The Business Year

Dr. Jaime Parada Ávila

Director General, Nuevo León Institute of Innovation and Technology Transfer (I2T2)

Dr. Manuel Montoya Ortega

CEO, Automotive Cluster of Nuevo León

Nuevo León's universities attract talent from all over the country, and companies are taking advantage of the abundance of know-how.

What have been the reasons behind Nuevo León’s success in attracting foreign investment?

DR. JAIME PARADA ÁVILA Monterrey, the capital of Nuevo León, has an important set of educational institutions. In total, there are about 200,000 students enrolled in higher education. Of this, 20,000 are graduate students. People come to Monterrey to invest and do business because we have a factory of human talent needed not only at the level of operators and technicians but also management. Notably, the city has more than 100 research centers that make up a platform with more than 5,000 scientists and technologists. Nuevo León invests more than 0.7% of its GDP, above the national average of 0.4%, on R&D. 3,000 scientists and technicians are working at the Research and Technology Innovation Park. For the last 10 years, we have given ourselves the task of delivering strategic clusters in the main economic sectors. We have 13 clusters, including automotive, aeronautical, agricultural, IT and software, medical services, biotechnology, nanotechnology, tourism, and energy. There is collaboration between the government, the academy, and companies that facilitates the rapid implementation of public policies and has been key to the success of Nuevo León. The state has reached a high level of GDP per capita by investing in goods and services that require human talent and scientific-technological knowledge. To achieve future goals, we need to move toward a knowledge economy. This is the profound reason for the strategic importance of knowledge, research, and innovation.

DR. MANUEL MONTOYA ORTEGA The Automotive Cluster of Nuevo León was established in 2007 by a group of 11 stakeholders including Vitro, Nemak, and Metalsa; international players such as Ternium and Navistar; and the government of Nuevo León. Academia also joined the cluster with the incorporation of universities such as the Tec de Monterrey and the State University of Nuevo León. Today, there are over 100 companies and institutions, from both Mexico and abroad. The automotive industry in Nuevo León has become increasingly important, and today 20% of the manufacturing GDP in Nuevo León is automotive. It creates almost 90,000 jobs, and over the past five years has increased in importance. We are extremely strong in material-providing tier-one companies, but we did not have much actual car manufacturing in the region. Kia Motors came in to fill that gap. Today, Kia is the fifth brand in Mexico, impressive given that before 2014 it had not sold a single car in Mexico. In Mexico, in general, the automotive industry consists of foreign firms. We only have one Mexican original equipment manufacturer (OEM), and 95% of the tier-ones comprise international companies. We only have a dozen Mexican tier-one companies, and most are based in Nuevo León. Of the 12 companies present in the country, eight are based here. Nuevo León is not a state of cheap labor, but rather, one of skilled technicians and engineers. We have excellent universities in Nuevo León that attract talent from all over the country. This is an opportunity that Nuevo León has managed to capture, and that companies are taking advantage of.

What is your economic outlook regarding R&D investment in Mexico?

JPÁ We want investment in science, technology, and innovation to reach 1%. We also want to increase local manufacturing. At present, only 30-40% of Mexico’s exports are produced locally. Also, the level of integration does not reach 5%. We must promote local integration. For example, under the new free trade agreement, the US has insisted on increasing the level of regional integration from 60% to 75% as well as salaries so that investments arrive not only for low-cost employment. Nuevo León is a different case because companies invest here because of the quality of local talent.

To what extent can localization of the automotive industry be increased in Nuevo León?

MMO This is challenging, but the new agreement between Mexico, the US, and Canada may help us to increase our local content. Also, the NAFTA content will be higher in the case of OEMs. The tier ones have to accomplish NAFTA content, and their core parts must be 100% produced in North America, which forces those players, mainly Asian and European firms in Mexico, to find local content providers. NAFTA was greatly successful in helping us produce 4 million cars per year in Mexico. Nuevo León produces 9% of the country’s output, but more importantly the light vehicles industry is a parts-based one, and in 2018 we generated USD85 billion in country with 10% derived from Nuevo León. The challenge is that Mexican content remains low, at just 15%. For Nuevo León, which is more integrated, and we are talking about 30%.



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