MEXICAN SILICON VALLEY

Mexico 2018 | TELECOMS & IT | FOCUS: GUADALAJARA’S IT SPECIALIZATION

Guadalajara is increasingly being referred to as “Mexico's Silicon Valley." Is this the result of a well-tuned city-branding campaign or a relevant, substantial trend?

Should sufficient capital and talent continue to come to Jalisco, regional authorities plan to transform this hub into a regional technological corridor stretching from Guadalajara to the coastal city of Puerto Vallarta in the medium term. Close ties between Guadalajara and Silicon Valley have existed for over 30 years. Initially, the former served as a manufacturing hub for the latter and then as a software prototyping center. More recently, Guadalajara has specialized in software and application development for American firms, hence its new label. That being said, the two areas are still not entirely comparable, as Silicon Valley receives drastically more venture capital (VC) investment. Nevertheless, the label refers to a tangible and growing reality. According to official figures of the State of Jalisco, more than 15 large IT firms and 1,200 start-ups are based in the region. “Our current growth does not depend on employment in the United States," stated Jaime Reyes, Secretary of Innovation of Jalisco, concerning the decreasing dependence on remittances.

There are several underlying factors explaining Guadalajara's successful IT specialization. Some of them are widely known, such as the advantages of geographical and cultural proximity to the US. Guadalajara displays all the benefits of nearshoring: being in the same time zone as much of the US and having a highly bilingual population. These characteristics represent a comparative advantage over similar setups in Southeast Asia. Other factors, such as President Trump's migration policies, are quite recent and are only reinforcing the trend. In fact, facing the complexity of obtaining work visas to move to California, many developers are opting for Guadalajara. Yet, the region is not only benefiting from external decisions; Jalisco has taken the initiative to lead the digital revolution in Mexico. In April 2018, the Jalisco 4.0 Council was launched. An example of the triple-helix innovation model to foster knowledge-based economic development, the council gathers the regional government, academia, and the private sector. Representatives of the business community will now join Centro Jalisco, the State of Jalisco's international agency in San Francisco functioning as the official liaison between Jalisco's IT ecosystem and Silicon Valley.
Along the same line, the publicly funded JalisConnect program has set up several initiatives. First, a “tech visa" can be issued within 24 hours by the Mexican Consulate in San Francisco for those willing to join Jalisco's IT corporate ecosystem. This is complemented by the Digital Bridge initiative, which was launched to pair national and international entrepreneurs with local incubators. Finally, a soft landing program was set up in order to support incoming entrepreneurs through services such as mentoring, easier access to accounting and legal facilities, housing, and networking. The program is reciprocal, meaning that Mexicans going to the US can also benefit.

Guadalajara is not only providing IT services to US firms. The local start-up ecosystem is also thriving. Jalisco's Corporate Promotion Fund (Fojal) Director, Xico Méndez, highlighted, “First, we need to build bridges with other ecosystems, then make VC come to Jalisco." In 2017, there were 11 active VC funds investing in Jalisco, namely in fashion and other creative industries, but also in Industry 4.0-related activities. To further fuel this development, Jalisco State estimates that, by 2025, demand for engineers will soar by 250%. In April 2018, Guadalajara hosted Talent Land, the largest technology fair in Latin America; 30,000 students and young professionals seeking employment in the tech industry attended.

Guadalajara's label of Mexico's Silicon Valley is certainly still aspirational to a certain extent. Yet, all the ingredients are present for the city and its state to strengthen their positions as a global hub for IT nearshoring and start-up incubation.