial parks. But particularly, these northern states have received a great impulse of foreign capital for the establishment of manufacturing industrial parks due to their proximity to the United States (CONEVyT, n.d.).
Alan Russel (2019), chairman of the Board and Chief Executive Officer of Tecma, affirms that in 2019 the northern border experienced the most dynamic regional growth nationally. Hence the value of manufacturing on the northern border increased by a real annual rate of 5.7%. It is stated that one of the multiple factors this region was experiencing an increase was due to the tax incentives in the free zone that was created across the Mexican northern border, reducing the value-added tax from 16% to 8%. That same year, the minimum daily wage for workers was increased to 176.72 Mexican pesos (Russel, 2019).
In that same article, Russel (2019) mentions that Baja California had the highest manufacturing growth in the country by an increase of 17.7% and Coahuila ranked third with 7.2%.
According to the CONEVyT document, different economic and productive activities can be found in the region, such as agriculture, with cultivations of apples, peaches, cotton, corn, and beans; livestock farming where cattle, sheep, goats, and pigs are raised; mining, since it is the main mining area of the country where coal, barium, gold, silver, iron, zinc, marble, quartz, and calcium are extracted, as well as other sectors like the paper, food, glass, brewery, oil, and wood industries.
The main reason this region is being powered by the Mexican government along with the governments of the U.S. and Canada, is because of its enormous area of opportunity in nearshoring activities. The T-MEC document Investing in Mexico made by the Mexican Secretary of Economy affirms that “this region has three of the five states with the highest number of international sales (Nuevo Leon, Chihuahua, and Baja California)” Following this information, the report illustrates in a table of each state principal exports (Secretaria de Economia, 2021).
Table 3. The states and their main exports
Innovation
The Economic Corridor of the North
The Economic Corridor of the North (CEN) is composed of 19 municipalities that work together for the economic, social, and cultural development of the region by working on joint projects and agreements of cooperation. Although most of the municipalities belong to a northern state of Mexico, some that integrate this corridor do not belong to the northern region of the country (Ibarra & Morales, 2015).
The corridor goes all the way from Tepic, Nayarit to Ahome in Sinaloa, connecting with the Gulf of Mexico through Mazatlán, Sinaloa reaching Matamoros, Tamaulipas; Also, it communicates north and south via Ciudad Juarez, Chihuahua with Zacatecas (Ibarra & Morales, 2015).
According to Forbes (2021), the CEN represents 21% of the national GDP. In its surroundings, a lot of projects are being developed, like the Aerospace Park and the new project of Mazatlan Logistics Center (MLC). This new logistic and industrial park of Grupo ARHE connects Mazatlan with the world; the plot has 80 hectares, and it is divided into 66 lots with different dimensions, between 2,300 to 18,000 square meters (Forbes, 2021). The article by Forbes reports that the MLC had an initial inversion of 636 million Mexican pesos and 3B Mexican pesos in total.
Made in Mexico: Challenges for science and innovation in the northern border of Mexico
The book Made in Mexico: Challenges for science and innovation in the northern border of Mexico proposes an investigation of the enterprises, private and governmental initiatives, educational institutions, and centers of investigation of the region. Networks of enterprises, governments of the northern states, and the main actors of the innovation ecosystem were interviewed.
The diagnosis reflects the analysis of the active innovation ecosystems on the northern border of Mexico, whereas the concept of innovation ecosystems has gained relevance due to the boost of science, technology, and innovation activities that the private and public sectors have supported.
The authors indicate that the northern states have been characterized into a productive profile on account of the significant amount of FDI under the IMMEX model, where the relationships between suppliers and local productive enterprises work in a hierarchy configuration, however, this evolved due to the higher demand for production processes with greater complexity.
The methodology used by the authors was an original development, the objective was to analyze and quantify the behavior of science, technology, and innovation (CTI) in the innovation ecosystem of the above-mentioned region, to enable the investigation the authors divided the research in three, integration of the frame of reference, field research in the border states and the analysis of each state proposals.
Performance results were achieved at quantitative and qualitative levels, as well as a proposal for public policy for the border states or even for other similar contexts in Mexico.
Within the proposals is to strengthen the bilateral relationships with other nations, for example with the United States, since it has not been used as a source of knowledge or collaboration to accelerate the processes of development of CTI.
Our clients can take advantage of the areas of opportunity this region offers. Mexico is a country that proposes huge growth for the transnational companies that make use of their industrial parks.
Along with the motivation of this country to innovate and the constant inflow of FDI, Mexpando helps you connect with the right leads.
Cabrera, D. P. (January, 2020). Crecimiento económico en el norte de México. Retrieved from Crea Soluciones: https://creasoluciones.com.mx/general/crecimiento-economico-en-el-norte-de-mexico/
Carrillo, J., Villavicencio, D., Santos, S. d., & Plascencia, I. (2016). Made in Mexico: Desafíos para la ciencia e innovación en la frontera norte. México: El Colegio de la Frontera Norte.
Castañares, G. (2022). Nearshoring impulsa inversión en México; empresarios del norte, los ‘ganones’. Retrieved from El Financiero: https://www.elfinanciero.com.mx/economia/2022/09/15/nearshoring-impulsa-inversion-en-mexico-empresarios-del-norte-los-ganones/
CONEVyT. (n.d.). Regiones de México. Retrieved from https://www.conevyt.org.mx/colaboracion/colabora/objetivos/libros_pdf/sso1_u3lecc2.pdf
BANXICO. (2022). Retrieved from Reporte sobre las Economías Regionales: https://www.banxico.org.mx/publicaciones-y-prensa/reportes-sobre-las-economias-regionales/%7B249D0126-CC0A-E289-0559-5FF8CA63A88A%7D.pdf
Data Mexico. (2023). Retrieved from https://datamexico.org
Forbes Content. (December, 2021). Mazatlan Logistics Center, el nuevo parque industrial en el Corredor Económico del Norte. Retrieved from Forbes Mexico: https://www.forbes.com.mx/ad-mlc-parque-industrial-en-corredor-economico-del-norte/
Forbes Staff. (2020). ¿Qué es el T-MEC y por qué es importante para México? . Retrieved from Forbes Mexico: https://www.forbes.com.mx/economia-que-es-el-t-mec-y-por-que-es-importante-para-mexico/
Ibarra, A. V., & Morales, R. G. (September, 2015). El Corredor Económico del Norte y su fortaleza nacional. Retrieved from IMPLAN: http://www.trcimplan.gob.mx/blog/el-corredor-economico-del-norte-y-su-fortaleza-nacional.html
INEGI. (2020). Información por entidad. Retrieved from https://cuentame.inegi.org.mx/#.
Russell, A. (2019). Manufacturing on the Northern Border of Mexico. Retrieved from https://www.tecma.com/manufacturing-on-the-northern-border-of-mexico/
Secretaria de Economia. (May, 2021). Investing in Mexico T-MEC. Retrieved from https://www.economia.gob.mx/files/gobmx/canada/tmec_investing_in_mexico.pdf
SEDATU. (2018). Programa Regional para el Desarrollo del Norte. Retrieved from https://www.senado.gob.mx/comisiones/desarrollo_regional/docs/ProgRegDesarr_Norte2014_2018.pdf