MexicoNow May-June 2008: Pushing Strong For the Development of Central Mexico


Pushing Strong For the Development of Central Mexico, MexicoNOW Staff Report

Based on an Interview with Entrada Group’s Doug Donahue

Zacatecas is a magnet for competitive foreign investment. This is because it comes with abundant human, natural and technical resources. It has unmatchable strategic location. The place features a government committed to sustainable economic development. This means a higher quality of life expectation for the people of Zacatecas. With surface area of 74,668 sq. km., equivalent to 3.8% of the total surface of the country, Zacatecas ranks as the eight largest Mexican state. The state’s density is 18 inhabitants per square kilometer, a figure which is less than half the national average.

The future of the State is promising. It can easily exploit its strategic location and its closeness to the large consumer markets. Also, its experienced labor should be added onto the equation. Without a doubt, Zacatecas has plenty of communication infrastructures, governmental incentives and an unbeatable location. These are factors, that when everything is working together, allows for the generation and development of competitive advantages for companies already established in the State.

Nicolas Castaneda, Secretary of Economic Development for the state of Zacatecas, proudly explained to MexicoNOW: “Zacatecas” is a strategically located State that allows investors to benefit from many advantages including access to international and domestic markets. This is because it is located in Central Mexico. Our State is a national leader in the production of beans, dried chili peppers, green chili, garlic, oregano, grape, guava, and tuna production. Also, the qualities and characteristics of the maguey allow the state to offer high-quality mescal. There is also great mining potential and all this represents singular leadership in competitive natural resources.”

He continued by mentioning this: “The availability of skilled labor in the state,” he said, “is where the “Zacatecanos” really show an open attitude toward the standards of quality, productivity and discipline that are demanded by world markets. This is well complemented, he added, “by the availability of viable land to set up business where there are available lots, for example, in Fresnillo’s Industrial Park and other municipalities.” All of this his continued, “is encouraged by an excellent business climate characterized by social, working and political stability.”

This Central State has other multiple competitive advantages to offer for potential investors. There are factors like having a population with an average age of 23 years. This is something that gives an outright energetic and youthful labor force and at the same time guaranteeing the availability of workers for diverse industries coming to Zacatecas. This labor force is well known for being as qualified and educated as demand anywhere in the market.

Zacatecas also features a location that offers easy access to many markets in the Mexican Central Region. The State enjoys excellent labor conditions, features an available work force, and has an abundance of natural resources. There is also a Government committed to maintenance of a climate adequate for competitive operation of a successful enterprise. Economic diversification, plus being qualified as the national leader in mining and agricultural industries are two other advantages that have been in place with everyone deciding to come and establish in Zacatecas.

Zacatecas qualifies as a competitive city for its labor practices and economic development of the IT. Zacatecas is a place where there are reliable and objective people who have formed an inclusive society that is well prepared and healthy. It also has a stable political system and a functional, efficient and effective government.

The State Government is attracting foreign investment by improving the state’s infrastructure. It is doing this with fiscal stimulus, through training and by providing an excellent business environment for building business, government and the unions’ relationships. The non-fiscal incentives by the investors include help finding the best-suited location, personnel training, assistance with constitutional and licensing procedures, and even technical information regarding entity and financial data. The fiscal incentives include labor tax exceptions, graduated tax discounts on the acquisition of goods, and discounts on the land taxes.

There are many strategic sectors for investment, and all are excellent choices when planning to embark on important first-time development projects. Zacatecas is a place that encourages investment in strategic sectors such as mining, agribusiness, textiles and clothing, auto parts, electrical and electronics. Information technology, trade, service, tourism and handicrafts are also actively supported, according to Mr. Castaneda.

Zacatecas is a binational State that consolidates the information technology industry with a solid model. This is based on the formation of high-quality human talent, innovation, technology transfer and detonators from regional, domestic and foreign companies.

Pacific Insight Electronics is a corporation that has leased approximately 30,000 square feet within the Entrada Group Shelter, located in Fresnillo, Zacatecas. Stuart Ross, General Manager and Director of the company, told MexicoNOW: “currently we have 37 employees in the facility, including management. The facility is primarily for assembly of our wire harness and cable products that we currently manufacture for the heavy truck and commercial vehicle industry.”

