A Latin American Silicon Valley? Not in Mexico

Commentary by Doug Donahue

This recent article from Univision looks at the many factors that the author feels will make Mexico the Silicon Valley of Latin America. He cites access to talent, education, business-friendly environment and proximity to the US market as reasons why Mexico will top Brazil to be the leading tech power in the region. I agree with the author’s enthusiasm for ongoing growth in Mexico, but to say that Mexico has the necessary ingredients to become another Silicon Valley takes things too far.

First I’d like to point out that the author of this article, Stephen Keppel, got a lot right about the capacity of technology to support growth in Mexico. The state of education in Mexico has improved drastically over the past 20 years and the current and most recent governments have been determined to see education in the country improve. In my opinion the key ingredient missing in Mexico, to keep it from being a Latin American Silicon Valley, is a culture of innovation.

Culture of Innovation Lacking
The vast majority of innovation in manufacturing and high tech-related industries in Mexico comes from outsiders – US, Japan, Germany – that have brought their production technology and know-how to Mexico. Yet internally in Mexico, there is a limited heritage of innovation and innovative thinking, as well as the conditions to contribute to innovation. It’s important to distinguish between creativity and what we think of as 21st-century innovation. Mexico is a great source for creativity in the arts and literature. Yet the country is decidedly lacking in the type of forward-thinking innovation that can result in new companies and products for global markets, like you see in Silicon Valley.

One barometer or indicator of innovation in an economy is the presence of small- and medium-sized companies with an international (that is, outward) focus. These are the types of companies that can spur innovation and technological advances. Mexico doesn’t have this track record of outward-looking, dynamic small- and mid-sized firms. If you look at all the successful Mexican companies that are well known outside of the country, they are larger companies run and controlled by wealthy Mexican individuals (think Carlos Slim). Such individuals are less likely to drive innovation than are small, nimble firms.

Mexico lacks access to venture capital, an attribute essential to fuel innovation. There are few dedicated institutions in Mexico for venture capital and, hence, a limited capacity for innovation to take hold and flourish. Individuals who want to innovate and start their own company often find it easier to simply move abroad and take their ideas with them. Mexico does see its share of private equity money available to fund or purchase outright existing companies. But venture capital to fund innovation is virtually non-existent.

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