Q&A: Sinaloa Strives to Become an Alternative to Nuevo Leon and Jalisco

The western Mexican state of Sinaloa has been a major agricultural exporter for years, but now it is trying to diversify its industries and position itself as attractive …

The western Mexican state of Sinaloa has been a major agricultural exporter for years, but now it is trying to diversify its industries and position itself as attractive site for foreign investment. Nearshore Americas finds out more from Carlos Balderrama, the Executive President of the Council for Economic Development in Sinaloa (CODESIN) – a strategic alliance of the public and private sectors, which aims to encourage investment in the state.

Nearshore Americas: Aside from agriculture, what are the main industries in Sinaloa?

Balderrama: Agriculture has generated other important industries, such as the production of seeds, agrochemicals, greenhouses and fertilizers. But we also have global manufacturers here such as Delphi, Sumitomo, Walbro and Hikam, who have enjoyed over 20 years of success. There are also industries related to the biotechnology sector that are taking advantage of the enormous availability of biomass in the state, as in Sinaloa we have the largest biomass production capacity in the country, with more than 8.8 million tons per year. Aside from this, for over 60 years we have been producing innovative, high-tech propellers and marine chutes in the naval industry. Other newer industries include the IT and communications sector which is around 15 years old and we already have local examples of growth and success at a national level. Sinaloa represents 2.5 percent of the country’s population and contributes 5 percent of computer engineering.

Nearshore Americas: Why should foreign companies consider doing business in Sinaloa?

Balderrama: In Sinaloa we know what investors need. We have an important export culture driven by our agricultural potential and this has helped us to be successful in business at a national and international level. Today Sinaloa is a place of great opportunities for businesses to thrive, with some of the most important companies in Mexico having sprung up here. We have reformed our legal and institutional framework in the fields of sustainability, science, technology and innovation, as well as improving public health. Sinaloa is also undergoing an economic transformation, the product of a growth and development model adopted more than 15 years ago in order to increase competitively. Companies and investors have the support of the government and CODESIN, which provide incentive packages and give advice throughout a company’s installation, consolidation and growth process.

Nearshore Americas: What economic incentives does the state government offer foreign businesses for setting up operations in Sinaloa?

Balderrama: Sinaloa has a law to promote investment that promotes general incentives for companies that decide to open operations in the state, ranging from tax exemptions related to property, job creation or industrial construction, plus access to public services and scholarships to support the training process for new employees. Unlike in other states, these incentives are guaranteed by law. We also have additional incentives, including for infrastructure development, which are available through negotiation, with applications analyzed by CODESIN and the Economic Development Secretary according to the proposed level of investment and job creation in the state.

Nearshore Americas: How long does it take to set up a business in Sinaloa?

Balderrama: In its 2012 report for Mexico, Doing Business, recognized Sinaloa as one of the top five states in terms of the time it takes and the number of procedures required to set up a new business. From 2007 to date, we have reduced the time it takes to set up a business by more than half. Registration now takes approximately 10 to 12 days. In the same report, Culiacan, the state capital, is ranked sixth of 32 Mexican cities. On average it takes six days to register a business there. It is important to add that companies have great support from CODESIN and the government throughout the installation process. In special cases we can further reduce the time that state and federal regulation takes, but there are also cases which might take a little longer especially when it comes to environmental regulations.

Nearshore Americas: What percentage of workers in Sinaloa speak English?

Balderrama: Official statistics indicate that in Mexico only two percent of the population is bilingual, which is low compared to other countries. In Sinaloa we estimate that the level is a bit higher because we are very export-oriented. We have an English-speaking population equal to industrialized states like Nuevo Leon and Jalisco. In cities such as Mazatlan with strong tourism sectors we have a more heterogeneous population that dominates the English language and is above the national average. Management and mid-level employees have an excellent level of English learned at national or international private schools and meeting the demands of companies that require their employees to master the English language has not represented a problem.

Nearshore Americas: What are labor, energy and transport costs like?

Balderrama: Our labor costs are very competitive because we have a young and highly productive population. The labor force is very loyal, with little turnover. There has not been a strike in Sinaloa in the last 17 years, which shows the stability of the labor force. We are witnessing the opening of major infrastructure projects to improve energy costs and transportation in Sinaloa. We’re just finishing the construction of a $6 billion USD pipeline that will bring natural gas to the state in 2015, providing Sinaloa with cleaner and cheaper energy, at less than half the rates charged in Asia today. As for transportation costs, we have to accept that prices are still not as competitive as we would hope for, but the opportunities are enormous as the expansion of our two large-scale ports, Mazatlan and Topolobampo, will reduce costs substantially.

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Nearshore Americas: How will the new Durango-Mazatlan highway affect business in Sinaloa?

Balderrama: The Mazatlan-Durango highway will cut the driving time from Sinaloa to Texas by six hours. It will now only take 12 hours to reach Texas, the same amount of time it takes to drive to Arizona or California. The proximity of new markets in the southeast of the United States and the reduced distance between domestic markets will create new business opportunities in Sinaloa. The port of Mazatlan is the door through which we will receive goods mainly from Asia. These can then be transported by road to the Matamoros-Texas border to enter the market in the US southeast.

For more information on Sinaloa, visit www.sinaloaforbusiness.com.

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