Gustavo Puente
Ministry of Economic Development of San Luis Potosí (SEDECO)
View from the Top

Keeping Pace with a Thriving Industry

Fri, 09/01/2017 - 11:35

Q: How much does the automotive sector contribute to San Luis Potosi’s GDP and growth potential?

A: The manufacturing industry in San Luis Potosi, of which automotive is a major part, represents 25 percent of the state’s GDP. Automotive specifically makes up almost 7 percent of the total, more than double what it was 10 years ago. In the rest of the country, manufacturing accounts on average for 18 percent of GDP. This, teamed with the rapid expansion in automotive operations, shows that San Luis Potosi is industry-focused.

Q: Which projects have boosted quality of life for San Luis Potosi’s residents?

A: We estimate 90,000 people are employed by the automotive industry and projections for the next three to four years estimate 30,000 new jobs will be created during our term. The administration plans to close its six-year term with 120,000 people specifically employed in the automotive industry by 2021. We have broken records switching people from the informal to the formal labor market. In July 2017, we registered 417,546 employees with social security across all industries, 41,463 of whom were newly registered workers in the current administration. In the first year of this administration, inaugurated in September 2015, the state received investments totaling US$1.7 billion, which is equal to what Ford was expected to invest here. In our second year in office we reached US$2 billion.

Q: How will the state take advantage of the supply chain that was put in place before Ford canceled its plant?

A: The investment plan and cancellation happened so quickly that few companies had time to establish new operations in preparation. The majority had not even purchased land because choosing a location is often the most complicated step for company expansions, so the effect of Ford’s cancellation was limited. Eight companies canceled their expected projects in San Luis Potosi but at least six more went on to establish a relationship with BMW.

Q: To what extent do states compete for automotive investments or collaborate to boost the country’s competitiveness?

A: We are so close that it is hard for each state to specialize in just one area of the industry, and we do not need to if we work together. Toyota, Honda and Mazda are next door in Guanajuato, Aguascalientes is home to a huge Nissan plant, Puebla is a growing cluster and home to Volkswagen, and even though Queretaro does not have any OEMs, there are vast supply-chain operations established there so being located in the Bajio region is a prudent decision for any automotive company. Within less than 300km of San Luis Potosi, seven OEMs have facilities. As a result, the supply chain has developed so that within 250km, companies can find 836 automotive suppliers covering Tier 1, 2 and 3 operations. We are not far from FCA in Toluca nor from the capital city where most corporate headquarters are located. If a company plans to invest in Mexico, the Bajio is a better bet than Tijuana or Monterrey, for example, which is the reason behind the central region’s impressive growth.

Q: How is the state building infrastructure and facilities to keep up with rapid industry growth?

A: As a state, San Luis Potosi grew 3.1 percent in 2016 while Mexico’s growth reached 2.3 percent. Based on our R&D expansions and the rate of investment we have already seen, we estimate 3.3 percent growth in the state by the end of 2017 while the country is projecting 1.5 percent. Traffic is increasing in the locality and companies sometimes misdiagnose a lack of employee mobility as a lack of available workforce. We need to create solutions to get the skilled population to the many workplaces that are opening. In response, the government is implementing a mobility plan that will improve connections with industrial zones and Mexico City to the southeast. This will involve a MX$3 billion (US$170 million)investment. We have already started creating some bridges with the federal government’s help. Government and state concessions will hopefully begin 70-80 percent of the project and complete it by the end of the administrative term, funds permitting.