Episode II- Mexico City and the State of Mexico
The core of the Mexican nation. This Central region appears to be an unbreakable giant of steel in the eyes of foreign investment, when in reality, it is a window of opportunity for the rest of the Latin American market. The new episode of the Mexican region’s series; Mexico City and the State of Mexico.
Mexico City and the State of Mexico in context
Mexico City is the capital of Mexico and the oldest city in the American continent, founded in 1325. According to DataMexico.org, in 2020 Mexico City had a population of 9,209,944 inhabitants, while in the State of Mexico the population was 16,992,418 inhabitants that same year. The State of Mexico surrounds Mexico City on the west, north and east.
Both entities are situated in the heart of the nation and together they add up to more than 27.5 million potential consumers (Economic Development Secretary, 2021). The contribution of the national GDP varies between both entities, while Mexico City is the largest economy in Mexico and generates 17% of the national GDP (Gobierno de la Ciudad de México, 2021), the State of Mexico contributes 8.9%. Mexico City and its metropolitan area rank in the 3rd place for the largest GDP compared to other Latin American countries.
Being the 9th most populous metropolitan area in the world, Mexico City has the busiest international airport in Latin America with 54 direct international flights (SEDECO, 2021). Owing to their geographic location, Mexico City, and the State of Mexico have an excellent network of roads that connect with main national ports and important highways.
The State of Mexico borders with many relevant entities, such as Puebla, Queretaro, Michoacán, and Guerrero. The great geographical connectivity of the State of Mexico allows it to position itself as the most competitive hub for economic activities and development, due to the logistical advantages for trade with North and South America, Europe, and Asia (Economic Development Secretary, 2021).
Economy and Business
Indicators from the second quarter of the present year show that the central region is expected to continue with a notable gap in economic activity compared to the levels shown during the pre-pandemic years (Banco de Mexico, 2022).
However, INEGI (2022) figures of the first trimester confirm that the economic activity of this region represented 25.1% of the country’s total, with an augmentation of the primary and secondary economic activities of 7.4% and 2%.
DataMexico.org enables the comparison between Mexico City and the State of Mexico’s statistics, revealing that in the second quarter of 2022 the economically active population of Mexico City and the State of Mexico was 4.79M people and 7.77M people, respectively.
Also, the data from the same platform show, that the international sales of Mexico City in 2020 were $117B USD and, $12.2B USD in the State of Mexico. Both entities had a notable percentage growth from the previous year, being 19.9% and 18.9% respectively. Based on this data, the main destinations for international sales in 2021 for Mexico City were the United States, Canada, and Germany. While in the State of Mexico the main destinations in 2021 were the United States, Colombia, and Guatemala.
Analyzing the foreign trade of this region during the month of august 2022, the net trade balance of Mexico City was $5.66B USD and $1.01B USD for the State of Mexico. The main exported products in 2020 for both entities are products from the transport and motor-vehicle accessories and goods industry.
Whereas Mexico City is the capital of the country, it could be said that this attracts a lot of foreign investment; being a culturally rich metropolitan area, benefitting of different attractive industries. The government of Mexico City and its Economic Development Secretary (SEDECO) reveal that at least 40 countries invest in Mexico City and, that in 2019 the FDI was $8B USD, 40% more than the previous year.
Variety of industries
State of Mexico is one of the five states (next to Jalisco, Veracruz, Chihuahua, and Guanajuato) that have a transcendental weight in primary, secondary, and tertiary economic activities (Suckling & Amiel, 2022).
The State of Mexico has 111 Industrial Parks and possesses 669,981 economic units, 225,935 more than Mexico City and 322,204 more that the Jalisco region (Economic Development Secretary, 2021).
This region is home to industries of major importance to the Mexican economy. The Swiss Chamber of Commerce in Mexico reports that due to the improvement of the regulatory framework and the increase in quality certifications, Mexico has become an interesting destination for the pharmaceutical market. It is the second largest market in Latin America and, Mexico City and the State of Mexico are two of the three states where this industry generates 70,000 jobs, representing 7.2% of the manufacturing GDP (Swisscham Mexico, 2022). The importance of the chemical sector is represented by 8.8% of the value generated in this region’s economy and the 31,052 people it employs (Economic Development Secretary, 2021).
The state of Guanajuato leads the automotive sector with the quantity of investment for projects, with a total of 27 investments during the first semester of 2022, contrasting with 4 that the State of Mexico has. Nevertheless, the State of Mexico leads in generating employment in the industry (Cluster Industrial, 2022). According to the Economic Development Secretary (2021), the automotive sector in the State of Mexico employs 51, 175 people and contributes 12.7% of the value generated in the state economy.
Innovation
Many international corporations have settled in the capital, demonstrating the relevance of the Mexican ecosystem of entrepreneurs and the importance of the economic hub this region represents (Gonzalez, 2022).
