By SAMUEL PEÑA GUZMAN Automobiles Assemblers

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We continuously hear automobiles assemblers announce their expansion plans in some cases or plants closing in other cases.

Undoubtedly, both cases raise a huge interest in several states in Mexico: Aguascalientes, Baja California, Coahuila, State of Mexico, Nuevo León, Puebla, San Luís Potosí, Sonora, are nowadays headquarters for important assembly plants for automotive and trucks industries. However, due to the closing of some assembly plants, mainly in the USA, competition to attract that kind of plants is extremely strong. Even if not all of the states can offer a qualified and available labor force, there are many states and countries willing to receive this kind of investment.

It is really amazing to observe that states like Coahuila may offer qualified labor to two large assembly plants, like Chrysler and General Motors.

There is nowadays, according to the constant complaint by foreign investors, a lack of technicians (not professionals) trained in this field. Ironically, in spite of the high unemployment in Mexico, the demand for technicians and qualified labor is still unsatisfied.

In Nuevo Leon, for example, which has a population of around 4.5 million people and an economically active population of 45%, there is currently the capacity to host one automotive assembler. However, Nuevo Leon could hardly have the capacity to host two, notwithstanding the high academic level and qualified labor found among its population. What is the reason of this paradox?

Even if Nuevo Leon has a large population, automotive industry there represents only a little over 20% of automotive industry in Mexico. Despite having trucks and not automobiles assemblers, auto parts sector is above many other states that have automobiles assemblers.

Some investors in said industry have questioned us as to the reason of this. They ask why is it that the most industrialized state in Mexico does not have an automobiles assembler. The reason is easy, Nuevo Leon has become a highly diversified state, and even if automotive industry is an important industry for the state, we are not willing to depend only on said industry, unlike other states; this brings economic strength to the State, let alone costs when compared to other states.

In my very own opinion, maybe for Nuevo Leon having an automobiles assembler is the only ingredient missing to have a complete cluster in the automotive sector. As I had already mentioned, we do have a trucks and buses assembler, in addition to a supply chain like no other in Mexico, comparable maybe only to the State of Mexico. Many automobiles assemblers in Mexico and even n the USA, do not have their own supply hub and are therefore forced to import from other countries or states some supplies and services.

In colloquial words, it seems as if bringing a child to the world is not as important as raising, feeding and providing for him. Nuevo Leon’s case might be similar, maybe we are prepared for the “baby” because we do have the required supply chain; however, there is not an automobiles assembler in the State as yet.

Foreign Investment Office in the State of Nuevo Leon is decided to attract and establish an automobiles assembler in the State, not only to increase and foster employment, which is no doubt a fundamental task of this Administration, but also to consolidate automotive industry, and therefore auto parts industry in the State.

There is no doubt that the task is no easy, competition with other countries is hard and quite competitive, mainly due to a lack of structural reforms and juridical certainty that Mexico requires.

I am absolutely positive that we have the capacity to attract an automobiles assembler of any size. States in northern Mexico, as Nuevo Leon, where I have the opportunity to be of service, do have enough technical, operations and services capacity to receive an automobiles assembler.

The State will undoubtedly have to be innovating when presenting alternatives to investors in said industry. The task is not easy, links and bridges must be set, going beyond traditional incentives usually offered by other states in Mexico.

It is precisely there where the States’ capacities are measured. This kind of projects will undoubtedly take time and require strategic planning. However, efforts will be added to consolidate a project of this kind, and there is no doubt that establishing some automobiles assembler at the State is feasible, taking advantage of the opportunities and beauties offered by the State of Nuevo Leon. I am fully convinced that the multiplying effect of that kind of investment would bring significant business opportunities, together with benefits and growth to the region.

About the Authors Cañas and Coronado are assistant economists at the El Paso Branch and Phillips is a senior economist and policy advisor at the San Antonio Branch of the Federal Reserve Bank of Dallas. Notes 1. "Texas Border Benefits from Retail Sales to Mexican Nationals," by Keith R. Phillips and Roberto Coronado, in The Face of Texas, Federal Reserve Bank of Dallas, October 2005. 2. "The Economic Impact of Mexican Visitors to the Lower Rio Grande Valley 2003," by Suad Ghaddar, Chad Richardson and Cynthia J. Brown, Center for Border Economic Studies, University of Texas-Pan American, Technical Report, May 2004. 3. "The Economic Impacts of Mexican Visitors to Arizona: 2001," by Alberta H. Charney and Vera K. Pavlakovich-Kochi, University of Arizona, Research Study, July 2002. About Southwest Economy Southwest Economy is published six times annually by the Federal Reserve Bank of Dallas. The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System. Articles may be reprinted on the condition that the source is credited and a copy is provided to the Research Department of the Federal Reserve Bank of Dallas..