Foreign Investment Booming In The Other Baja

We are in the state of Baja Sur, not Baja

The Mexican government has free trade agreements of one kind or another with 46 different countries on three continents including with NAFTA, for now. In comparison, the U.S. has only 20. And, with NAFTA changes looming over Mexico, trade officials here are hustling out making more arrangements. For instance, with Trump’s threats of imposing tariffs on corn, Mexican farmers are making deals with Brazil. Mexico has access to 60% of the world’s GDP (That’s gross domestic product, a monetary measure of the market value of all goods and services). According to the 2017 World Investment Report, Mexico is one of the emerging economies most open to foreign investment.

Covering approximately 3.5% of Mexico’s overall land mass, the Baja Peninsula, consisting of two states, Baja and Baja Sur, (south), this total area is a real asset to the national economy and currently accounts for around 5% of the country’s foreign investment. The subject matter surrounding this can be a little dry but as I delved deeper, I became fascinated with how it all works and the current levels of investment particularly from the USA.

Each state in Mexico offers relatively liberal foreign investment rules often with little difference to those imposed on a national company. In Baja California the state government offers several temporary exemptions to help companies start the ball rolling, including reduction on taxes for real estate purchase and special incentives for research and technological development projects. They welcome foreign investment particularly when it contributes to increasing Mexican employment, exports, and higher levels of learning in the field of technology. Baja’s unique position sharing a border with California and Arizona and being the closest Mexican state for access to Asia gives it a big advantage. It’s all about looking after their country and maybe, on the odd occasion or two – themselves!

Five of Baja’s main cities already have well established investment. Tijuana, with its direct border crossing into the USA has attracted companies such as Bose, Panasonic, Toyota, Hyundai, Philips and Samsung. State capital Mexicali, which borders to the north with California and Arizona, has long been a significant contributor to the state’s overall economic development and hosts international companies such as Bosch, Kellogg’s, LG, Honeywell and Rockwell Collins (no relative!).

Ensenada, probably best known for its wine production, also controls the state’s largest and most important sea port with direct access to the Pacific Ocean which has led to companies such as Softlek, ICU Medical Inc, Huchinson, Schlage and Navico to plant roots in the area.

Playa de Rosarito, even though it mainly brings dollars through the doors with its beaches and tourism, has an attractive infrastructure for specialised manufacturing activities such as electronics, textiles and automotive which has led to investment from Sharp, BWS, Tensho and SE-GI.

In 2017 Baja California received over more than 1.4 trillion dollars in foreign direct investment, most of which was focused on the manufacturing industry. 

This year has already seen success stories such as $154 million dollars of further investment to their Tijuana manufacturing plant by Esterline Corporation. They have been operating since 1980 and already employ over 1000 people. This new investment will create a further 400 jobs. A 2018 European tour designed to promote foreign investors to Baja has also led to some lucrative deals for the state, which will reap the rewards later in the year and on-going into 2019.

Baja Sur does not have all this manufacturing, as we’re 1000 two-lane miles from the border, we don’t have enough employees as it is, and we are off Mexico’s electricity grid, making energy ruinously expensive. We would be screwed if not for the 70% of our economy that’s tourist based.

With the impending AMLO government coming in, a few foreign investors are holding back to see what will happen. President elect Lopez Obrador has stated that he is committed to retaining foreign investment legislation and fully recognises that it is needed to help Mexico continue its growth and journey into the 21st century, but he is a populist and even threatened to kill some oil deals Mexico has made during the current administration. His determination to clean up corruption will be a further incentive to investors that may be watching on the side-lines.

As they say – we’ll just have to wait and see and work through what is bound to be a complicated transitional phase while we observe what transpires, but continuing investment alongside a thriving tourist economy points to a future that is looking bright for Baja!