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Mexico City Business Clusters Generating Significant Advantages

By Fadlala Akabani Hneide - Mexico City Ministry of Economic Development
Minister of Economic Development


By Fadlala Akabani | Secretary of Economy Development - Wed, 05/31/2023 - 11:00

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Mexico City is a bustling hub of economic activity. One of the key features of this metropolis is the existence of business clusters, which have a significant impact on the city's economy. In this article, we will explore these business clusters, their effects, and the advantages they bring to Mexico City. 

Business clusters are groups of companies that operate within the same industry and geographical location. It is an organizational model of interconnected companies, specialized providers, service providers in related activities, universities, business associations, and government institutions, among others. The agglomeration economies generated by the proximity of organizations facilitate the development of vertical (purchase-sale) and horizontal (exchange of resources, technologies, and skills) relations. Collaboration with each other helps to improve productivity, competitiveness, and innovation in an economy. Clusters can be found in various sectors, such as manufacturing, technology, and services, with significant positive effects on the economy, society, environment and technology.

One of the primary economic effects of clusters is that they promote specialization. When companies within the same industry and geographical location work together, they can specialize in different aspects of the industry, which allows them to become more efficient and competitive. Within a business cluster, some companies may focus on marketing and distribution while others may specialize in product development and manufacturing. This specialization can lead to increased innovation and productivity, which can help the companies within the cluster to compete more effectively in the global marketplace. For example, the Food and Beverages Industry Cluster located in the Vallejo industrial zone of Azcapotzalco borough concentrates about 641 companies that employ 6,544 workers. While global companies like Bimbo, Coca-Cola and Sabritas focus on product design, manufacturing and distribution, they have specialized local SME suppliers for raw materials and packaging, thus contributing to the development of new products and services, as well as of the value chain.

Another economic effect of business clusters is that they can lead to cost savings. Companies within a cluster can share resources and infrastructure, which can reduce their overall operating costs. For example, manufacturing companies in a cluster may share a warehouse or logistics services, which can help to reduce their transportation costs. Such is the case of the Textile Cluster in the Granjas Mexico industrial zone in Iztacalco borough, which concentrates 103 textile and apparel manufacturers employing around 2,655 workers. These cost savings can be passed onto customers, making the companies within the cluster more competitive and attractive to consumers.

Clusters also have a positive impact on employment. When companies within a cluster grow and expand, they often create new job opportunities. This can lead to increased employment within the local community, which can help to stimulate economic growth and development. Additionally, when companies within a cluster work together, they can create a more robust talent pool, which can lead to higher-quality job candidates and a more skilled workforce. For instance, the Information Technology Cluster led by Prosoftware, a civil association, has contributed to almost doubling employment in the sector since its creation in 2005. In 2023, it represented 68,364 jobs and 6,190 tech companies, including software development firms, hardware manufacturers, and telecommunications companies. This cluster also has close collaboration with universities in Mexico City like the National Polytechnic Institute (Instituto Politécnico Nacional) for training specialized human resources in research, development and  innovation for the sector.

Mexico City has several other notable business clusters. One of the most prominent is the Pharmaceutical Cluster, which is located in the south part of the city, in Coyoacan and Tlalpan boroughs. This area is home to over 200 companies and laboratories dedicated to manufacturing pharmaceutical products, raw materials for the pharmaceutical industry and pharmaceutical preparations, employing 34,564 workers. In recent years, the Tlalpan Innovation District promoted by the Monterrey Institute of Technology and Higher Education Mexico City Campus and the Mexico City government have encouraged startup acceleration and research programs within this industry. 

Moreover, Mexico City is becoming the financial capital of Latin America thanks to a high concentration of banks, financial institutions, and insurance companies across three main corridors: Reforma, Insurgentes and Santa Fe. Over 11,800  businesses work together to provide financial services to other businesses and individuals in Mexico and in Latin American countries. The Financial Clusters are an essential hub of economic activity in Mexico City as they employ nearly half a million people and contribute to the attraction of new investments and expansion of existing businesses. 

The social and environmental advantages of business clusters in Mexico City are numerous. On the one hand, society benefits from clusters that strengthen community ties and social networks in a particular area. This can lead to greater local interaction and collaboration, better quality of life for local residents through greater access to goods and services, as well as better job opportunities and higher income. On the other hand, clusters can contribute to the reduction of environmental impacts due to the efficient and collaborative use of resources and better use of waste. Companies in a cluster generate  green business networking and promotion of green technologies and practices, such as coordinating logistics processes to lower the carbon footprint for transporting people and goods. 

In conclusion, Mexico City's business clusters have continued to evolve and develop in recent years. The city has seen the emergence of new clusters, such as the automotive, aerospace and medical devices clusters, which are becoming significant contributors to the city's economy. Furthermore, the existing clusters have continued to expand and innovate, leveraging new technologies and business models to drive growth and competitiveness. Despite the challenges posed by the COVID-19 pandemic, these clusters have shown resilience and adaptability, demonstrating the crucial role they play in the city's economy. Going forward, it is clear that business and industrial clusters will remain vital to Mexico City's economic growth and development, especially in the context of nearshoring. Thus, the city government is now working on a public policy to enhance clusters in order to maintain its position as a leading global city.

Photo by:   Fadlala Akabani Hneide

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