The roots of Mexico’s economic and cultural ties with the Bay Area run exceptionally deep, dating to Spain’s settlement of California the 1700s. Also unique is the size and longevity of the Bay Area’s Mexican-American community—which is reflected in a depth of social and cultural engagement between Mexico and the Bay Area that endures to the present.
Linked by history, culture, and family, the two economies have grown in parallel but on very different paths. A turning point came in 1994 with the entry into force of the North American Free Trade Agreement (NAFTA), which stimulated a wave of investment in manufacturing by US and California companies in Mexico, primarily in cities along the US-Mexico border. That process forged a more integrated North American economy, linking the United States, Canada, and Mexico through integrated supply chains and production processes. Most of that production was in assembly. Since then, Mexico’s image has been primarily associated with basic manufacturing, as well as tourism and issues surrounding immigration.
A quiet revolution has been taking place, however. Mexico has been systemically working to increase the sophistication of its production processes and transition its economy to one where more economic growth is generated through knowledge and innovation. Advanced manufacturing is now the norm, supported by growing R&D. And, while the transition is still in its early stages, Mexico is generating large numbers of highly skilled engineers and a growing cadre of startups focused on markets not only in Mexico but in Latin America and the United States as well. As that occurs, Mexico’s ties with the Silicon Valley/San Francisco Bay Area are set to strengthen.
This report examines Mexico’s’ continuing transition and the issues and opportunities that it presents for Bay Area companies. It particularly does this through the lens of cities and regions that cluster assets that Bay Area/Silicon Valley companies look for: infrastructure, talent, universities, R&D, and entrepreneurs. This defines not just where Bay Area companies are located now but also where they might go in the future. Five city/regions are a particular focus: Tijuana, Ciudad Juárez and Monterrey, all on or near the US border, and Mexico City and Guadalajara to the south. It also looks at two regions that show promise: (1) in central Mexico, El Bajío region (all or part of four states—Aguascalientes, San Luis Potosí, Guanajuato, and Querétaro, known together as El Bajío—along with adjacent portions of the states of Zacatecas and Jalisco, and (2) the city of Mérida in the state of Yucatán. The report concludes with analyses of the engagement of Bay Area companies in Mexico; Mexico’s educational, cultural, and business footprint in the Bay Area; and opportunities for expanded cooperation between California, the Silicon Valley/San Francisco Bay Area, and Mexico.
As global supply chains shift and regional relationships such as the US-Mexico-Canada Agreement (USMCA) grow in importance, Mexico will present new opportunities for partnerships that are different from those in the past and are based on a growing alignment around technology and innovation.
Executive Summary (PDF)
Read the Full Report (PDF)