March 1, 2013

U.S. Business Fuels Mexican City's Boom

Querétaro is an example of what's working in Mexico, economists say

plaza queretaro spotlight Plaza Santa Rosa de Viterbo, Querétaro, Mexico. (PHOTO: Fernanda Echavarri)

Querétaro is a city in central Mexico that economic experts have said models the economic development of the entire country. Some of the city’s success has been attributed to the growth of American companies doing business in Querétaro.

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“It’s an example of what’s working in this country,” said Arturo Herbert, Mexican economist and international commerce professor in Querétaro’s prestigious university Instituto Tecnológico de Monterrey.

arturo herbert portrait Arturo Herbert (PHOTO: Fernanda Echavarri)

Querétaro is a city of about 1 million people located 120 miles northwest of Mexico City. In terms of logistics, Herbert said, Querétaro is attractive to American companies because it’s not far from both the east and west coasts of Mexico and it is 500 miles from the international border with the U.S.

Foreign companies do business in cities like Querétaro because labor is cheaper and because the pool of high-skilled workers is large, said Herbert, a former university president who retired from the National Bank of Foreign Trade in Mexico.

General Electric, Bombardier, BMW and Mercedes Benz are some of the big companies with factories and offices in Querétaro.

ge focus large General Electric plan in Querétaro. (PHOTO: Photo from GE website)

Former Mexican President Felipe Calderon spoke at the inauguration of GE’s newest plant in Querétaro in 2011.

He said Querétaro is General Electric’s second-largest engineering center outside of the U.S. for the company's aviation division. About 1,300 Mexican engineers work in the aerospace industry in Querétaro, he said.

“These companies are looking for a good deal and we are interested in them doing business in Mexico,” Calderon said. “This is an example of the strategic relationship between GE and Mexico.”

Many things make it attractive to operate in Mexico, said Mauricio Varela, an assistant professor of economics at the University of Arizona.

“It’s cheap labor--let’s start there,” he said. “Minimum wage there is $5 a day and here it’s $7 an hour. That says it all.”

queretaro night plaza focus large Downtown Querétaro. (PHOTO: Fernanda Echavarri)

But Mexican economic growth isn't just about the savings--it’s about workers’ skills, Varela added.

The number of college graduates is large and has been growing in Mexico, Varela said. In Querétaro, the number of engineers graduating every year is increasing and that interests firms that need technical skills. Those firms have a better pool of workers in Mexico than in Asian countries, he said.

Manufacturers in Mexico can be more flexible than China when it comes to changing orders on the fly. It takes days, not weeks, to get products from cities like Querétaro to the U.S., he said.

There is also opportunity for joint research development with Mexico.

“That’s a huge possibility for everybody because here we have a lot of highly trained researchers and we know that research and development cost a lot of money, and obviously it can be done cheaper in Mexico,” Herbert said. “That’s a very well-kept secret.”

Mexico’s new president, Enrique Peña Nieto, has said international trade is a top priority for his administration, and Herbert expects Mexico to see an increase in foreign investment.

queretaro arcos spotlight The aqueduct in Queretaro Mexico (PHOTO: File photo)
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