Mr. Ross also reported that: “Fresnillo, Zacatecas, offers an excellent location for us to do business in the area and we have always felt very comfortable with the Entrada Group’s owners and enterprise. Business ethics are very important to our Company and we have found some very strong synergies within the Entrada Group. We are very pleased with our investment to date in Fresnillo and we will continue to expand the operation over the next several years. We have just surpassed our one year anniversary in the Entrada Group Park.”

Westbrook Ohio is an automotive contract manufacture that supplies customers with interior components and systems using their design. John White, VP of Operation commented on his Company: “Being an automotive manufacturer we are capable of assembling many different products as required by our customers. The main purpose was to establish a facility to better serve our customer’s Mexican plants and also create better pricing for the products exported to the U.S. We started our operations in April 2007 in a 6,000sf facility with approx. 18 employees. In September 2007 we moved onto a new 60,000 facility and our current employment is 68 with target of 150 to 200 employees by year-end. Being in a Maquiladora, our capital outlay has been small. Utilizing our current equipment, our investment was primarily in facility setup, electric and compressed air systems, as well as office furnishings”

Mr. White continues, “We reviewed many options in Mexico and were drawn to Zacatecas for multiple reasons. Of course, the overall manufacturing costs looked better; the location in relationship to our customers facilities; being in a smaller community for lower competition for labor; the technical schools; the highway system being centrally located; the climate which eliminates the need for extensive heating or air conditioning; the wonderful atmosphere of Zacatecas, and the professional shelter group for which we are part, The Entrada Group.”

NxStage Medical is a company that started operations in Zacatecas in May of 2007 to produce medical devices. Bill Weigel, VP of equipment operations of the Company explains, “Our plant is currently located in a 35,000 sq ft building within the Entrada Group de Mexico industrial park. Our operations within the plant include the manufacture, test and repair of machine used to perform kidney dialysis. We also manufacture several disposable products used in conjunction with our equipment that support water purification and therapy fluids. All of the products produced are party of the NxStage hemodialysis service providers in the USA. Within the first year in operation we have expanded our facility to over 100 employees.

“Right from the start, Entrada took the time to understand our needs. We have a great relationship that continues to grow even stronger.”

– John White | Vice President Operations, Westbrook Manufacturing  Inc., Dayton, Ohio

“The Primary reasons for choosing Zacatecas for our plant were because of the location away from the border and the services offered by Entrada Groups a shelter manufacturing partner. We chose to start our operation within a shelter manufacturing relationship to decrease the time required to start and expand our operation.” continues Mr. Weigel “because of the support offered by Entrada we were able to start exporting products in less than 2 months from the completion of the building.” Relative to the location, we liked the fact that Zacatecas was away from the border and offered a large pool of potential employees. We have found many well educated assemblers, technicians and engineers in Zacatecas to staff our growing facility.

Three industrial parks are located in the State ready to receive interested companies and they continually work to surpass even the highest expectations:

  • Fresnillo Industrial Park: Includes Entrada Group and Lala. They each have successful operations here.
  • Calera Industrial Park: There are important companies such as Juvasa (Jugos Del Valle); CESANTON; and Grupo Modelo. All are located in this park.
  • Guadalupe Industrial Park: Bimbo and Carso are two of the companies that have also established in this park.

This State makes for easy access to some of the most important markets in the Country. This is because it is in close proximity to an estimated 45 million potential customers! The three big cities in the Country are Mexico City, Guadalajara and Monterrey. They are all located within a radius of 600 km. and the center of operations is in the capital of the State. Saying this Zacatecas can boast of impressive logistic qualities that will benefit whomever is looking to establish distribution canters, or for that matter, anyone who is a link in a given supplier chain connected to the big companies located in the North Central Region. The State of Zacatecas is strategically located and shares its borders with the State of Durango, Coahuila, Nuevo Leon, and San Luis Potosi. It also has contiguous borders with Guanajuato, Jalisco, Aguascalientes and Nayarit. This gives the State an important logistic advantage with the proximity of so many neighbors so close to its strategic location in the heart of the country.

