Nuevo León and Monterrey: Attracting Smart Investors
Global investor interest is shifting to the best of mid-sized emerging markets. Few countries are benefitting more from this trend than Mexico, where the state of Nuevo León is leveraging proximity to the United States, a large manufacturing base and skilled technical workers to attract growing foreign investment.
Monterrey, the state capital, was named the country’s top business location in 2012 by the Mexican Institute for Competitiveness after analyzing items such as per capita GDP, foreign investment, education, infrastructure, innovation, labor relations and services. The institute also ranked Monterrey highly for local government transparency.
All too often, states in northern Mexico make the headlines just for drugs-related violence, and Nuevo León is no exception. But business is booming. The International Monetary Fund forecasts Mexico will enjoy economic growth of 3.5% this year, far better than most developed countries. And foreign direct investment is flooding in. “This year our goal is to exceed US$3 billion, because Nuevo León is more and more attractive,” said State Governor Rodrigo Medina de la Cruz, predicting a 10% increase over 2012.
Caterpillar, one of numerous multinationals located in the state, announced late 2012 that it will build a US$500 million precision components factory just north of Monterrey to make gear assemblies. Company directors told local media that Nuevo León’s infrastructure, logistics, skilled workers and the high-tech supply chain weighed in the decision.
This special report, for publication with FOREIGN POLICY magazine, will focus on the key advantages that are leading American and other companies to choose Nuevo León, together with state government strategies to enhance this attractiveness going forward.
Large established industrial base
The region around Monterrey is the traditional industrial heartland of Mexico, the world’s 14th largest economy. With less than 5% of the country’s population, Nuevo León accounts for over 10% of GDP and industrial output. Automotive plants alone exported around US$7 billion from Nuevo León to the United States last year.
The state government has identified aerospace, automotive, biotechnology, nanotechnology and software as key sectors for foreign investment, but also sees potential in household appliances, foodstuffs, housing and health sciences.
Expo Manufactura, a major annual trade fair in Monterrey, last year attracted 350 exhibiting companies and more than 600 brands with a focus on various areas of high-tech manufacturing. The automotive supply chain dominates but organizers said aerospace, wind power and medical appliances were gaining ground – this latter sector generated exports of some US$6 billion in 2012.
Center for technology and innovation
Monterrey has more than 30 universities, with the Monterrey Institute of Technology – Tecnológico de Monterrey – regularly ranked among the top 10 in Latin America. The institute has joint degree programs with U.S. leaders such as Carnegie-Mellon, Thunderbird, Texas A&M and Johns Hopkins, plus Brazil’s Getúlio Vargas Foundation and the Chinese University of Hong Kong. And since 2004 Monterrey has promoted a public-private initiative called “Monterrey International City of Knowledge” that encourages the formation of knowledge-based clusters in key sectors.
This outpouring of technological competence helps drive local industry and spurs innovation. The state government supports the Research and Technology Innovation Park, a 70-hectare venue for R&D centers and associated businesses, and this January the Monterrey Institute of Technology joined with soft drinks giant Femsa and local technology investment company Dharma Capital to launch the Protein Research and Development Center. Leveraging Nuevo León’s rich farming areas, the center will develop vegetable-based substitutes for animal proteins for use in foodstuffs, pharmaceuticals, cosmetics and industrial applications.
Proximity to the United States
Just two and a half hours by road from the Texas border, or twice that from San Antonio, Monterrey is ideally placed for serving the U.S. market. ‘The Economist’ magazine recently suggested that Mexico stands to gain substantial manufacturing investment as U.S. and other multinationals relocate away from China, where wages and logistics costs have risen sharply, to places closer to their major markets.
Seeking to capitalize on this advantage, the state government is promoting Interpuerto Monterrey, a 1,254-hectare customs bonded intermodal dry port just north of Monterrey. A private development with strong public backing, the Interpuerto will link directly with U.S. rail networks through Nuevo Laredo and Eagle Pass (TX). There will be free-zone manufacturing and goods can be pre-cleared for the U.S. market. Announced investments include a grain terminal, a high-security petrochemicals warehouse and a steel products terminal with capacity for 175,000 tons per year. In all, the Interpuerto could attract US$2 billion of investment, the government said.
High standard of living
Nuevo León boasts a significantly higher standard of living than the Mexican national average and Monterrey offers a lifestyle fitting for a city that is home to major corporations. The government is investing to boost urban infrastructure – Line 3 of the city’s subway is a major project within a US$6.8 billion rail investment program recently announced by Mexican President Enrique Peña Nieto. And nature is close by with the Friar’s Mountain cable car, the Garcia Cavesand hiking and biking opportunities in the Chipinique National Park.
This special report now being researched by Peninsula Press, a global communications agency, will be published with FOREIGN POLICY magazine. We will examine the traditional and emerging strengths of Nuevo León and Monterrey, putting this in the context of federal government plans to accelerate economic growth to 6% a year, create jobs, improve income distribution, combat corruption and continue the fight against drugs cartels.
The public and private sector decision-makers who comprise the sophisticated global readership of FOREIGN POLICY magazine understand that real progress requires clear and workable strategies. We will hear government and private-sector leaders about the challenges Nuevo León and Monterrey face to capitalize on their undoubted potential and to communicate this opportunity to key investors.