Guadalajara faces challenges as Mexico's high-tech center
Arizona Republic
GUADALAJARA, Mexico — Mexico's technological future is taking shape not in a West Coast-style yuppie mecca, but in this city of 400-year-old buildings and filigreed plazas.
Monterrey, in northern Mexico, has long been recognized as the country's heavy industry hub; but it's stately, colonial Guadalajara, in the center of Jalisco state, that has become Mexico's version of Silicon Valley.
American high-tech firms have flocked here in the past few years. Arizona even moved its trade office here from Mexico City to be close to the city's technology sector.
However, like its U.S. high-tech counterpart in California, Guadalajara faces challenging times as economic downturns work their way through both countries.
The city's transformation from laid-back tourist haven to bustling technology center took place quietly — and not by accident.
It began after the peso-devaluation crisis of 1994-95 as state officials looking for an economic renaissance pushed to strengthen technology and computer-science programs at local universities, said Carlos Fragoso, director of Jalisco's International Center of Commerce, or Jaltrade.
The state promoted itself to large technology firms as a place where they could find university-tested, computer-trained employees who work cheaply and do everything from build chips to write programs.
With an average age of 19 in the state, firms would have no trouble finding young, vibrant talent, Fragoso told prospective businesses.
At the same time, the National Chamber of Electronics, Telecommunications and Information Industries persuaded U.S. companies about to locate here to bring their suppliers with them.
"I was in the middle of it," said Manuel Escobar, a Solectron engineer who was treasurer of the industry group at the time. "I could feel the energy in the air. We were right there listening to the GMs and the IBMs telling their suppliers, 'You have to be here.' We were right there at the tables."
Soon, Jalisco and federal officials jumped on the Guadalajara bandwagon, handing out subsidies in the form of tax advantages, cheap land and low energy prices, said Edgar Amador, Latin America economist for Stone & McCarthy, a Princeton, N.J.-based research firm.
U.S. firms listened eagerly to the pitch, and in the years that followed, Guadalajara's economy became as hot as the city's summers; its outlook just as sunny.
Now, more than 100 high-tech companies have operations here, including Motorola, IBM, Hewlett-Packard, Solectron and Flextronics.
Carlos Equihua, 25, has been with the Mexico operation of CDI Technical Services, an Arizona-based engineering, drafting and design firm, since February 2000. The company even sent him to Phoenix for further training.
"I don't think I would have had access to this kind of job outside Guadalajara," he said. "Would I have been exposed to this kind of work? I don't think so."
Foreign investment in the state from 1995-2000 reached $3.25 billion, most of it from U.S. companies. The boom has created 65,000 to 70,000 jobs each year, Fragoso said.
"Before, our region was (only) known for handicrafts and tequila," he said. "Now they can't think of us as only mariachis, charros and artisans."
U.S. firms have much to take advantage of: eight universities, two junior colleges and one technical college with 1.8 million students; two airports serving 5.6 million passengers each year; and a relatively central location close to Mexico City.
When the state of Arizona moved its trade office here last August, it joined Kentucky, Missouri and Colorado as well as the city of San Antonio, Texas.
"We're seeing a lot of businesses move to Guadalajara from Mexico City," said Steve Sullivan, Arizona trade office director.
What is still a question mark is whether Guadalajara and its infant technology base will weather the U.S. economic downturn that has dragged Mexico along with it since February.
The Mexican economy so far has lost between 200,000 and 400,000 jobs, economic analysts for Mexican and U.S. firms said.
"The evidence is that Guadalajara has been very heavily hit by the slowdown in the U.S. economy," Amador said. "(In addition), Mexican wages have increased solidly in recent years. Most of the cheap labor has gone away."
Nationally, wages in the manufacturing wages rose 6.6 percent in the last six months to an average of $3.50 an hour, Amador said. Much of this is in benefits, which means companies are competing for trained labor.
Even accounting for the 1994 peso crisis, wages now are above what they were before the devaluation.
Complicating the economic picture is the strength of the peso, which averaged 9.08 to the dollar in June.
It has been appreciating since the beginning of the year because of stable economic indicators and an inflation rate that stayed within projected limits, analysts said.