“Looking at the map, Zacatecas can be seen located to the north of Guadalajara, Jalisco and also Aguascalientes. These are the two major cities in respect to electronic manufacturing,” Mr. Ross pointed out “It is on the highway route to Laredo, Texas. And for these reasons we find the location very well suited for our facility,” he explained. Last year another Flight opened to Los Angeles which has certainly helped with air travel. I think a lot of people forget that Mexico is still in North America and it offers many logistical advantages, as compared to some of the alternative Asian sources.”

Bill Weigel explained on this way, “The infrastructure in Zacatecas has proven to be very adequate. We have enjoyed being near the city of Zacatecas. This city has helped attract employees re-locating to the area and visitors from the US have enjoyed their stay in Mexico. We appreciate the proximity to the truck route to the US border. We find transit times are predictable and transportation costs quite reasonable.”

“I’m very pleased with the ability of the employees to learn new jobs and meet5 the requirement quickly” stated John White. “The automotive industry is a scheduling rollercoaster and the employees are adjusting well to these changes. We’re still in our start-up and I look forward to a very successful operation. Our ability to get programs transferred is our biggest obstacle.”

Thanks to improvements in the highway system, along with the expansion of flights destinations, the closeness of the State with the industrial poles gets better every day. Stuart Ross commented on it by explaining: “We have also been very pleased to see continued investment in the State, both in roadways and infrastructure.

Entrada Group has been on of the main promoters and industrial leaders of the State, working together with the diverse levels of Government to increase the competitiveness of the State.

Zacatecas has plenty of communication infrastructures, governmental incentives and also an unbeatable location. At the same time, for exporters Zacatecas is also a favorable destination, even though it is located in the center of the country. The important borders, like Reynosa and Nuevo Laredo are no farther than 680 km. from the most important Mexican ports. A distance of only 600 km. separates it from Mazatlan on the Pacific and Tampico on the Gulf of Mexico.

John White explained his satisfaction on working at Zacatecas, “I believe there is a very solid infrastructure in Zacatecas. At the government, cities, and local business all work very hard to make it easy for us to accomplish our mission. It’s very well located right in the middle of the country, close to the major cities (Mexico City, Guadalajara, and Monterrey), all are about 6 hours drive or less, and it is close to the U.S. border (Laredo) also the Fresnillo Industrial park where the facility is located, is only 20 minutes away from the Zacatecas airport.”

Zacatecas works along strategic lines of action in order to develop their economy. Promotion of private investment in a global content, agro industrial development and the reactivation of mining are some of these lines of action.

Other approaches include strengthening of micro, small and medium enterprises along with the internal market and the market’s social economy. There is also the development of tourism as a dominant economic activity. And, certainly the consolidation of the maquila industry and international commerce has to be included.

In addition, the development of the new labor and entrepreneurial culture and the IT Business effort are part of the strategic lines of actions being developed in this State.

Regarding the State’s economy, Nicolas Castaneda invites us to make some comparisons says: “If we compare the growth of the State GDP, we find that in 2002 the Gross Domestic Product in the Mexican economy presented an annual variation of 0.65%. Zacatecas excelled with a growth of 9.11%. In Zacatecas, the most dynamic activities in this period were mining and the agricultural sector, with annual growth rates of 28.03% and 21.71% respectively. In 2003, the total GDP of the Mexican economy showed an annual 1.44 rate variation. Zacatecas itself introduced an annual variation of 3.31 percent, occupying the 11th place in GDP growth in 2003 compared to 2002. This was especially noticeable in the area’s industrial sector which had the best performance. It exhibited an annual growth of 10.56%.” Castaneda continues: “In real terms the Gross Domestic in 2004. Zacatecas had an annual variation of 2.51 percent: the transport division had the best performance with an annual growth of 11/7 percent. According to estimates of the Center for Analysis and Economic Projections for Mexico (CAPEM) for the years 2005 and 2006, Zacatecas achieved a 3.2% and 6.7% growth in GDP, respectively.”

