Zacatecas Spotlight

Zacatecas, Mexico’s tenth-largest state, has long been associated with the country’s mining and agriculture industries, accounting for some 21% of Mexico’s gold production and 53.2% of its silver. Recently however, the state has begun to receive attention from the automotive and aerospace sectors with the likes of Ahresty, Delphi, Entrada Group, and Yusa already having invested there. The Asian automotive industry in particular has been taking advantage of Zacatecas’s proximity to the many major investments taking place in and around Mexico’s Bajio region. In April 2014, the Zacatecas government announced that 2014 would see US$134 million invested in the state by five automotive companies from Japan, South Korea, and China, generating 1,900 jobs in total. The state is particularly attractive to Tier 2 and 3 companies, who commonly require greater support and attractive rental rates. Takeshi Yoshida, the President of Koide, a Japanese supplier of auto parts for Yusa, outlines some of Zacatecas’s attractive features, saying that “Zacatecas offered more incentives than other states. We also aim to remain a medium-sized company with around 200 staff, so being in Zacatecas means we do not have to compete for personnel with larger companies in major industrial clusters. Over three years here, we have managed to keep our turnover of staff very low compared to companies in nearby states.” Koide established its plant in Zacatecas in 2011 exclusively to serve its major customer Yusa, but the wealth of opportunities being presented in the region has led to the company investing US$7.5 million in expanding its current capacity. “We thought we would have to double or triple our initial investment within three years but it became necessary to do so after just two years,” explains Yoshida.

Entrada Group, a company providing shelter services to a host of clients, invested in Fresnillo in Zacatecas after recognizing its potential to compete with China in terms of labor costs. Entrada’s Vice President of Business Development, Douglas Donahue, explains that many foreign automotive suppliers have chosen to establish under a shelter company in Zacatecas solely to provide for Mexican based clients that demanded they be closer. As time passes, such suppliers have gradually been taking greater advantage of the state’s strengths. “They come here with a basic concept, wanting to access cheap labor and to be close to their clients. However, they start moving on to more sophisticated processes, such as seeing up joint programs with local technical schools and universities to develop employees,” says Donahue. The news that Zacatecas is becoming more than just a mining and agricultural state will of course take time to reach a wider audience, and the state must continue to invest in modernizing. It seems certain that the state will continue to benefit from the trickle-down effect of surrounding Bajio investment, and its authorities would do well to position Zacatecas shrewdly to seize on any long-term opportunities that come its way.