R&D Investment Key to Take Advantage of USMCA

Investment in technology and technical training is key for Mexico to compete within the framework of USMCA, explained Jesús Seade, Deputy Minister for North America at the Ministry of Foreign Affairs, and Francisco de Rosenzweig, President of the Foreign Trade Committee of the American Chamber of Commerce in Mexico (AMCHAM) in an article by Expansión. For Seade, government funding via CONACYT can function as an incentive for private sector investment, coordinating joint research between universities and productive sectors for the aerospace and automotive sectors. Rosenzweig emphasized that for private investment to be successful in the country, it must be supported and guided by the public sector.

Currently, efforts to increase investment in R&D in Mexico have not been sufficient when compared to developed countries or even with some countries in Latin American. Mexico is one of the countries with the lowest technology and development investment in the world as a percentage of GDP, below 1 percent. Countries like the US allocate more than 3 percent of their GDP to R&D.

Low investment translates to major disadvantages and dependence on other countries, according to the Office of Scientific and Technological Information for the Union Congress. Mexico reflects a strong dependence on the exterior, with high costs in the transfer and import of technological goods and services, as well as late incorporation of global advances. Countries that have known how to develop and use their technologies have developed the competences and technological advantages to boost the design and production of new tools and devices to lend services and improve the socio-economic condition of their population, explains the Office of Scientific and Technological Information.

The current government has vowed to promote "scientific and technological research by supporting students and academics with scholarships and other incentives and to coordinate the National Program for Innovation with the participation of higher education institutions, towns, scientists and companies. According to the 2020 Federation Expenditure Budget Project, to carry out these actions the government will destine in 2020 a budget of MX$25.6 billion (US$1.14 billion). 75.9 percent of these resources will be assigned to CONACYT and 24.1 percent to public research centers (CPIs). In addition, to support the scientific community, the government aims to allocate MX$10 billion (US$450 million) to the Graduate Scholarships Program and the Quality Support Program through 59,190 scholarships. Likewise, a greater emphasis will be placed on the development and completion, to the extent possible, of the National Strategic Programs (PRONACES) on issues such as food sovereignty, climate change and air quality, health, education for security and peace and energy transition.

Chambers of commerce are among those actively fostering investment in the country. These players are constantly working to increase the productivity of companies, to promote free trade and to help companies follow best international practices. R&D, in this case, does not only rely on promoting international trade of goods and services but also on analyzing and incorporating the best technologies that benefit countries' international competitiveness, according to a report by AMCHAM.

In consequence, Mexico Business News conducted an interview with various chambers of commerce to find out what investors should know about investing in Mexico. Armando Ortega, President of the Canadian Chamber of Commerce in Mexico (CANCHAM), explained “investing in Mexico requires a long-term vision to outweigh the uncertainty stemming from a new federal administration, new ways of public communication, new players in Congress and so on. Moreover, it requires a solid project rooted in knowledge of the playing field and of the formal and informal rules related to investment.”

In comparison, Antonio Basagoiti, President of Spanish Chamber of Commerce (CAMESCOM) considers Mexico “a country where you have to bet on, regardless of the landscape.” Basagoiti explained that “international economy is complex and there is uncertainty in Mexico, Brazil, Spain, England and even in the US. Mexico has a young population profile, natural resources, an enviable geographic location, human capital many countries desire and development opportunities across energy, infrastructure, industry and tourism. This is one of the most attractive countries to be. If a company aims to have a sustainable, long-term business while contributing to economic and societal development, Mexico is the place to be. “

Enrique Covarrubias, Chief Economist of Grupo Financiero Actinver, explained to MBN that Mexico has different realities. On one hand, “Mexico that is highly integrated to the best production practices in the world. It is a Mexico that has an export focus, manufactures products with high added value, offers juridical certainty and a highly capitalized financial system.” On the other hand, “there is a Mexico that is even bigger, where two-thirds of the workers are in the informal sector, that does not have a buffer against financial blows, that does not have access to basic services, that does not know how to improve its rule of law.” Covarrubias explained that when an investor comes to Mexico, they should keep in mind the bigger picture.