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News Article

New Alliance Aims to Revive the Bajio's Economy

By Rodrigo Brugada | Tue, 06/01/2021 - 17:08

Uncertainty and insecurity have set back Mexico’s Bajio region, a key manufacturing hub. Through the El Gran Bajio alliance, local businesses aim to regain the region’s position in Mexico and abroad.

 

The Bajio region, located in Mexico’s central area, has historically been a thriving center for economic activities. The region is comprised of the states of Queretaro, Guanajuato, San Luis Potosi, Aguascalientes and part of Michoacan, Jalisco, and Zacatecas. The region has been one of Mexico’s crucial extraction and manufacturing hubs since the establishment of Spanish colonizers. It had enjoyed growth rates of more than twice the national average for the past 20 years but recently started seeing a decrease in growth that started before the current pandemic. Instead of its average annual 4-5 percent growth, the region’s economy shrank during 2019-20.

Business people claimed that President Andrés Manuel Lopez Obrador’s unfriendly policies towards investors were behind the contraction. Among many of the policies often cited by local businesses are the cancellation of the new airport in Mexico City and the novel energy laws that give more power to state-owned companies. These changes have projected uncertainty and are making it increasingly difficult for companies to invest in the country, claim local businesses. Complaints also blame the government’s decision to stop public tenders and reduce public expenditures to fight corruption. 

The pandemic made a bad situation worse. During its course, millions of jobs were lost and many businesses faced a never-seen-before uncertainty. This led to a country-wide decrease in economic growth, which also impacted regional growth. These conditions led to a reduction of foreign investment in Mexico during the 1Q2021, which fell from US$16.75 billion to US$11,86 billion.  According to Banxico, this means a decrease of 29 percent compared to the same period last year.

Another critical factor hurting the Bajio is the rising violence. While the whole country lives in insecure conditions, several states near the country’s center have reported a higher incidence of violent crimes. Such is the case of states like Guanajuato and Michoacan, making business conditions at the Bajio region less favorable than in the past. 

Now, local businesses have teamed up and created a league called El Gran Bajio. This league is a private initiative that aims to articulate the region’s business community and position the Bajio nationally and internationally. It seeks to integrate leading business people in the area and build a network that helps the region develop big projects, attract investment, create strategic partnerships locally and globally and enter new markets. 

As discussed in the Financial Times, this last point is particularly relevant with the recent transition from NAFTA to USMCA. Free trade in the North American region has historically meant more manufacturing opportunities and the Bajio has been one of the most prominent players in the country to ensure supply. For example, the Bajio region has a booming auto sector, housing multiple car manufacturing plants. This new initiative might provide more and better opportunities for existing companies and might mean new opportunities for innovation and venture capital. 

The data used in this article was sourced from:  
Nearshore Americas, Banxico, Nexos, El Gran Bajío, Financial Times
Rodrigo Brugada Rodrigo Brugada Journalist & Industry Analyst