Cesar CantuWhile politicians squabble over hot-button issues surrounding the Mexico-US border, business keeps booming in the so-called “Cali-Baja” mega region, blurring the dividing line between the states of California and Baja California.
Few places embody the Nearshore mentality like the Cali-Baja region. The juxtaposition of Tijuana and San Diego as bordering cities allows for a steady flow of people and business between the two, a circumstance that has led to the emergence of a cross-border tech ecosystem which is being cultivated from both sides of the line.
But the argument could be made that Cali-Baja finds itself in a post-nearshoring phase. The results of the experiment have reached beyond the economic. It has reshaped –and continues reshaping– the cultural and societal makeup of both states, with Tijuana and San Diego as the epicenters of that transformation.
Aiming to get a richer picture of the mega region and the role it plays in the wider Nearshore ecosystem, NSAM reached out to Edna Patricia Hernandez, Binational Senior Advisor at ITJ, a binational company which has come to embody much of the Cali-Baja mindset.
With over 20 years of experience as an investment promoter in Baja California, Patricia Hernandez has witnessed the rise of the local tech ecosystem, as well as the emergence of the mega region and its effects on both sides of the border. In our conversation, Hernandez provides a brief history lesson on Cali-Baja, speaks about cultural affinities in the mega region and wonders about the possibility of similar experiments taking place throughout the rest of the Mexico-US border.
NSAM: It might seem like a natural occurrence, but there’s a lot of work required to build a tech corridor like the one seen in the Cali-Baja region. What was the process that led to its edification? What’s needed to keep it going?
Patricia Hernandez: We need, for starters, to give credit to industrial investment; all of the industrial development that occurred in Baja California thanks to manufacturing. That’s what led to growth in the state, which in turn led to the local boom in electronics. All of that technology was planted in the ecosystem and leveraged later by other sectors that were considered emergent then: nanotechnology, cleantech and medical devices, which came off real strong. There were defense and aerospace too.
Baja California’s IT cluster saw its beginnings around 2000 or 2002. We were feeling strong pressure from NAFTA in 2001; that’s when a lot of the industrial migration [to China] began. By 2004, most of the great manufacturing companies that gave us glory were gone. Forget about being the TV capital of the world; that went kaput. In response, things began tilting towards innovation.
We’ve traversed 20 years of varied and collaborative efforts since then. The push was orchestrated many times from the side of public policy, and many times from the side of private enterprise. Many businesses took advantage of the opportunities put forth by government programs to accelerate companies taking them to Austin, to Silicon Valley, to Europe. There have been several efforts to allow the thriving of an entrepreneurial mindset.
Today, or at least back 2018 when I left the [local IT] cluster, there were more than 300 tech companies [in Baja California]. Fifteen years ago, when it began, there were only 20, and most of them formed by self-employed entrepreneurs.
NSAM: Who are the main players keeping this ecosystem active?
Patricia Hernández: Businesses. The push comes from them. The cluster shrunk, I don’t know why, but you still have business chambers. There’s CANIETI, for example. The Coordinating Business Council [CCE] itself is pushing that vision, as well as local economic development councils [EDCs].
There’s some push there, but, in reality, day to day investment comes from businesses. They’re the ones certifying the talent, sending them abroad. I know of companies who began investing in EVs several years back. They saw them coming, and seized on the chance to develop talent that could code for those platforms.
Want to know more about tech development in Baja California? Check out NSAM’s video series “Mexico’s Rising State of Innovation“
They develop the talent; they send it outside of Mexico, beyond California. They are footing the bill, because there are no state or municipal programs that offer to do so. The ecosystem has remained strong thanks to investment by businesses, definitely.
NSAM: That’s a bummer, wouldn’t you say?
Patricia Hernández: I would say it’s liberating. There used to be a mindset among companies of certifying employees only if they received government or cluster money for that purpose. But businesses are the ones generating wealth. The ecosystem only facilitates; it is businesses who hold the pan by the handle. That has changed. Now companies decide which technologies they’re going to push. How much does it cost to do it? A million dollars? They don’t care. They’re putting in the money.
The mindset has changed. Businesses certify their talent now. Today, they don’t have anyone in the ecosystem providing those funds. They have to pay out of their own pocket; they have no choice.
