Mexico City is growing exponentially and it’s no secret that many businesses—not just tech—have been moving into the area for a number of reasons. After having a tarnished reputation in the past, Mexico City is diving head first into the tech industry by allowing new and established tech companies to stake their claim and take advantage of everything this location has to offer. The government is working hard to make it known. The following are the top reasons to pay closer attention to Mexico City as the next Silicon Valley.
1. Booming economy
Mexico’s economy is growing at high speed. Goldman Sachs predicts it will be the world’s fifth-largest economy by 2050. In a climate where costs are increasing in the U.S., it’s more affordable for tech companies to outsource and expand operations in Mexico from obtaining the labor that is needed to operational costs. Mexico City is also the 7th biggest city in the world with the metro area having a population of over 22 million people. The government has proven its commitment to startups by funding them with over $600 million. Mexico City only makes sense as the next big tech giant – it accounts for around one quarter ($490.6 billion) of Mexico’s entire GDP. Numbers like these is music to the ears of even tech giants. It’s also exactly why Amazon continues to expand its property there because of the growing potential they see.
2. Untapped talent
As tech salaries rise in North America and companies are coming up short for qualified workers, businesses are looking to experienced tech talent in Mexico where the talent pool is plentiful. According to ManpowerGroup Talent Shortage research, 46 percent of U.S. employers say they can’t fill open jobs. This constitutes as the highest reported talent shortage in the U.S. in the past decade. One of the top reasons leading the shortage is the lack of an experienced workforce. Meanwhile, Mexico is reporting an employment outlook increase of 14 percent. With little competition and talent waiting to be utilized, Mexico City has become very attractive to tech companies.
3. Leader in Fintech
According to Finnovista, the Mexican financial technology or “Fintech” ecosystem grew 50 percent in less than a year in 2017, overtaking Brazil as the leader in Fintech in Latin America. Eighty new Fintech startups popped up in the last year in Mexico. As a big push to support fintech, a bill recently passed in Mexico’s Congress that will allow “open banking” or the sharing information by financial institutions through public application programming interfaces (APIs) assuming authorization is given. The bill will help regulate the fintech market regarding cryptocurrencies and crowdfunding technologies, according to Reuters. Regulations like these will only help fintech companies compete with more traditional banks and bolster the country’s tech status.
4. Affordable cost of living
Mexico is one of the most affordable countries in Latin America. Not only that, but rent prices in Mexico City are 83 percent lower than San Francisco, and food prices are 70% lower. It’s no wonder this location is becoming more and more attractive to tech companies. With so many tech companies – established giants and startups – expanding to this location, it’s a lot more attractive without the hefty price tag that comes with property in the likes of Silicon Valley. The close proximity to the United States is another big appeal to North American companies looking to expand and open up satellite offices – the time zone is nearly the same.
5. Investing in startups
Aside from powerhouse tech companies expanding in these locations such as IBM, Oracle, and Microsoft, Dell, and Intel, Mexico is investing a lot of money in tech startups. Through the Instituto Nacional del Emprendedor (INADEM), the federal government has provided around US $658 million to over 620,000 entrepreneurs to jumpstart the ecosystem. Mexico City is working hard and proving itself to be home to companies who are innovative and can thrive.
More importantly, due to the North American Free Trade Agreement (NAFTA), North American companies looking to spread their roots into Mexico will have an easy time doing so. NAFTA ensures U.S. companies that are located in Mexico retain full copyright and patent protection and promotes tariff-less commerce between Mexico, the U.S. and Canada.
6. Increase in Connectivity
Mexico’s digital economy is also rapidly increasing. As of 2013, 25 percent of companies in Mexico used cloud computing. In 2016, 84 percent had moved to the cloud. Mexico is also believed to be one of the three most competitive mobile app markets, joining Brazil and the United States. According to the International Trade Administration, Mexico also invested $1.6 billion in Internet of Things (IoT) solutions in 2016. According to Frost & Sullivan’s Mexican Industrial Internet of Things Market Forecast, Industrial IoT (IIoT) is projected to reach almost $4 billion in revenues in 2022, up from some $1.3 billion in 2017.
Although Mexico City still has a lot of work to do compared to the rest of the industrialized world, with a supportive government, talent pool, and economy that Mexico City has, there’s no doubt that this location will continue to be home for several businesses and startups. It’s the ideal location that will help the tech industry flourish.
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