The World Bank’s ranking of the easiest and most difficult cities to do business in Mexico may come as a surprise to investors.
The nation’s capital, Mexico City, is the most difficult place to do business, while the relatively unheralded western city of Colima is the easiest, according to the latest Doing Business index. There is further bad news for more of Mexico’s most mature markets: the World Bank rates Guadalajara, widely known as “Mexico’s Silicon Valley,” as the eighth most difficult place to do business, while Monterrey, which is often described as the nation’s business capital, is only ranked the 16th easiest city to do business in.
The World Bank’s sub-national ranking for Mexico rates 32 major cities on the ease of starting a business, dealing with construction permits, registering property and enforcing contracts. While it should provide encouragement or caution for those considering investment in certain cities, it is hardly a definitive study of the best places to invest given that it does not take into account key factors like local investment incentives, existing infrastructure and the cost and availability of real estate and talent.
While Mexico City is rated the 11th easiest place to start a business, the World Bank ranks it only the 26th easiest place to deal with construction permits, the third most difficult place to enforce contracts and the hardest place to register property. Its rating for the ease of trading across borders has also fallen since the previous year’s ranking.
Advocates of Mexico City could cite the high levels of talent and strong infrastructure available in the capital. However, the high costs of living and real estate which are not taken into account by the World Bank would also count against the capital when compared to the many more affordable options presented by Mexico’s second-tier cities.
Colima is a Smart Bet
An often overlooked city close to Mexico’s Pacific Coast, Colima offers a high standard of living and one of the lowest unemployment rates in Mexico. The World Bank rated it the second easiest place to start a business in Mexico, the easiest place to register property and deal with construction permits, and the fourth easiest place to enforce contracts.
The city has a major technological industry with many companies involved with software development, IT services and biotechnical development. Colima’s Tecnoparque CLQ provides space for technology‐based companies and science and technology institutions, while the Kenner, Louisiana-based nearshore IT service provider 4th Source has its own delivery center in the city. There are three major universities in the city: the University of Colima, the Technological Institute of Colima, and the Colima campus of the Monterey Institute of Technology and Higher Education.
Colima is strategically located between Guadalajara, Mexico’s second biggest city, and the major port of Manzanillo, which is currently undergoing redevelopment with the intention of making it one of the most high-tech ports in Latin America. Manzanillo will be linked by rail to Cancun, creating a virtual canal across the country so that commercial goods can be rapidly shipped from east to west and vice versa.
After Colima, the next best cities to do business – according to the World Bank – are Aguascalientes, Celaya and San Luis Potosi, all of which are located in Mexico’s central Bajio region. Last year Nearshore Americas identified the Bajio region, which incorporates the states of Aguascalientes, Guanajuato, Jalisco, Queretaro and San Luis Potosi, as one of the best places to invest in Mexico, given the rapidly developing real estate industry and the strength of the local automobile, aerospace and IT sectors.