Jalisco in the top 10 of foreign direct investment

  • High technology, pharmaceuticals, advanced manufacturing, metal mechanics, automotive and renewable energy are the sectors where the State of Jalisco has focused its market strategy to attract foreign direct investment, mainly from China, Japan, Germany, as well as Texas and California in the United States. In the second quarter of 2021, the State of Jalisco ranked number nine in the top 10 states receiving the most foreign direct investment (FDI).

  • The Secretariat of Economic Development of Jalisco (SEDECO), registered USD$217.5 million of Foreign Direct Investment in the second quarter of this year, which represents a positive performance, however, lower compared to the same quarter of 2020, when USD$581.1 million were registered.

    In the total accumulated of the first half of 2021, Jalisco's FDI was USD$874.7 million, which represented a decrease of 43.3 percent at annual rate with preliminary figures. In this regard, Mr. Sergio Javier Ríos, general director of Investment Attraction at SEDECO, points out that for the second half of this year they expect a recovery in FDI. "We are going to recover when the pandemic restrictions are paused and businessmen can visit Jalisco, which for us is a key point. For example, two years ago we received 26 businessmen from China in one year, that is, we were receiving one businessman every 15 days, that was the dynamic we were bringing. Meaning that the current Chinese investments are from that wave of visits in 2019.”

    The official reports that this year in Jalisco they have attended 70 new projects, both physically and virtually. "Something that is interesting is that more than half of those new projects are high-tech, that is, they are companies that bring software development, cybersecurity, fintech, agrotech, among others. It is the largest investment we have received this year and more than 30 companies come from the United States. We hope that in the rest of the year we will be able to bring more manufacturing.”

    He stresses that the State of Jalisco, located in western Mexico, is open to any type of investment project. "For example, we already have our second Japanese investment in food products and another Japanese investment in software development is coming. We are very open to receive investment, so if we see potential in the project we will gladly attend, develop, and guide it. We can also help investors to get to know other states in the country with potential, for example, Durango, which has an important forestry industry.”

    It is worth mentioning that Jalisco has 22 industrial sectors, 19 of which are focused on exporting. "We are a very diversified state economy, we do not depend on a single sector, which is something that investors like. We have everything from jewelry to furniture, agriculture, food, chocolates, sweets, metal mechanics, among many other sectors. Approximately 68 percent of the state's exports correspond to the electronics sector and there is a very interesting phenomenon that is taking place: companies with greater added value in technologies are arriving, that is, previously they came to manufacture hardware and make basic software, however, today we have fintech companies, cybersecurity, machine learning, animation, creativity, cloud computing, among others. That is why Jalisco is called the Mexican Silicon Valley, because although the region has been growing in basic processes, companies are also beginning to see much more advanced or complicated processes," says the official.

    He also points out that another attraction for investments is the Jalisco State Energy Plan 2019-2034, since its objective is to guarantee the state's productive sectors the economic and safe supply of the energy needed by their value chains and, in turn, to promote a gradual decarbonization process that allows the transition from the use of petroleum products such as gasoline, diesel and fuel oil to the use of clean and renewable technologies that guarantee the sustainability and health of citizens.

    "We have a state energy agency and what we seek is to be the greenest and most self-sustainable state in the energy sector. This approach allows us to target the countries we want to attract, and we have obtained palpable results in attracting investment,” adds Mr. Ríos.

    Nearshoring in manufacturing and services

    The general director of Investment Attraction at SEDECO states that with the United States-Mexico-Canada Agreement (USMCA) there are two industries in Mexico that have increased their degree of regional integration: electronics and automotive, which went from 62.5 percent to 75 percent. "The treaty is a very interesting sales tool for companies from Japan, Germany, France or the United Kingdom to become interested in producing in Jalisco and integrate into the value chain that already exists here in the state, which will eventually end up in the United States or Canada. And foreign companies have seen it with good eyes because we are giving them the whole cake, that is, information about the size of the business they can find in Mexico, which is very attractive because they are seeing that they can have a growing business, in development and which can allow them to take advantage of this treaty.”

    He also remarks that a trend that started in 2020 is nearshoring in the manufacturing and services sector. "Nearshoring is trying to have your production, your suppliers and your ecosystem as close as possible to your market. I think a great advantage we have as Mexico is that we have the North American market as a neighbor, so having your production here helps you a lot. In fact, many companies are using this concept of manufacturing nearshoring to send products to Central and South America, so Mexico is a very interesting springboard to supply the entire American continent. Last year we saw a very strong migration of production lines that were in Asia -not necessarily in China- and came to Jalisco. They used to produce in Asia and export to the United States, but the pandemic and the restrictions between the United States and China hindered the agility to carry out this process, so these production lines were installed in Jalisco to reach the North American market. And the same thing is happening in Asia, the production lines that the companies have there are for the Asian market.”

    World-class engineers and technicians

    In Jalisco they have bet on the development of talent that responds to the needs of Industry 4.0 and the companies that invest in the state.

    The general director of Investment Attraction at SEDECO reveals that 16,500 engineers graduate each year, of which 7,500 specialize in IT. "Jalisco provides seven percent of the engineers in information technologies in all of Mexico, that is, they can be Jalisco citizens who work in other states or students who come from other states but are already working in some part of the country. In general, we have been able to develop very good and specialized talent, which is often not found in other parts of the world. The technology-based companies that have come to Jalisco State that the level of our engineers and technicians is practically the same as that found in the United States, Canada and Europe; they can carry out the same processes and developments. This has been very valuable for us and that is why we have bet on the development of talent."

    He emphasizes that universities, technological institutes, the National College of Technical Professional Education (CONALEP) and the Center for Technological, Industrial and Services Studies and Services (CETIS), have been able to keep up with the requirements of companies, which have been able to prove that Jalisco's talent is world class.

    The government of Jalisco works with universities and companies to develop talent; in fact, it is the first state to have a Secretariat of Innovation, Science and Technology and 13 high-level José Mario Molina Pasquel y Henríquez Technological Institute (TecMM).

    "We also work with the triple helix model, which others call quadruple helix, that is, we are really closely linked to the universities. What we have achieved in attracting investment cannot be done by the government alone, the universities play a key factor, their incubation laboratories, their development, everything they have has been very important. We have constant communication with the companies, and I, personally, have the opportunity to be a professor at the TEC de Monterrey and participate in several committees of this institution to be able to comment on what the trends are, what the companies are criticizing or what they are asking for. Both public and private universities can find the perfect match between what the industry is asking for and what they have to do. This is very enriching because many companies have scholarship programs in early semesters, which allows university students to have professional experience at a very young age, so that when they graduate, they have access to a job or even a higher position within the company. It has worked very well for us to listen to industry, technology companies, advanced manufacturing companies, and the automotive sector,” Mr. Sergio Javier Ríos concludes.

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