Nova workboard

a blog from young economists at Nova SBE

Building a path for sustainable economic growth – The Case of Tijuana

When you think about the city of Tijuana, the first words that come to your mind are likely to be either ‘Tequila’ or ‘Drug Cartels’. However, Tijuana has recently become the world hub for flat-screen TVs and is now starting to attract different engineering-related industries from Automotive and Robotics to Medical Equipment. In order to keep investment flowing in, the city has given a great example on how to benefit from comparative advantages while focusing on improving its downturns.

The first steps for development in Tijuana started with the successful installment of major companies (essentially Japanese) that produced to the American market. Companies opted to take advantage of the shorter supply chain for manufacturing goods in Mexico rather than outsourcing to the Far East. Even though costs are not as low as in some Asian countries, the human capital is unarguably more advanced (more than 100.000 engineers graduate per year), thus resulting in a better product quality.

As the interest for investing in the city grew, the local government started enacting programs – from state tax incentives (for Start-Ups and expansion programs) to partial funding of technological R&D and infrastructure strengthening – to improve the conditions for firm’s installment.

The government doesn’t create work; it’s the private sector, but the government allows investment in infrastructure, security, and schooling. In other words, we work together.” – Jorge Astiazarán, mayor of Tijuana. (i)

One can state that attractive tax programs and good infrastructures are fundamental but not sufficient to convince investors. In fact, safety and a good social environment are also needed.

Based on this, a major focus has been given to improve the quality of life in the most violent and problematic neighborhoods – not only in Tijuana but throughout the country – with an estimated $9 billion program. The program aims to make the more disfavored feel respected instead of marginalized. In that way, it is expected that youngsters have the tools and, more importantly, the belief that they can become a part of society – and not thinking crime is the only option they have. This is being done by improving access to schooling, construction of public parks, organization of sports events and festivals; and, moreover, the implementation of more innovative and exquisite ideas such as the promotion of urban street art, for example.

Clearly, it is early to evaluate the success of these policies but since the city is creating a cool and positive hype around itself while keeping attractiveness for investors and forming skilled workers, there are reasons to be optimistic about the future. In the end, this may be key to create a bigger consumer class in Mexico and help the country entering the big league (of developed economies).

 “There is the feeling that the city has retaken itself,” – Teddy Cruz, architect and professor at the University of California, whose work has examined Tijuana – “There’s a kind of a vibrancy that is really unique in recent times. There’s something about the city taking back its spaces.” (ii)

Quotes:

(i) – http://www.foreignaffairs.com/about-us/sponsors/mexicos-best-kept-secret-tijuana

(ii) – http://www.nytimes.com/2012/09/23/travel/tijuana-rebuilds-on-its-art.html?_r=0

References:

http://www.economist.com/news/americas/21588071-having-decided-play-down-fight-against-drug-kingpins-enrique-pe-nieto-has-yet-come

http://www.nytimes.com/2013/01/27/opinion/sunday/the-tijuana-connection-a-template-for-growth.html?pagewanted=all

http://tijuanaedc.org/how-to-start/government-incentives

http://mexicanlawblog.com/san-diego-tijuana-a-regional-economy-of-the-future/

http://www.theguardian.com/world/2012/dec/18/tijuana-leads-way-mexico

http://www.npr.org/blogs/codeswitch/2014/04/22/304592761/more-art-less-tequila-in-tijuana-spring-break

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Author: studentnovasbe

Master student in Nova Sbe

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