Baja's New Investment Boom - the Insider View
The benefits to global manufacturers include world-class facilities and customer service similar to that received in the client's home.
• logistics proximity to the U.S.;
• rising fuel costs; and
• high productivity in Mexico.
This will continue during 2006 with expansion plans by existing global firms manufacturing in Mexico - as well as new relocations from Europe, Asia, and North America. As Baja California commences its largest investment boom in 30 years, international investors and corporate users are actively participating across a broad spectrum of opportunities. Foreign investment in the manufacturing sector was $6 billion in Mexico during 2005 - and expected to rise even more during 2006. As usual, Baja California, due to its proximity to California and major U.S. markets, will reap the lion's share of the investment.
Manufacturing Sector Leading the Way
The manufacturing sector in Baja California, led by the cities of Tijuana, Mexicali, Tecate, and Ensenada, represents the most dynamic employment engine for the state. During the contraction period from 2002 to 2003, Baja California lost more than 50,000 manufacturing jobs. This trend has been reversed with the creation of 78,000+ jobs from 2004 to 2006.
Tijuana, with a population of in excess of two million, is situated immediately south of San Diego, California. These two cities share the most dynamic international border in the world, with daily pedestrian and vehicle crossings totaling more than 400,000. Mexicali, with 900,000 inhabitants, the state capital of Baja California Norte, is located two hours east of San Diego and directly south of El Centro and Calexico, California. Mexicali, hosts two international border crossings. Tecate is located 20 minutes east of Tijuana, adjacent to Tecate, California; it also enjoys its own international border crossing. Ensenada, long known for its cruise ship terminal and international port, has also attracted a major cluster of foreign manufacturers and the new Punta Colonet port project; it is located 1.5 hours south of Tijuana.
As of March 2006, Tijuana had a total of 573 global manufacturing plants in operation, Mexicali had 137, and Tecate and Ensenada were hosting 144 and 78 foreign firms, respectively.
Hotspots and Opportunity Sectors
Electronics: The electronics industry has traditionally been shared by Asian and U.S. firms producing for the consumer electronics and business sectors. Tijuana was the television capital of the world, producing over 70 percent of the world's televisions, 19-inch and above. Tijuana produced more than 13 million analog and digital televisions during 2005. Global brands such as JVC and Hitachi recently expanded. Sanyo recently completed a milestone - 10 million televisions produced for Wal-Mart - in Tijuana. Delta Electronics from Taiwan has shifted production to projection TVs with dlp (digital light processing) technology. ADI is contracting manufacturing for new television-makers from People's Republic of China (PRC) - again, in Tijuana. In Mexicali, monitor-maker NEC moved production to China, but Taiwanese monitor-maker Acer/BenQ opted to retain its plant as a showroom facility and R&D center - offering quick turnaround for its North American clients. Even Mexican firms such as Diamond Electronics have entered the television market in Baja California. The rebound in the electronics industry supersedes manufacturing. Several national retailers are actively searching for repair and fulfillment centers to rapidly modify returned products and ship them back to the U.S. market.
Automotive: Automotive firms and suppliers are now located in every manufacturing city in Baja California. Tijuana produces the CSX 427 model of the Shelby Cobra luxury sport car. Toyota purchased a 700-acre site situated between Tecate and Tijuana for its twelfth manufacturing plant in North America. Already in production, this plant will produce more that 50,000 Toyota Tacoma pickups annually by next year. Some Toyota suppliers have committed to establish in Baja, while others are currently investigating ways to enter the market. Three other automotive OEMs are seriously considering Baja operations due to logistics access to Pacific Rim suppliers, nearby port infrastructure, emerging automotive labor pools, and proximity to major U.S. markets.
Medical: Another hotspot to watch is the biomedical sector due to its high profile: 34 plants operate in Tijuana - with more than 60 in the state. Medtronic, from Minneapolis, and Tyco Healthcare have led the way for several years, but new world-class manufacturing facilities were established during 2005 for DJ Orthopedics and Wilson Greatbatch Technologies. Many of the medical device firms operate sophisticated "clean rooms" and are licensed by the FDA to manufacture Class III medical implantable devices. Medtronic held job fairs during its market investigation to assess the training capacity for local workers in Tijuana; the local engineers and operators have contributed to Medtronic's Mexico success in a meaningful way.
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