We are always impressed with the level of activity you see happening in the State where it is a national leader in a number of different products. Also, Zacatecas has been undergoing a remarkable development in mining. In the year 2006, for instance, Zacatecas ranked second in the value of mineral production. Its share of 17.7% of total production, with a value of 13,319 million pesos, represents an annual growth of 54.7%. Zacatecas is the leader in production of silver and also enjoys the first place in production of cadmium and zinc; it is second in lead and copper and fourth in gold.

In the manufacturing industry, Zacatecas has been rewarded because their beer brewing excels as the most important industrial activity. It contributed with 24.8% of the total gross output of the entity and 26.6% of the fixed assets. It also ranks first in the generation of added value.

Also, highlighted in this segment is the manufacture of auto parts. In the automotive industry the State’s main products are gas pumps, molded parts, harnesses and conducting cables, among other products. For the textile industry Zacatecas manufactures underwear and denim for other countries. For the electric sector there are modular circuits for gas, climate controls and also electric components for video games for export. There are also airplanes brakes, steel products, plus ceramics and don’t forget the gold and silver mining products.

Bill Weigel, from NxStage Medical explained, “We are very pleased with our operation in Zacatecas and we have been able to grow rapidly with highly qualified employees. We have been able to consistently expand production month after month while maintaining high product quality. The turnover within our facility has been very reasonable which an important aspect for maintaining highly trained employees is. This has been a key requirement for us given the complexity of our manufacturing process. We plan to continue transitioning manufacturing calls directly in Zacatecas and the facility in Zacatecas will be our primary manufacturing facility for the products produced there.”

Stuart Ross concludes about his experience in Zacatecas this way: “We are a Canadian business and we have been losing a competitive advantage over the years due to the strengthening of our currency in comparison to the U.S. dollar. This is, in effect, our business market. Mexico offers a business cost advantage that we were looking for.”

The Secretary of Economic Development of Zacatecas mentioned that in 2007 the entity obtained the largest foreign direct investment in the metal mining activity. He said that the company Gold Corp. (Minera Penasquito) made an investment of US$390.7 million dollars and contemplates making a further investment of US 1,494 million in construction. There were also substantial investments in the manufacturing industry (auto Parts), in addition to domestic capital in manufacturing activity, which is something that also stands out for its investments. There is also agri-business, the commercial sector and services. Foreign investment is a primordial element for economic growth. It complements national investment and in this way that Zacatecas has been intensifying its actions to attract new investment. Companies with Foreign Direct Investment are located mainly in the Municipalities of Zacatecas, Guadalupe, Fresnillo and Jerez, with investment as we said before, coming mainly from the United States.

Manufacturer Highlight: Pacific Insight

Pacific Insight Electronics Corp. (PI) designs, manufactures and delivers world class electronic products and full service solutions to the automotive, commercial vehicles, off-road, and marine markets. PI is always there when their customers need service, technology and high quality solutions.

PI has developed into a company that designs and manufactures a broad range of advanced electronics and lighting solutions. The company has four primary products groups: LED Lighting products, instrumentation products, electronic modules, and wire and cable products.

PI has expanded operations to Mexico because of the attractive infrastructure and excellent proximity into the company’s primary US customer base.

Stuart Ross, CEO of the Company mentions on this way, “We have leased approximately 30,000 square feet with in the Entrada Group Shelter, in Fresnillo, Zacatecas. Currently we have 37 employees in the facility, including management. The facility is primarily for assembly of our wire harness and cable products that we currently manufacture for the heavy truck and commercial vehicle industry.”

Fresnillo, Zacatecas offered an excellent location for us to do business in the area and we felt very comfortable with the Entrada Group’s owners and enterprise. Business ethics are very important to our Company and we found some very strong synergies with the Entrada Group,” stated Stuart Ross.

According to the CEO, PI is very pleased with their investment to date in Fresnillo and will continue to expand the operation over the next several years. “We plan to continue expanding in Fresnillo, Zacatecas. We would expect to have a minimum of 100 associates at the plant in Fresnillo by the end of 2009 working on harnesses as well as an expanded product base.”

Article published in MexicoNOW, May-June 2008

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