Nearshore Americas

Mexico to Allocate $5 Million for Science and Technology

Mexico is planning to allocate over US$5 million for science and technology-related activities in its 2020 fiscal budget, as the government looks at technology to prop up the flagging economy.

The money is 6.5% more than what was allocated to the sector in 2019, according to the President of the Congressional Committee on Science and Technology, Marivel Solís Barrera, who announced the move on October 4.

Technological development will improve the living standards in addition to creating numerous economic opportunities for Mexicans, Barrera told a press conference, according to local media reports.

The move to increase the budget for the technology sector has surprised economists as it runs contrary to the typical behavior of Mexico’s new leftist president.

Since taking office this year, President Andrés Manuel López Obrador (AMLO) – described by many as a socialist – has been known for his cost-cutting measures.

Not long after taking office, AMLO shut down the country’s investment promotion agency, ProMexico, scrapped plans for an already partially-built new airport in Mexico City and even cut salaries for government officials in order to save money.

His moves have spooked foreign investors with the IT and BPO industry facing possible disruption. Slow economic growth and the lack of government business enthusiasm in innovation, entrepreneurship and new technologies is creating a “volatile situation of uncertainty,” with no one really knowing which way the country is going.

Corporate Mexico has also generally been paralyzed because of AMLO’s unpredictability.

This recent move is a huge turnaround from AMLO’s previous cost-cutting measures.

Reports suggest that the decision to increase the budget for the technology sector came following an extensive meeting between the lawmakers and the officials at the National Council of Science and Technology (Conacyt).

Barrera explained that after a legislative analysis, it was agreed that the decision to encourage research and technological development “will allow the country to move forward and guarantee better life opportunities for citizens.”

She added said the Conacyt will make a thorough review to ensure that next year’s budget is increased and distributed in an equitable and efficient manner.

Members of the Congressional committee have also told the government that it is vital to strengthen the hands of Conacyt with sufficient resources, citing the role of technology in the country’s economic growth.

The move has been seen as positive by some businesses, as Eduardo Campos, CEO and founder Mexico for Screen IT, a company that helps businesses outsource talent in Mexico, tells Nearshore Americas: “Support in the field of science and technology helps so that all this can be used for programs or scholarships for postgraduate degrees, or fiscal incentives that promotes growth in innovation and entrepreneurship.”

“But we still have a lot to do, we are a country that historically invests less than 0.5% of the gross domestic product in science and technology compared with compared with the average of 2.5% of OCDE. But hopefully in the next few years in higher percentages.”

He added it would “absolutely be beneficial to the BPO and IT sector in the country.”

Mexico spends less than 1% of its gross domestic output on research and development, according to a report published by the Inter-American Development Bank (IDB) last year.

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The IDB urged the country to invest more in research and development (R&D) activities, blaming the lack of investment for a drop in productivity.

Largely due to the decrease in R&D spending, there have hardly been new products and processes in recent years.

Of all the OECD countries, Mexico and Chile spend the least on R&D, according to America Economia.  Brazil, in comparison, spends more than 1.2% of its GDP on research and development.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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