Nathaniel Parish FlanneryDespite falling behind Guadalajara in terms of IT and software development, and suffering a wave of drug-related violence from 2008 to 2011, the city of Monterrey has recovered well and re-established itself as a multi-faceted industrial hub.
Mexico’s third largest metropolitan area, Monterrey is home to the headquarters of major Mexican companies such as Cemex and Grupo Bimbo, as well as manufacturing facilities operated by Mercedes, BMW, Samsung, Boeing, and General Electric. Carlos Ross, the director the city’s Center for Global Innovation and Entrepreneurship, a non-profit institution connected to the University of Texas at Austin, told Nearshore Americas that the modern era of entrepreneurship began in the 1980s when Monterrey was producing a lot of engineers.
As Mexico’s economy buckled under repeated economic crises, the existing network of companies was unable to absorb new graduates, Ross said, but, “In the 1990s, NAFTA had a big effect on Monterrey. There was a boom in traditional industry and manufacturing that relied on low costs of production.”
The city’s businesses have continued to evolve. In the late 1990s, graduates from the city’s prestigious Tec de Monterrey University worked to launch a number of software companies. “The big push in software development came in the late 1990s as big companies and some Indian companies came in,” Ross said. After the burst of the dot-com bubble, many nascent ventures fizzled. Monterrey, however, moved forward with programs such as the “City of Knowledge” and invested in tech clusters to draw new investment. “The idea was getting academia, industry and government together to work on projects, Ross explained.
Recent Challenges
Monterrey is Mexico’s wealthiest city in terms of per capita income. It is also considered to be the most “Americanized” city in the country. Monterrey’s ascendance as one of Latin America’s best locations for foreign investment was interrupted, however, by the influx of violence related to organized crime during the administration of former Mexican President Felipe Calderon.
From 2008, Monterrey emerged as one of the epicenters of Mexico’s then-expanding drug cartel conflict. In 2010, after the detention of the local leader of the Zetas, Mexico’s most violent organized crime group, cartel gunmen set up carefully coordinated roadblocks on major arteries, blocking traffic. In 2011, the worst year of the cartel conflict, gunmen killed the local state police’s head of security and intelligence. Monterrey saw its reputation badly tarnished as shootouts, robbery and extortion jumped between 2008 and 2011.
More recently, however, the city has been able to reduce crime and improve security. “There’s been an effort between the private sector and the government to develop [a new state police force]. The number of violent incidents has gone down,” Ross said.
While Mexican security forces arrested and detained the senior leaders of the crime groups that operated in Monterrey, the state government set up a new heavily vetted and highly professional police force known as the Fuerza Civil. Security analyst Alejandro Hope explained, “It seems like a success story. In a relatively short period of time they’ve created an effective police force that’s better trained, better paid, and better armed that what existed before.”
Monterrey-based political risk analyst Miguel Treviño explained, “the numbers say that conditions have improved—particularly for high impact crimes—homicide, car robberies.”
Software Boom or Bust?
As security improves, new economic activity is emerging in hip neighborhoods such as San Pedro. Overall, Monterrey’s economy continues to serve as one of Mexico’s major engines of growth. However, as other parts of the country develop their own nearshoring clusters, Monterrey has seen its reputation slide when it comes to helping spur the development of a homegrown software sector. “[Software sector development] has sort of cooled down. The software sector in Monterrey has remained where it was ten years ago. The main focus [here] has been on other industries—materials, biotech,” Ross said.
“The software industry hasn’t grown as it has in Guadalajara,” Ross added. The core of Monterrey’s economy still focuses on metals, class, cement, and ceramics and much of the technology and innovation originating in the city caters to these sectors. “Old traditional industry is coming back with new technology,” Ross explained.
“Ten or fifteen years ago, software was considered new technology. Now there’s a push on biotech, nanotech. There’s a much broader focus on technology.” Ross said.
However, “Monterrey still produces the country’s best software engineers,” Ross said. Many of the engineers Monterrey produces are quickly hired by major companies in the U.S. “In the last ten years many of the top software engineers have been hired to work in the states,” Ross said.
Enrique Lima, a Monterrey software veteran whose venture Publish 88 builds software to help magazines and media companies create digital content for tablets and cell phones, remains confident about Monterrey as he sees his business grow.
“We started to work with a lot of magazines and now work with newspapers—one in Australia and one in Ohio. We’ve realized that medium-sized businesses and big businesses are publishers—they create internal communications as well as external texts and photos. This can all be done digitally,” Lima explained.
Lima, who came to Monterrey in the mid-1990s to study at the Tec before dropping out to launch his first startup, explained that while many of his original peers shuttered their shops, “Between 1996 and now two big business have been built up. Softec and Neoris. They’re global businesses, they do outsourcing for U.S. companies.”
But, as the local job market has shifted, Lima has seen a drop in the number of students pursuing software engineering and development degrees and an increase in software administrators—a trend that may be helping to increase corporate staffs but discourage entrepreneurship.
“Now it’s harder to find talent in Monterrey,” Lima said. “During the internet boom there were a lot of businesses like us. When the bubble burst, that ended. We tried to make a new media cluster, but it didn’t work,” he added.
While Monterrey is not quite seen as a software start-up development center, Guadalajara – a city to the southwest – has clearly moved forward. “Guadalajara is a lot more active in terms of small businesses and networking in IT,” Lima said. “There aren’t a lot of start-ups [here],” he added. “The big businesses are creating their own software, but there are few companies like ours— start-ups creating their own platforms,” he added.
While Guadalajara bills itself as Mexico’s Silicon Valley, Monterrey is fomenting a more multi-faceted industrial base. “They have an incubator [here] and focus on innovation but it is more focused on engineering and design than IT,” Lima said.
A Brighter Future
Diego Etienne, a Monterrey-based industrial designer and entrepreneur explained, “things got really ugly here and some people left but now things are improving and the businesses that stayed are flourishing.”
“Visiting restaurants, walking around, there’s a buzz [here], a lot of possibilities,” he added. Despite the challenges Monterrey has faced, local entrepreneurs are confident there city will bounce back. “Entrepreneurship has always existed in Monterrey,” Carlos Ross explained.
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