Nearshore Americas

Take a Deeper Data-Dive into Mexico’s Second-Tier Locations

When shopping around for new site locations in developing countries, much of the decision process too often hinges on second-hand and potentially biased information. Oftentimes, data from a conference presentation or a promotional agency website are all you have to go on when taking that initial step into a new market. This is particularly true when considering untested, second-tier markets that have yet to prove their worth as global services platforms.

Places like Cali, Lima, Aguascalientes, Queretaro and other up-and-coming markets may sound promising, but limited labor and economic data at the local level can make it difficult to plan strategically and with confidence.

Yet, when comparing these up-and-coming destinations, there is definitely more visibility into Mexico’s second-tier markets than other Latin American countries. Agencies like the Ministry of the Economy and the National Institute of Statistics and Geography (INEGI) are very good at providing detailed and relatively up-to-date figures on things like regional GDP, unemployment, graduation rates, and other indicators that can be used to make strategic site-location decisions. Try finding this data for local markets in Peru or Argentina and you will quickly hit a brick wall. Likewise, Asian markets, including India, are shrouded in mystery when it comes to accurate market data.

With Mexico you have some comfort of basing your site-location decision on current and historical data at the local level. Here is a checklist of factors that can be evaluated using readily available data on the Mexico market, as a complement to your discussions with people on the ground:

 Labor shed analysis

 Regional economic base analysis

 Labor pool forecasting

 Educational obtainment

 Demographic base analysis

 Crime statistics

Below are suggestions on how you can use these data to make the site-location decision less scary:

Look at Labor Shed in Addition to Major Population Centers 

Like most of Latin America, Mexico’s 113 million people are heavily concentrated in urban areas – 75 percent compared to 28 percent in India. Identifying major population concentrations and their spatial relation to each other is a good first step to site location, particularly if you require a specialized-skills base and hope to recruit talent from surrounding areas. Below is a population density map that we developed with data from INEGI, using ArcMap GIS mapping software:

Focus on Quality When Evaluating Local Talent Base

Basic graduation rates are often sited when evaluating markets, but it’s also important to look at the quality and outcomes of local educational systems. Here, data on graduation rates, concentrations of talent with advanced degrees, as well as trends across the K-12 base were used for deeper comparison of 11 local markets in Mexico:

As we can see, Mexico City performs well with the largest pool of college graduates (bubble size); the highest concentration of graduates with advanced degrees (vertical axis); and the highest K-12 grade achievement rates (horizontal axis). Veracruz on the other hand has a relatively large pool of generalized talent, but scores low on K-12 quality, as well as those with professional degrees. Queretaro is a third scenario where you have a relatively small talent pool, but one that is highly specialized and above the national average when it comes to K-12 performance. Clearly other factors such as infrastructure and telecommunications costs, wage premiums, and language skills have to be considered in addition to education quantity and quality. Nevertheless, we get a better sense of where these markets stand, relative to each other.

Analyze Specific Sectors to Seek out Specialized Skills 

More and more, service providers are adopting specialized services around vertical markets. Hence, a closer look at a region’s existing economic base can shed light on availability of specialized talent (not to mention demand for services). We looked at ten states in Mexico and evaluated them based on market size, as well as concentration in the Professional, Scientific, and Technical Services sector. A high concentration in this particular industry is one indicator of a highly skilled labor force, relative to other markets.

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Good Market Data Is Not the Be-All of Site Location Decisions

In a perfect global world, we would have readily available data on every place, everyone, and everything from specific programming skills to language capability. Until we get to that point, making the right location decision will remain part science, and part art. Nevertheless, Mexico has taken the right steps to provide local-level data that can be used to make more confident decisions. If you have a good command of the Spanish language then you should be able to dig up some good data to support your overall strategy. If not, feel free to contact us and we can help you out.

Luke Bujarski

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