Opportunity Knocks at Mexico’s Door and the State of Jalisco Answers

Uncertainty continues to be a key theme of 2017, as Trump’s unforgiving approach to visas, trade agreements, and foreign policy leaves everyone in an unprecedented state of limbo.

However, while many of us linger in “wait and see” mode, certain parties are adopting a more opportunistic stance, apparently privy to the silver lining on this cloudy situation.

The government of the state of Jalisco, Mexico, last week published an open letter to U.S.-based technology companies, entrepreneurs, and innovators, inviting them to forge new partnerships with existing companies in the state.

“To our colleagues in U.S. tech companies who are adjusting to policy changes affecting your 85,000 foreign workers: the Mexican state of Jalisco hears you, understands your concerns, and stands ready to work with you,” opens the letter.

A bold and defiant response to President Trump’s proposed changes.

Keeping Collaboration Alive

Following the letter, the governor of Jalisco, Aristóteles Sandoval, embarked on a mission to reinforce the collaboration that companies in the state have with those in Silicon Valley, California. Accompanying him was Jaime Reyes, the state’s Minister for Science, Technology, and Innovation.

“The main objective of this visit is to keep business going and explore how we can support the U.S. tech companies present in Jalisco and Mexico,” he told Nearshore Americas. “The majority of the companies that we are visiting are multinational, so we have found a favorable business climate as they continue to focus on keeping things going in Mexico as normal.”

In response to how Jalisco will support these companies, Reyes cited the state’s provision of talented human capital as the top factor, adding that other incentives, like subsidized infrastructure, education and training, and state payroll tax breaks, are simply “add-ons”.

Talent Sourcing

Reyes confirmed that Jalisco does not intend to remove jobs from the U.S., but instead increase the labor pool through collaborative activities. “The name of the game is cooperation and we respect the U.S. government policies; we cannot interfere with them and we need to have respect for whatever the U.S. government implements,” he said.

“We are in the knowledge economy of the 21st century, where physical assets are not as important as they used to be. The guiding factor for competing internationally is now human capital, which the Jalisco government provides, alongside the basic infrastructure and services that companies need.”

Every company visited by Governor Sandoval and Minister Reyes has mentioned that they don’t want to be disrupted by new changes, as they are likely to suffer from that. Even so, they see “business as usual” and aren’t noticing any changes to the collaborative environment they have established.

Investment Hurdles

For individuals without H1B visas, salaries in Mexico won’t be nearly as attractive as in the U.S., but the investment opportunities might be. However, the government still has work to do to expedite and simplify the process of FDI.

“If there is a ban on the H1B visa then Mexico will open for business, but there has to be some incentives in place for foreign companies,” said Guillermo Gonzalez King, CEO of Mexico IT.

“There first needs to be a deregulation of immigration policy to enable foreigners to more easily start businesses. Also, a change in legislation on the limit of foreign workers, in which only 10% of a company’s staff can be non-Mexican, should be applied. However, INM (National Institute of Immigration) is unlikely to change it and no-one is lobbying for it right now, so the tech industry will need to make its standpoint clear before the government will consider it.”

According to Minster Reyes, when new companies enter Mexico, they usually need more foreign employees at first, but as they grow and mature that requirement diminishes. “That is short-term though, from around 6-12 months, then the local employees take over,” he said. “The majority of international companies we have in Mexico now have 95-96% local employees. For whatever reason that foreign employees find it hard to work in the U.S., they can go to Mexico and continue their operations.”

Promising Future

Despite Trump’s efforts to distance the U.S. from Mexico, the Jalisco state government intends to keep linking U.S. companies with its local technology ecosystem, while developing an external reputation as a more forward-looking location where innovation thrives.

“Our state has a passion, focus, and pride for the technology hub we are building, and our ultimate goal as a government is to enhance the quality of life for our citizens, a goal that will only be achieved through the effective use of technology,” concluded Reyes.