San Luis Potosi Lives Uo to Its ReputationMon, 09/01/2014 - 11:03
Q: How did San Luis Potosi evolve to become a center of automotive manufacturing?
FM: San Luis Potosi is one of the states with the oldest history as a center for manufacturing activities. The state was founded as a mining center, but around 60 years ago, during the boom in the manufacturing of hard metal all over Mexico, San Luis Potosi benefited from being midway between the Valley of Mexico and the north. Public industrial zones were developed in San Luis Potosi under presidential decrees, accompanied by an active policy to attract companies here. At one point, our collection of industrial zones was the largest in Mexico. Having a large metal mechanic industry along with some chemical manufacturing made San Luis Potosi an ideal location for automotive manufacturers. We are not the biggest hub in the country but we are one of the most strategic. Today, we are really focusing on creating long-term sustainable growth by establishing incentives for medium to long-term automotive investment. This focus has paid off with our success in bringing BMW to San Luis Potosi, and shows the well-earned trust that automotive leaders have in us.
Q: Most central states credit their unique attractiveness to their geographical location. How do you stand out from your immediate neighbors?
PF: Our main differentiator is that we have one of the most important roads running through the state, which is Highway 57, also known as the NAFTA highway. Highway 70, which connects to the ports on both the Gulf of Mexico and the Pacific Ocean, also crosses San Luis Potosi, giving the state direct access to the ports of Lazaro Cardenas, Altamira, and Veracruz. It is true that we are in a very good geographical location, but we also have very strong infrastructure to support that. We are known as the ‘two hour city’ as we are just two hours from Aguascalientes, Guanajuato, and Zacatecas. That connection really helps facilitate companies to take optimal advantage of the developments taking place in the Bajio region. We are also working closely with Kansas City Southern de Mexico, which last year announced a rail connection from San Luis Potosi to the railway line serving the port of Veracruz. The connection to the Altamira Port is also being worked on. We do currently have a connection but we are expanding the height of the tunnels to accommodate double height container units. KCSM has its largest intermodal station in San Luis Potosi, which allows for close collaboration.
FM: We do not believe in extremely fast growth as it is very difficult for infrastructural and social development to take place at the same pace. Problems arise with housing, labor availability, and even with security. The development of San Luis Potosi has been extremely steady and that means that we are able to offer a good quality of life and a supportive environment to the people that live here.
Q: To what extent do you compete with neighboring states?
FM: San Luis Potosi believes in regional development, and we do not compete with our neighbors. Competing with neighboring states can push up the cost of incentives, for example, which does not benefit any of us. Without regional development none of the states will succeed, we need each other and there is enough industry for all of us to develop. Certain investments fit better in other locations than ours, and vice versa, and we have to be able to recognize that. As some investments are more strategic than others, we should have enough communication with other economic development bodies to work together. We have very good communications with the states surrounding us.
Q: Does ample room for growth remain considering the number of industrial parks in San Luis Potosi that are already at peak capacity?
PF: Some of the private parks, such as the one in Colinas de San Luis, have seen a lot of movement in the last two years. We also have private investors looking to develop industrial parks in the metropolitan area. We are also developing more industrial space in Matehuala, which has universities, technical schools, and is two hours closer to the north than the city of San Luis Potosi. PEMEX is developing a pipeline that will pass just 7km from Matehuala, and that presents new opportunities for this land to be developed. It is therefore an area of interest for development land from private investment.
Q: How has the presence of GM shaped San Luis Potosi, and how useful was it in attracting BMW?
FM: GM arrived during a very difficult time and the plant was designed to have a larger capacity than it has today. During the first few years, the plant produced no more than 45,000 cars. In recent years, this has increased with the introduction of the Chevrolet Aveo, the best-selling car in Latin America, as well as trucks. As of today it is producing close to 130,000 cars and 270,000 transmissions. There is still room for growth in that plant. We have recognized that San Luis Potosi still needs to invest a lot in supporting that plant to convince GM that is should bring more production to Mexico. We believe there is also room for another OEM, given our infrastructure and labor support. We also have a harmonious labor environment and have experienced no strikes. This is not to say that problems do not arise, but union leaders, companies, and governmental bodies have worked very closely to ensure that agreements are reached and problems prevented. The BMW investment will generate 1,500 jobs by 2019, which will only serve to further encourage our economy, and the accompanying suppliers will reinforce the state’s already solid supplier base. BMW already has doubled its number of Mexican suppliers to over 100 over the last four years, and more opportunities are there for the taking.
Q: What is really needed to attract a major OEM, and why do you disagree with providing incentives?
FM: Attracting an OEM cannot be compared to attracting a supplier in terms of the investment it represents for a state. Before investing to try and attract an OEM, every state should evaluate properly how much it has invested in the past, and how adapted it is to the manufacturing industry in order to support any investment made. We have proven to many companies that we have the conditions in San Luis Potosi to support automotive companies. Incentives have to be offered in a very intelligent way and need to be assessed carefully in terms of value and return on investment. Assisting a company is very important to us, but we want to see companies expand beyond an initial investment incentive. Expansion means a positive result was achieved, and it means that companies found what they were looking for. We believe incentives need to be tailored to the individual company rather than sweeping incentive offerings. Certain companies will require very specific incentives, and the state will do the best it can to help them establish themselves.
PF: Right now we are working on a development center for Tool & Dye, which is being supported by CONACYT. INADEM supported this during the first stage, and CIATEC is now starting the center. CONACYT is studying the way this is being done, which will benefit all of the central states and the automotive industry. It is difficult to find Tool & Dye manufacturers in Mexico. We are working with ProMéxico to host a Tool & Dye conference that will connect suppliers from all over the world and Mexico to help develop this segment.