NSAM: Vendors on both sides of the border are aware of this ecosystem. But do potential clients know about it?
Patricia Hernández: I’ll speak about Baja California. Baja is so prosperous that there have been moments in which companies didn’t have to go out there looking for business. The ecosystem itself generated wealth, and other companies came here naturally.
Other sectors are more specialized, with capabilities which aren’t as generic. Promotion and evangelization are important in those cases. Baja has for long been perceived from the outside as an industrial town, not a technological one.
Now companies decide which technologies they’re going to push. How much does it cost to do it? A million dollars? They don’t care. They’re putting in the money.
When a company is in Baja California, it’s natural for it to re-buy capacities and do project upscaling, because they know what they can find here. A new company might not believe that’s the case, because they see Mexico as a third world country. They don’t imagine the infrastructure. I’ve been an investment promotion agent for most of my life and I’ve been asked if we have wi-fi here.
That’s why we’re here; cultivating the market and speaking publicly about our capabilities.
NSAM: Free trade agreements are important to build and maintain the flow of trade in services between countries. From this perspective, are Mexico and the US well equipped when it comes to FTAs?
Patricia Hernández: When the first version of NAFTA was in place, software was literally packaged; you bought a program from Microsoft and it came in a box. That forced it to travel through a customs office, where a customs code had to be registered, as well as a goods category. Today, innovation travels through safe and encrypted digital lines; no need for customs. What’s required, in that case, is the protection of intellectual property, which is set in place by laws.
The USMCA is more geared towards those IP protections. The FTA recognizes the patent and IP protection frameworks in both Mexico and the US. Whatever happens between both countries is protected by the agreement, which puts it above national law. That’s quite an advantage for any company. You don’t see that in India.
NSAM: With such a constant flow of talent from Baja California to California, is there a fear of brain drain growing stronger?
Patricia Hernández: That’s our day to day; it has always been. Engineers are privileged by FTAs. If you look at who has priority as an immigrant, in visa processes, engineers are privileged all around the world. They have visas of national interest. They are talents, and all countries want that.
When you look at the border, Baja California-California is the only place where two bordering economies are quite big.
Our challenge is to create sources of employment attractive enough to make engineers stay in Mexico, in Baja California.
Fortunately, I think that here in Baja we have that. We have companies in every sector with that capability: in aerospace, defense, health, agriculture, blue tech, green tech and clean tech.
NSAM: Cultural affinity has played an important role in the development of this mega region. How are these affinities channeled and cultivated to the advantage of businesses?
Patricia Hernandez: It’s curious. It’s been said that people from Baja California are the most Californian Mexicans. We celebrate the same holidays as the US over here. Binationality is quite common here. There are people living in Tijuana and working in San Diego.
Part of this binational culture has been built in businesses thanks to training programs being delivered in English. That results in groups of engineers, like us [at ITJ], 400 engineers speaking English all day, even though they’re Mexican. And being trained in California, in the US, makes the US business mindset stick, replacing the original programming.
Being trained in California, in the US, makes the US business mindset stick, replacing the original programming.
There are executives and collaborators who live in Baja but have to travel to San Diego for a meeting, and vice versa. That’s the day to day; the volume of binational border travel is brutal.
NSAM: The Cali-Baja mega region is quite the phenomenon, but similar developments are occurring in other areas of the Mexico-US border. Do you see the consolidation of other mega regions as successful as Cali-Baja?
Patricia Hernández: Indeed. There’s the Borderplex region, which is similar to Cali-Baja. There has been a strong push coming from the Sonora-Arizona region. Binational integration is very important.
What makes Cali-Baja different, though? When you look at the border, Baja California-California is the only place where two bordering economies are quite big.
In the case of Monterrey, the shared border itself is quite small; it’s not the whole state. If the latter was the case, there would be another mega region, that’s fore sure. Chihuahua has a more natural advantage from a geographical standpoint, because it shares most of its border with Texas. Even then, when you look at those border towns in Texas, they’re not that big. I believe Chihuahua has bigger cities on its side of the border.
California is the world’s fifth largest economy by itself; they’re like a whole country. Being right next to it is quite the asset. This binomial [Cali-Baja] is very positive. You develop talent; you develop an economy; you integrate roles and positions that would not make it to Mexico otherwise.
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