It feels strange to say this, but, in a way, the threats to radically alter NAFTA by the Trump administration have actually brought positive exposure to the overall benefits of nearshore operations in Mexico, especially in Baja California.
What’s odd is that virtually nobody in neighboring Southern California seems to know about it.
At the very least, the level of visibility into how productive Mexico truly is, and how dependent we in the US are upon their exports, has increased dramatically from previous years. This is particularly true in specialized industries such as medical devices, high-tech electronics, and IT services.
Initial Awareness of a Thriving Ecosystem
I’ve been working in the biotech field in San Diego for the past six years, and it wasn’t until just over a year ago when I really started to become aware of the prolific medical device, high-tech manufacturing, and software development activity that existed just 40 miles south of San Diego’s main tech hub in the UTC/Sorrento Valley area.
For me, this awareness came about pretty organically, based mostly on my interests in the growing bi-national startup scene, as well as my frequent tourist trips to the Baja California beach towns of Rosarito and Ensenada. It was actually on one such trip when I had decided to take an alternate route to the coast through the industrial park region of Tijuana, where I discovered just how many recognizable companies had operations in the city.
Looking out my car window I could see huge buildings with names like Foxconn, Medtronic, CareFusion, Fisher & Paykel, and Samsung. Even having been involved closely within the medical tech industry for several years at that point, I had no idea of the level of sophisticated production which was occurring just an hour’s drive away from where I lived.
As I worked to increase my knowledge over the following months, I often asked my colleagues in San Diego if they were aware of the fact that they were working right next door to a high-tech manufacturing and development ecosystem that, at least to the naked eye, appeared to be on par with San Diego’s. Most of them had very little idea what I was referencing, even those who were currently employed by the very same life sciences corporations, often headquartered in California, which were producing thousands of highly-regulated Class III medical devices just south of the border.
Reaping the Benefits just South of the Border
Fast forward to 2017, and my interest and experience in commercial real estate has forced me to develop an understanding for the relative strengths on both sides of the border.
What I see is a highly complementary ecosystem, which has the potential to become much more integrated and cohesive than it is presently. I’ve also seen specialized bi-national configurations such as the one implemented by Thermo Fisher Scientific in 2016.
Thermo Fisher had already been manufacturing devices in Tijuana for decades, and management was so impressed with the level of technical expertise that they decided to increase the scope of their investment in Mexico by commissioning a software development center of excellence. Presented with several capable options, including locating in Guadalajara (often considered the Silicon Valley of Latin America), the company’s management ultimately determined that the capabilities and close proximity to their major center of operations just north of San Diego would make Tijuana the most logical choice.
It’s my understanding that the Thermo software development operation is still looking to add hundreds of additional engineers in Tijuana over the coming years.
Similar development operations have been set up by other global corporations in recent years as well, including a digital content center operated by Samsung. Furthermore, KIO Networks cited the ability to deliver cross-border connectivity into Mexico as one of their main reasons for setting up shop in San Diego. KIO is now providing over 1,000 miles of high-speed fiber optic connectivity between US-based companies and their subsidiaries in Mexico.
Lack of US Awareness
Being in the position of working on both sides of the border, I suppose I do have the rare luxury of seeing this ecosystem functioning smoothly on a daily basis, but I still continue to be surprised by the lack of knowledge on the US side of the border. People are still unaware of the technical capabilities that are present in Mexico, and that continue to grow as the country graduates engineers at a higher per capita rate than the US.
The product and service offerings in Mexico are undeniably becoming more comprehensive by the year, in that an R&D rapid prototyping lab, a software development center, a high-volume manufacturing facility, and a highly-scalable customer support contact center can all be housed cost-effectively within the same region, or even within the same building if desired.
Often when I’m first introducing a US-based counterpart to the potential benefits of nearshoring in Baja California, and in Mexico, I get the impression that their initial expectations of what is possible aren’t quite on par with what I’m seeing being delivered to other clients on a consistent basis — in fact, they’re usually much lower.
Generally, these newcomers to the region prefer to take a “dip your toe into the water” style approach, gradually building up their comfort level as they consistently generate high customer satisfaction levels and substantial value to their bottom lines. But as the success stories continue to pile up each year, and the advocates become higher in profile, the nearshoring sell becomes easier — not even stalled NAFTA negotiations can substantially slow things down, with foreign investment in Mexico reportedly increasing 20% year over year for the first half of 2017.
These days, I choose to take that route to Rosarito through the industrial center of town more often than not, and I continue to be blown away by the level of activity I’m seeing. Sometimes I’m not sure whether I feel that the secret is already out on Cali-Baja at this point, or whether there’s still some grand catalyst just around the corner, waiting to explode and take this region to the next level.
If the imminent threat of a physical wall can’t substantially diminish the enthusiasm, then I don’t think there’s any barrier that will keep Baja California and the surrounding region from climbing the proverbial ladder to becoming an economic powerhouse.