Published On: Thu, Feb 4th, 2016

Jalisco is now known as “Mexico’s Silicon Valley”

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A considerable number of foreign young professionals (most of them Americans) are attending large-scale events in major cities in Mexico, and many of them are already working for high-tech multinational companies or running their own startups.

This  signals an evolution in NAFTA, the North American Free Trade Agreement that was negotiated more than 20 years ago between the Mexican government and the U.S. Congress. Mexico’s high-tech manufacturing industry coupled with tariff-free technology imports now fosters a critical mass of gadget consumers who demand software and content specifically tailored to them.

Prior to NAFTA, the high-tech industry in Mexico was limited to low-wage, labor-intensive assembly operations. But reforms initiated by the agreement opened a new era of investment in Mexico’s tech sector. Hardware companies are now able to bring their money through multinational banks to invest in equipment design and capital-intensive manufacturing lines. Software companies and app developers, meanwhile, enjoy full protection by courts under very stringent copyright and patent laws.

Foreign investment is no longer just the business of big corporations.

The emerging software industry (that is still in its early stages) and in great need of greater technical expertise in Mexico, is an immense opportunity for US startups to meet the needs of a new business-to-business market while at the same time increasing their cash flow by saving substantially in operating costs.

For these startups, a move to Mexico could mean surviving that dreadful gap between initial investment and revenue generation known as the Valley of Death. Mexico is not only welcoming these international entrepreneurs, but actively recruiting and incubating them, including small companies from Silicon Valley like Ooyala, Wizeline, and3DMX.

In the case of the Mexican state of Jalisco, in order to help draw more high-tech companies, Governor Jorge Aristoteles Sandoval created a cabinet-level Innovation Department upon taking office. He’s also leading a revitalization of Guadalajara’s historic downtown by building a 940-acre media-oriented business hub for TV, film, advertising, video games, animation, interactive multimedia and e-learning. Firms such as Kaxan, Inzomnia, Ocelot, and Metacube have already opened doors even though construction is still underway.

Guadalajara

Jalisco is now known as “Mexico’s Silicon Valley” (Photo: xataka.com.mx)

The existing tech industry base in Jalisco is already formidable, with firms such as IBM, HP, Oracle, and Latin America media titans Televisa and TV Azteca. Startups that land these corporations as customers can secure an immediate revenue stream, not only helping them overcome their startup curve but gaining them long-term stability for growth. Many of Jalisco’s domestic industries, such as agribusiness, manufacturing, and the service sector, are also increasingly incorporating technology into their operations.

Other advantages include tech-hungry venture capitalists, business advocacy organizations, hundreds of bilingual high-tech graduates joining the workforce each year, and sound telecommunications infrastructure. But most importantly, a half-day flight away from home and on US Central Time, Jalisco offers an enviable quality of life in a community that is home to nearly 40,000 American and Canadian expats.

Software giants such as Softek and Hildebrando are examples of companies that started in Mexico and now have large operations headquartered in the United States, employing thousands of American high-tech workers. They offer a roadmap that could be replicated by expat enterprises willing to capitalize in a thriving emerging market like Jalisco’s and return later to expand their businesses back home in the US.

High-tech in America was born from startups. Jalisco has acknowledged this power by using NAFTA rules to attract international small businesses and startup entrepreneurs. In other words, foreign investment is no longer just the business of big corporations. Jalisco has earned the moniker of “Mexico’s Silicon Valley” because it recognizes that knowledge is capital. Investing that capital in Mexico could be a startup’s gateway into the global market of technology and innovation.

For those who negotiated NAFTA more than 20 years ago, this is a dream come true.

Opinion piece by Governor Bill Richardson for WIRED.COM

Governor Bill Richardson is a former New Mexico governor and UN ambassador. As deputy minority whip in Congress, he was instrumental in the final passing of NAFTA.

Source: http://www.wired.com/

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