In his first 18 months in office, Mexican President Enrique Peña Nieto and his closest cabinet members have championed wide-reaching economic reforms. Many of these refroms have been promoted in the press, most notably in the February 24 edition of Time magazine, but there has been little to no media coverage of the impact of the reforms on the Information Technology Industry.
While the Telecom law reforms are creating a more competitive local environment and have generated hope for non-dominant industry vendors, the IT industry remains in more tranquil state and has a proven track record of success.
National Digital Strategy
Mexico’s National Development Plan, publicly available online, makes several references to the IT industry as a facilitator for the current administration’s five main objectives, although it does not lay out a specific plan for the sector. Those specifics are explained in the National Digital Strategy, which aims promote innovation, digital inclusion and open government, thus transforming Mexico into an an active member of the knowledge society. The President has appointed Alejandra Lagunes as the head of the National Digital Strategy, publicly available here.
The objectives of this plan are very broad and deal with aspects that are best understood if we focus on the priorities of a middle income country. In that context it is no surprise that the main aims are centered around improving of the quality of life of the Mexican population.
These include improving the educational system through technology, providing medical counseling to remote communities and connecting public hospitals through innovative systems. Other, more intangible aims include making government services available online, as well as making broadband more accessible for all the population, through public policies that promote competition and inclusiveness, as well as Public Private Alliances (APP).
These aims represent opportunities for companies that are able to provide such services to the government, potentially leading to a significant influx of foreign direct investment. The opportunities are greatest in the fields of healthcare, education and open governance. However, it has not yet been decided how the policies will be implemented, with such decisions set to determine the size and viability of the opportunity for foreign or domestic IT service providers.
Sustained IT Growth
Mexico’s IT industry has experienced a prolonged period of sustained growth, starting in 2002 with the inception of Prosoft, a program for the development of the sector. Currently in its second phase, Prosoft receives support from the World Bank and is divided into seven main projects:
1)Promote exports and investment attraction.
2)Train and form competent personnel in software development, in the required number and with adequate capacity.
3)Establish a legal framework to promote the industry.
4)Develop the internal market.
5)Strengthen local industry.
5)Reach international process capacity levels.
6)Promote the construction of physical and telecommunications.
There is also Prosoft fund, created in 2004, that with relatively little government investment (US$60+million in 2013, but the figure changes every year according to the budget assigned by Congress) has helped the IT industry to grow at four times national GDP rate of growth, with a constant annual exports growth rate of 12% from 2002-2013, according to Select & ATKearney.
Prosoft now funds almost double the number of companies that it did in 2002, in which time the local market value has tripled. Prosoft does not only fund Mexican ventures; foreign companies that have local franchises can also apply, with the funding in each case varying from 25,000 pesos to 45 million (US$1,880 to US$3.4 million).
A Model for Success
The National Development Plan aims to increase exports in all sectors, not just IT. But given that the IT industry has been growing organically for over a decade, it would be prudent to observe how this occurred, as it may well represent an opportunity for all other industries to learn from what was done in terms of public policy, industry activity and educational joint ventures, in order to replicate this success story.
There is still much to done in IT –- international market share to be appropriated, innovation to be discovered, procceses to be improved –- but there is no doubt that the industry, educational institutions and the government have done something right in order to create such an environment.
The National Digital Stategy can created an unparalleled opportunity within the IT industry. Let us hope that it creates knowledge, jobs, innovation and economic growth that generates wealth beyond the companies and employees themselves, and inspires other industries to adopt the best practices of this burgeoning environment.