TBY talks to Rolando Zubirán Robert, Undersecretary of Foreign Investment and International Trade at the Secretariat of Economic Development in Nuevo León, on the state’s significance to the Mexican economy.
THE BUSINESS YEAR What are the strengths of Nuevo León as an economic hub?
ROLANDO ZUBIRÁN ROBERT It is very important to point out that Nuevo León is the most competitive and productive state in the country. It has four strategic pillars that are the focus of all our energy. The first is our human capital, the second is our strategic location or logistics platform, the third is our supplier base, while the fourth and last pillar is innovation. These four pillars contribute much toward Nuevo León’s development strategy. With just 4% of the national population, Nuevo León actually produces 8% of the country’s GDP. We have been and continue to be the industrial capital of Mexico, and are transitioning to advanced manufacturing in several strategic sectors. Nuevo León produces 11% of all manufactured goods in the country, and in terms of exports that means approximately $30 billion a year. If you compare that to other places, we export more than all Central American exports combined, and are comparable with the US states of Tennessee and Massachusetts. This is a $90 billion economy. We are double the national average for GDP per capita. The national average is around $10,000 per year, while in Nuevo León it is around $20,000 a year. Nuevo León has been rated by the OECD as the most productive state in Mexico, the most competitive by IMCO, and the most productive by KPMG. We have been the highest receiver of FDI for the past six years. It is a tendency that continues to grow despite global levels of economic instability. Nuevo León is a logistically integrated platform all on its own. In fact, 70% of all economic activity that transits to the US passes through Nuevo León.
What strategies is the department employing to ensure that this is a sustainable, competitive, and innovation-based economy?
The governor commissioned us to restructure the primary functions of this organization to become more efficient and tailor it to the needs of enterprises. Nuevo León is interesting in the way that the industrial community here tends to push or align public policy. It has a very important say in how public policy is drafted. This comes from Nuevo León having 10 out of the top 20 companies in Mexico. Industry here has a very strong weight. Thus, it was necessary to understand and bring the needs of enterprises closer to the Secretariat of Economic Development. As a result, the entire undersecretariat was restructured. Now, it is called the Undersecretariat of Investment and Industrial Development. We are very tailored to foreign investment, but in 2013 we want to begin to develop local industry. To stimulate industrial development, we created two divisions that are now a part of our pivotal strategy. The automotive sector is key and it represents one of our nine strategic sectors. What we try to do is identify the needs of entrepreneurs and enterprises. How do we do this? We map the value chains. For example, in the automotive sector, Nuevo León produces approximately 27% of all auto parts in Mexico. However, we want to map all the components that compose a car in order to see all of our tier-one, tier-two, and tier-three suppliers. This is done to see how well integrated our supply chain is and to fill in the gaps. What we do then is develop SMEs, certify them, and promote them as reliable parts of the value chains of larger enterprises. Out of the 27% of national auto parts we produce, 70% of all raw materials are still imported. Consequently, we need to stimulate import substitution from a competitive standpoint. We bring in SMEs and develop them so that they can provide services via certification. We also have a foreign investment strategy, and try to look for companies that are targeting markets in the US, Europe, or Asia. When the big tier-one automotive companies came into Mexico, Nuevo León was already the industrial capital, and it developed in the face of many barriers to entry, whether political or economic. This is why Nuevo León’s strength lies in its supply base. The northern part of Mexico as a whole supplies approximately 65% of all auto parts.
Nuevo León recently won the tender for the construction of the new Caterpillar plant. What does this and other recent successes demonstrate about the state’s attractiveness as an economic hub?
Winning this tender was a very important step for us as it means a $45 million investment. It represents the first time Caterpillar is outsourcing its cabin manufacturing to Mexico. Also, it represents an interesting time for us because the transition from simple manufacturing toward advanced manufacturing is where Nuevo León is proving itself. Nuevo León has the advanced technicians and specialized engineers available in order to produce the cabins for general tractors, which will be assembled in the Caterpillar plant in Victoria, Texas. It was a very interesting expansion. We welcomed it and assisted with a whole soft-landing platform. This investment speaks to the fact that advanced manufacturing is one of our strategic sectors.
What regulatory reforms would you say are currently needed to support economic development?
A nationwide policy needs a lot of coordination. There are countries like Singapore, for example, where companies can be opened in approximately 14 to 20 minutes. It has very well aligned national policies. We have very good levels of cooperation with the government, both at a state and municipal level. I think it is a national challenge to have better cooperation mechanisms between municipal, local, state, and federal entities. In Nuevo León, more than 80% of all economic activity is in the metropolitan area, which forms a major cluster of development. Our municipalities are very integrated in the metropolitan area. That is a strength because we have a lot of industrial parks, and it all makes for a very business-friendly environment. Obviously, at times local regulations can contravene state and federal regulations, and can give rise to problems for companies. In those cases, we help to mediate the situation. I think we need to concentrate more on a nationwide policy. If I have a state law on investment and employment that supports foreign investment, but may directly conflict with some municipal or federal laws, then we have to negotiate with the municipal and federal authorities to find a solution—I would not call it lobbying.
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© The Business Year - October 2012