Demystifying Mexico's Tech Industry
By Jaime Aronowitz, Managing Director at Proximeteam
How Mexico has Become a Global IT Competitor Mexico may be known for its attractive sandy beaches, exotic cuisine and friendly and welcoming people. More recently, Mexico is also known for its great technological expertise. Its growth kicked off in the 1980s and 90s when large American manufacturers set base to take advantage of the large pool of cheap labor, geographical position as a near-shore country, and easy transportation to the world markets.
However, with the entry of China into the global scene during the late 80’s and 90s, Mexico was hit hardest as the dominant manufacturing companies moved their plants to the Asian nation due to the availability of lower wages. Some auto companies hired some of the jobless people, but more efforts were needed to bridge this gap. It was then that tech start-ups were introduced after a study was conducted on how to create employment for the skilled population. The country has since reported tremendous growth in the tech industry, now dubbed as the next Silicon Valley. Today, international business leaders, global corporations, technology companies and investors are looking in this country as the next IT power. The coming text further explains why it has emerged as a global player in the tech industry.
The country's geographic position is another bonus as it shares time zones and a border with the United States. It allows North American companies to trade efficiently with the country; in fact, more firms prefer outsourcing manufacturing expertise, business processing, and IT support to Mexico. According to the companies, the nation makes an excellent near-shore source of business due to the growing ITO ad BPO revenue and a large pool of IT and software professionals. The North American Free Trade Agreement has made trade associations between the two countries pretty smooth. NAFTA ensures US and Canadian firms trading benefits while maintaining full copyright and patent protection for their products.
A large Number of Free Trade Agreements
The country also boasts an open economy that allows tech companies like IBM and Tata Consultancy Services to set base in the country. International firms like IBM prefer trading in countries where there are minimal restrictions as to the goods and services they can export or import. The recent Trans-Pacific Partnership supported the unlimited use of overseas servers and the free flow of data across the borders. IBM's executive director of external relations in the country cited interaction with international companies helped the companies to become more global and conscious of the need to use advanced data-management systems
Ease of Transportation
The country's proximity to the US allows business executives to easily fly to and from US and Canadian cities like Miami, Austin and Toronto among others. In fact, more than 300 daily flights are connecting Mexico with its northern neighbors. The executives can fly to hold meetings in the satellite companies, inspect operations, and go home on the same day.
Large Talent Pool
The rising talent pool dominated by engineering students has spawned a growing tech sector that comprises young, skilled, and passionate individuals. It makes the country ripe for investment by foreigners and domestic investors. A report by the Mexico News Daily showed an estimated $120 million was invested in over 300 high-tech start-ups over the last four years.
The country is known to graduate over 100,000 engineers every year. The talent spreads out across the country with smaller cities like Tijuana, Merida, and Aguascalientes, providing plenty of untapped talent. Guadalajara, Jalisco's capital and second largest city in Mexico, is regarded as the country's higher education center as it has some of the best public and private universities that produce science, technology, and mathematics graduates. The engineers and other professionals have won several global awards and attracted international appeal for their mastery of electronic and robotic research.
Increasing Number of Tech Sector Start-Ups
Public policies, universities and private sector initiatives during the last 20+ years have supported competitive software development programs which are already showing results and paying dividends. Take for example the Creative Digital City, an area of over 100,000 square feet in Guadalajara created to support and nurture the growth of tech startup companies. This high-tech complex which started off as a working space for small tech companies includes today firms that have grown in scale, producing tech products worth more than $21 billion worldwide.
What the Tech Boom Means for this nation and the World
Recent studies show that the country has the 15th largest economy in the world. The exponential growth is a result of the booming technological development and tech startups. In fact, it has not only grown its IT ability but is now outsourcing IT and business process industries to other countries. A 2018 report showed that it expects an 11% annual growth in both sectors to approach $26 billion in value by the end of the year. Experts predict that the country will be the fifth largest economy by the year 2050. The Fintech economy is another outcome of the country's booming tech expertise and entrepreneurial talent as major finance and banking institutions look for ways to enhance operational efficiency. Additionally, Fintech companies help financial institutions and banks reach the unbanked population, reduce costs, and meet customer demands more efficiently.