Baja California’s privileged location and developed chain of services have created a broad spectrum of benefits and opportunities for different sectors in the country to contribute to the aerospace area. Even though the aerospace industry was one of the most affected by the COVID-19 pandemic, the forecast regarding new opportunities is optimistic. "We are aligning our operations to the requirements of our customers for the next few years. There will be increases in production as air traffic recovers in the next couple of years. People are slowly flying again. We need to align ourselves with the industry and make sure that we can meet the increasing demand," said Bijan Latifzadeh, Director Global Strategic Sourcing Mexico Regional Office at Raytheon Technologies, Collins Aerospace, to MBN.
Recovery Through Innovation
Baja California is highly recognized within the aerospace industry as a quality manufacturer. "Baja California was the cradle of the aerospace industry in maquila export dynamics,” said Tomás Sibaja, President of the Baja California Cluster. The state has set its mark as the sixth larger aerospace supplier to the US in 2019. Now, the state wants to push its limits and become a technology and innovation hub. “We have already gone through the experience of developing ourselves abroad. We think this is the moment to begin developing our own initiatives and generating even more value for our state and Mexico in general. The future is in technology, so the cluster fuels and promotes the brainstorming of innovative projects trying to solve everyday challenges," he adds.
Baja California has led the Mexican aerospace industry for five decades. The 2021 State Gazette of the Advisory Council of Baja California states the COVID-19 pandemic demonstrated the state’s strength and commitment to manufacturing operations, which will now drive greater investments to the benefit of communities. The goal now, according to Sibaja, is to "boost the national industry's participation and provide a higher percentage of national content so that we stop being a place that is a secondary stop and more a natural ally in a healthy ecosystem.”
Employment, Investment Challenges
The state reported an increase in GDP of 3.7 percent during 4Q20 against 4Q19, mainly led by primary and secondary activities that grew 8.3 and 10 percent, respectively. Meanwhile, tertiary activities fell 0.5 percent, shows data from INEGI’s Quarterly Indicator of State Economic Activity (ITAEE). Specifically in Baja California, aerospace companies were not hit as hard by the pandemic as in other regions. "Although aerospace in Mexico was not labeled essential at the beginning of the pandemic, we were able to continue operating because corporations in the US required our services. We sent a letter to Mexico's federal government and obtained a special permit to operate on a case-by-case basis. There was a time when we were operating at 200 percent while other states were at a standstill," says Sibaja.
Despite the good results, 2020 was a challenging year for the industry. Foreign direct investment (FDI) in Baja California plummeted 59.8 percent year-on-year in 1Q21. The total amount of FDI in the state was US$295.2 million, the lowest amount documented in six years for a first quarter, according to Sibaja. These numbers also include the economic support provided by the government of Baja California. However, based on the Expenditure Budget for 2021, all resources were destined to education, integration and social welfare, infrastructure, agriculture, sustainable economy and tourism and health, which means that the aerospace industry is not currently considered for government support.
In terms of employment, jobs in the Baja California exporting manufacturing industry fell from 336,602 in February to 334,589 in March 2020 and only began to regain strength in June 2020. However, by January 2021, the entity already showed growth with 26,356 jobs created, as shown in the official 2021 numbers of The College of the Northern Border.
R&D Opportunities Ahead
Opportunities abound for Mexico to develop its position in the market. However, a stronger focus on innovation and R&D is necessary to stand out, said Latifzadeh. "Mexico needs to continue to support companies that focus on advanced technology and R&D for the aerospace industry. The country also needs to work closely with local and US aerospace associations. Mexico has FEMIA, which needs to work with its counterparts in the US and Canada.”
A change in the industry’s model requires an adjustment in the strategies to support entrepreneurship and innovation policies in Mexico, among them those that affect access to financing and the structuring of operation and execution processes inherent to creative industries and that have an impact on human security and social well-being, as stated in "Elections in the States and the Northern Border, Some Scenarios 2020-2021" report by CONACYT.
In the case of Baja California, companies can take advantage of technology and new talent opportunities to strengthen the industry even further. According to Sibaja, this is what will move the aerospace industry forward, "Today, we cannot be oblivious to two important elements: technology and people, specifically younger talent. When we combine elements of technology with new talent, the result is creativity and disruption. It has been young people who have taken corporations, companies and SMEs forward during the COVID-19 pandemic because they understand digital services and they have been the ones to help us migrate toward new technologies.”
The state has worked on making technology available and approachable to everyone through trainings with Airbus and a recent alliance with Specialized Engineering Services to open the market toward simulation technology. These efforts have not only come from the cluster, however. Other players like Universidad Autónoma de Baja California (UABC) have also devised programs to support the industry, including a plan for aerospace engineering. Companies like Collins Aerospace have also tried to bring technology development to Baja California to develop and improve their local processes. "We want to become self-sufficient while actively participating with other countries to become innovators on our own merit. It seems to us that if we really want to transform this country, we all have to take risks and this is one of them. However, it is a risk that we think is worth taking. We need to be sustainable and support technology initiatives to have an industry that delivers sought-after products throughout the world," says Sibaja.