Private Sector Needs Digital Industrial Policy to Succeed

Several key industrial organizations in Mexico are advocating for the creation of an industrial policy focused on the digital environment to seize the opportunities created by nearshoring.

The National Institute for Industrial Development and Digital Transformation (INADI) says that Mexico needs a comprehensive industrial strategy to seize the historic development opportunities expected from nearshoring. The lack of this policy would expose the country to sustainability risks and perpetuate a maquiladora dynamic lacking national content, argues the institute. 

On the other hand, the Economic Commission for Latin America and the Caribbean (ECLAC) highlights that industrial policy is a crucial component of any sustainable development strategy. This policy should close the technological gap between developed and developing countries, guide innovation and technology diffusion processes, and promote productive diversification to encourage employment while decoupling growth from carbon emissions and predatory resource use. Static comparative advantages tend to reinforce existing unsustainable technological pathways, making industrial policies central to accelerating technical progress and steering it toward sustainability goals.

Since 2023, Mexico’s Business Coordinating Council (CCE) has proposed the creation of a Mexican Digital Industrial Policy System. This system would bring together public, private, social, and academic sectors around a major digital industrial development project that would address education, science, and technology, as well as government, connectivity, and digital industrial transformation. The goal of such a policy would be to enhance human welfare with a commitment to sustainability and social well-being. The CCE’s proposal includes establishing a National Digital Industrial Council, signing a National Agreement, developing a National Digital Industrial Plan for 2024-2040, allocating a sustainable budget, creating relevant legislation, and forming an Evaluation Committee.

The economic goals of this proposal include achieving an average annual growth rate of 5% to double GDP in 15 years, increasing the national content of exports to 40% by 2040, raising the share of global manufacturing value-added to 6%, increasing investment as a share of GDP to 35%, and reaching 6% of GDP in financing through Development Banks.

Challenges and Opportunities for Mexico

Embracing a new digital industrial development is one of the most significant challenges for Mexico amid the growing digital economy, which already accounts for 25% of the global economy, says Francisco Cervantes, President, CCE. ECLAC estimates that Mexico’s economic activity will increase by 1.9% in real terms in 2024, driven mainly by the economic slowdown in the United States and slower consumption and investment in Mexico.

Cervantes says that significant political changes are underway in Mexico, with one of President-elect Claudia Sheinbaum’s key proposals being the development of a digital industrial policy 

“There can be no nearshoring without an industrial policy; it is essential to integrate all states and SMEs into this opportunity,” says Alejandro Malagón, President, CONCAMIN. He suggests five key factors to enhance industrial policy: 

1. Increase investment spending on infrastructure. Public sector infrastructure investment in Mexico stands below 2.2%, and it should be increased to 5%.

2. Allow the private sector to undertake self-generation and cogeneration electricity projects, and prioritize the use of green energy.

3. Reactivate development banking with funding programs that guarantee support for Micro, Small, and Medium Enterprises (MSMEs).

4. Capitalize on Mexico's network of trade agreements and strengthen national value chains.

5. Implement a national strategy for innovation and digitalization.

“A national strategy for innovation and digitalization must be implemented, integrating digital transformation with industrial development. Currently, only 30-40% of Mexican industry is digitized, presenting a significant challenge and opportunity,” says Arturo Oropeza, President, INADI.

Strategic Focus Areas

Defining a successful digital industrial policy will require addressing telecommunications, supporting digital transformation with sustainable energy, and ensuring alignment with global sustainability goals, says Javier Juárez, Commissioner, IFT. This will involve reducing the digital divide, as over 50% of Mexicans over the age of six do not use the internet.

The UN outlines four global megatrends in industrial development: the reorganization of global value chains (including nearshoring), the energy transition, the fourth and fifth industrial revolutions driven by digitalization, and significant demographic shifts, including the imminent loss of the demographic dividend in countries like Mexico.

Bridging the gender gap in the industrial sector is also essential, as women represent only 38% of the industrial workforce. Addressing the underrepresentation of women and other groups in leadership positions within the industry is crucial for realizing the potential of a modern industrial policy aligned with sustainable development goals.