Stanford Business, 2020, qualifies Mexico City as an international city where the English language is commonly spoken, there are a lot of entrepreneurial opportunities and a big chance for large investments. Kavak, the first Mexican unicorn, stands as an example of innovation and success. An online platform for buying and selling second-hand cars that after 4 years of operation reached the sum of $ 1.15B USD. To this day, Kavak is worth more than $8.7B USD and they expanded their business to Argentina and Brazil (Carrasquero, 2021).
Mexico’s City government has several plans to promote innovation and growth in this metropolitan area, specifically in the residential and urban planning sector. One of the local entrepreneurship and innovation examples is Neuchâtel Cuadrante Polanco, a new urban zone where the first data and AI sculpture in Mexico was installed. This project seeks to combine housing, commerce, and green open spaces with technology and art. The sculpture “The Eye of Mexico” works with AI algorithms, creating demographic and urban data videos (Neuchâtel, 2022)
In 2018, Mexico City’s Digital Agency for Public Innovation was created as an independent department. A tool for leading, designing, and implementing policies related to data, such as free public Wifi in the city, data analysis, and other instruments for digital governance (Bloomberg Philanthropies and OECD, 2022).
With the high demand for more software production and technology solutions, manufacturing giants like Mexico are solicited. This is a window of opportunity for the central region to exploit, since the central region is a strategic export market with logistic advantage. The State of Mexico and Mexico City are two important entities that compete in the economic hub, yet they still have a lot to offer for new industries.
Cluster Industrial. (2022). Inversión automotriz creció 44.7% en el segundo trimestre de 2022; alcanza 2,837 MDD. Retrieved from https://www.clusterindustrial.com.mx/noticia/5238/inversion-automotriz-crecio-44-7-en-el-segundo-trimestre-de-2022-alcanza-2-837-mdd
Carrasquero, R. (2021). Kavak el primer unicornio mexicano pasa a valer 8.700 MDD casi 9 unicornios. Retrieved from Kavak: https://www.kavak.com/mx/blog/kavak-el-primer-unicornio-mexicano
Castell, H. (n.d.) Ángel de la Independencia [Photograph] Retrieved from https://traveler.marriott.com/es/consejos-tendencias/lugares-para-disfrutar-de-noche-en-la-ciudad-de-mexico/
Bloomberg Philanthropies and OECD. (2022). Mexico City. Retrieved from https://cities-innovation-oecd.com/cities/mexico-city-mex/
Banco de Mexico. (2022). Regional Economic Report. Retrieved from Banco de Mexico: https://www.banxico.org.mx/publications-and-press/regional-economic-reports/%7B3976CDD6-34E2-5071-656E-CA4BDC5D7905%7D.pdf
DataMexico. (2022). Ciudad de Mexico-Estado de Mexico. Retrieved from https://datamexico.org/en/profile/geo/ciudad-de-mexico-cx?compare=mexico-em&timeNetTradeSelector=Month#foreign-direct-investment
Economic Development Secretary. (2021). Invest in the State of Mexico. Why the State of Mexico? Retrieved from https://desarrolloeconomico.edomex.gob.mx/sites/desarrolloeconomico.edomex.gob.mx/files/files/INVERSION/2_%20State%20of%20Mexico%20Brochure%2007092021.pdf
Gobierno de la Ciudad de Mexico. (2021). Mexico City economic review. Retrieved from https://www.sedeco.cdmx.gob.mx/storage/app/media/Invierte%20en%20CDMX/Mexico%20City%20Economic%20Review%20.pdf
Gonzalez, C. (2022). The startup ecosystem in Mexico’s largest entrepreneurship hubs: Mexico City, Guadalajara, and Monterrey. Retrieved from Latam List: https://latamlist.com/the-startup-ecosystem-in-mexicos-largest-entrepreneurship-hubs-mexico-city-guadalajara-and-monterrey/
INEGI. (2022). Indicador trimestral de la actividad económica estatal de México. Retrieved from https://www.inegi.org.mx/contenidos/saladeprensa/boletines/2022/itaee/itaee2022_07_Mex.pdf
Jensen, B. (2020). Mexico City — Latin America’s Future Tech Hub? Retrieved from Stanford Business: https://www.gsb.stanford.edu/insights/mexico-city-latin-americas-future-tech-hub
Neuchâtel. (2022). The Eye of Mexico. Retrieved from https://neuchatel.mx/eye-of-mexico
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Suckling, C., & Amiel, R. (2022). Regional and sectoral growth dynamics in Mexico . Retrieved from S&P Global: https://www.spglobal.com/marketintelligence/en/mi/research-analysis/regional-and-sectoral-growth-dynamics-in-mexico.html
Swisscham. (2022). Mexico Nearshoring Report. Retrieved from Swiss Mexican Chamber of Commerce & Industry: https://swisscham.mx/2022/09/26/mexico-nearshoring-report-2022-swisscham-mexico/