Opportunities Are Coming, Can Baja California Seize Them?

Is Baja California having too much of a good thing? The state is growing at an accelerated pace, with an increasing number of companies investing in existing facilities or opening new ones, says Ossie Díaz, Operations Director of TACNA. This is posing a problem, he says, because the state cannot easily accommodate them.

Baja California is among the leading recipients of FDI in Mexico. With US$1.47 billion, it was the sixth-largest recipient of FDI in 2016, according to the Ministry of Economy, and is expected to receive US$2.7 billion in 2017, according to the Ministry of Sustainable Development of Tijuana, which says that most of this investment will be comming from expansions and new companies.

Salary increases, to be applied in California in 2018, and US federal reforms aimed at curtailing illegal immigration are among the factors forcing companies to look at relocating to the state, says Díaz. “Companies in California are trying to compete with China so they are finding themselves needing to move their operations to a cheaper zone to remain competitive,” says Díaz. “These companies are now looking to other options to reduce their costs and coming to Mexico is a good alternative.” However, he says the state is not ready for them due to a lack of labor and industrial real estate. “There is 2.3 percent vacancy for industrial buildings,” says Díaz.

TACNA has elaborated an ambitious strategy to expand its existing real estate and even to build its own industrial park. The shelter currently owns 70,000ft2 next to its main offices where it plans to continue building industrial facilities. The shelter leases approximately 3.1 million ft2 in many buildings spread throughout the state for 35 companies in different manufacturing sectors. Over the past five years,

TACNA has grown more than 250 percent and by 2017 the company had over 5,000 employees. The shelter is now present in Tecate, Tijuana and Ensenada and plans to expand into Mexicali. TACNA works with many different maquiladoras, which make everything from gun grips to sporting goods, from medical equipment to retail products. In its industrial park, TACNA plans to incorporate all types of companies but will focus on foreign entities. The park does not yet have a specific location or launch date, but Díaz says that it will be built “sooner rather than later; maybe we will begin building in 2019.” The first challenge, he says, will be to find an appropriate land parcel on which to build the park. The company is closely working with its clients to identify and address their needs. “We are planning to build mostly 150,000ft2 buildings, which can be divided for clients that need less space.”

A lack of workforce is another hurdle that must be overcome. To address this, TACNA implemented an initiative to incorporate into the local workforce Haitians who had recently arrived to the state. Thanks to this program, area Haitians received a work visa and quickly took up employment in TACNA’s companies. “As soon as they acquire a visa we provide them a job. They are excellent workers who only want to support their families. They also have very low turnover,” Díaz says.

Additionally, the shelter supported a state program to train individuals having only a high-school education as technicians for machining or molding to support the aerospace sector. “Baja California spends 50 percent of its budget on education, which translates into generations of many technicians and engineers. The state can generate the necessary human capital and the technological capabilities to continue supporting the sector.”

One area of opportunity for TACNA as the state grows is contract manufacturing, for which there is a pressing need as many expanding companies cannot increase production in their existing facilities due to internal policies that force them to look for subcontractors. “This is an advantage for us as we are the only shelter in the state with the capabilities for contract manufacturing,” explains Díaz. TACNA has a versatile manufacturing plant which produces silicon hoses and car dashes, but the company's manufacturing services can be offered to many industries.