Innovation, South of the Border

ArturoFrancoBy Arturo Franco, Nonresident Senior Fellow with the Atlantic Council’s Adrienne Arsht Latin America Center


Silicon Valley may no longer be a phenomenon unique to the United States. Some 1,500 miles south of San Francisco, creative minds, entrepreneurs and investors have found another oasis. Guadalajara, —in the state of Jalisco— is quickly becoming a hub for innovation.


Guadalajara has positioned itself as a center of investment in technology and innovation, through a combination of government action, corporate involvement, academic excellence, and vibrant technological communities. Almost two decades ago, electronics companies including Motorola, Kodak, Intel, and IBM began to settle in Jalisco, creating the basis for  the region’s technological development. The state is also home to some of the country’s most advanced research centers, particularly in the fields of electronics, biotechnology, and genetics.


Every year, 6,000 new engineers, designers, and developers join the labor force. Jalisco’s top 20 universities attract an enormous pool of talent —including 7,000 international students— making it one of Mexico’s top educational destinations.

With more than 200 investors, eight innovation centers, and several technology and software parks, more than 2,000 startups have been launched in the last decade. The state government’s Ministry of Innovation, Science, and Technology—so far, the only one in Mexico— has adopted an “ecosystem” approach, laying the groundwork for a knowledge economy.


In 2015 alone, Jalisco hosted a series of high-profile entrepreneurship and innovation events, including Campus Party Mexico, a hackathon supported by the Inter-American Development Bank, the Startup Weekend World meeting, and the government-led Digital Creative City series.


Sadly, these kinds of developments do not seem to capture headlines north of the Rio Grande. Instead, a hateful and divisive U.S. political rhetoric surrounding Mexico seems to have become the norm. While Donald Trump threatens to build a wall and anti-immigration sentiments climb, Mexicans seem crave recognition for all that this country brings —the good, the bad, and the growing.


Already, Mexico’s growth is more a consequence of domestic initiatives to transition from a commodity-based economy to a knowledge-based one, shielding it from precisely the type of global commodities slump from which much of the emerging world is suffering today. In 1980, oil accounted for over 75 percent of Mexico’s foreign exchange earnings. Today, manufactured goods represent three out of every four export dollars. And the states of Jalisco, Queretaro, Aguascalientes and Guanajuato, where higher value-added manufacturing is taking place, have seen growth in the double-digits.


In the last five years, the federal government has committed to transitioning from manufacturing to developing products; it has doubled its funding for innovation programs to $500 million and awarded countless grants to small, high-impact startups. The automotive, aerospace, and healthcare industries, in particular, have seen a massive influx of innovative products —designs made possible through concerted efforts to minimize risk for small businesses.


While these are key investments in spurring innovation and entrepreneurship, Mexico remains lacking in the capital necessary for many of these small businesses to scale up. To be able to compete on an international scale, young companies will need an influx of venture capital, much of which may need to come from abroad. Indeed, that has begun, with Spanish companies investing more in Mexican startups than U.S.-based companies do.


An Innovator’s Journey: The Makings of Mexico’s Knowledge Economy, —published by the Atlantic Council’s Adrienne Arsht Center for Latin America—, examines how Mexican business, universities, corporations, and the public sector are fostering successful innovation-friendly frameworks and policies to turn Mexico into a real knowledge-based economy. It weaves the personal stories of innovators together with analysis of public and private sector policies designed to boost innovation.


The report shows that simply increasing investment will not be enough to maximize Mexico’s entrepreneurial potential. There is a need for greater coordination among the private sector, government, and Mexican universities. Clear government stimuli, such as tax incentives, will be key in ensuring that all relevant entities channel investment into innovative research. A recent surge of public-private partnerships throughout Mexico has begun taking the initiative in this regard, but individual enterprises should also strive to foster innovative thinking and organizational learning.


Transforming Mexico into a truly innovation-driven and knowledge-based economy still has a ways to go. But the progress achieved thus far speaks volumes to the promise for its future capabilities. A vulnerable, oil-dependent nation has, in just a few decades, really began to emerge as an innovation powerhouse and regional leader. Mexico’s most valuable commodity has always been in the minds of its ambitious citizenry. Hopefully, over the next few months, innovation and entrepreneurship will become the true driver of Mexico’s success. 


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