Manufacturing: the pillar of the industry in Nuevo León in 2021
Nuevo León
By Perla Eunice
There are 238 projects under negotiation looking to establish themselves in the state, 65 of which are at an advanced stage.
Nuevo León has shown an average increase of 10% in economic units during the last four censuses. In 2021, with a panorama full of uncertainty, the manufacturing industry is the sector with the most opportunities for growth, according to Américo García Almaguer, undersecretary of Industry and Commerce. "In Nuevo León, we are very much manufacturers; it's our thing," he said.
This sector's strength is reflected with a 30% share of the state's Gross Domestic Product. According to the Nuevo Leon Data system, despite the complications derived from the pandemic, manufacturing industries represented 33% of the employment generated in the state from January to October 2020.
The unity, communication, preparation, and adaptation to changes are some of the main strengths that the industrial sector of Nuevo Leon has developed to face the challenges that this year brought. Today, with all the lessons learned and the common desire to be more competitive as a sector, the industry is preparing to face the challenges of 2021.
According to undersecretary Garcia, the automotive and home appliances sectors are the ones that will stand out the most in this coming year, based on their results in 2020. Nuevo León manufactures 40% of the country's auto parts. Furthermore, thanks to the regionalization of value chains due to the pandemic, its derived interruptions, and the opportunities presented by the USMCA, the need for local suppliers will increase.
Another sector with more opportunities is software, especially in the areas of new technologies (artificial intelligence, internet of things, and cybersecurity). In this regard, the undersecretary said that a cybersecurity center would soon be created to operate at a national level in conjunction with the software cluster.
As for the main challenges, one of the most important is to operate under the threat of Covid-19. Although protocols are already in place to operate safely within companies, it is imperative to have detection, containment, and response mechanisms for contagions to take care of employees and avoid having to shut down production lines, the official said.
Another challenge is that no long-term plans can be made due to the circumstances. "The landscape is very changeable, and you need to be very quick to adapt to them effectively," he said.
Exports
As of the second quarter of 2020, Nuevo León accounted for 9.65% of the country's exports, translating into 15 billion dollars. For this reason, Cecilia Carrillo López, director of Index Nuevo León, highlighted that Nuevo León has positioned itself as the fourth entity in terms of export value. She pointed out that 99.6% of the state's exports are from manufacturing industries, making it the entity with the highest dependence on the Manufacturing, Maquiladora, and Export Service Industry (IMMEX) sector.
In terms of export representation in 2020, the manufacturing of transportation equipment stands out with almost 31% of production, followed by the manufacturing of electrical generation equipment with approximately 19% and, finally, the manufacturing of home appliances, representing 9.92%.
These are estimated to be the sectors with the highest growth in exports for this year based on their results.
"As far as we can see, these sectors are growing. However, one of our advantages is that we are a state with diverse industries. Although these sectors are underpinning, other industries are also going to be investing, and the differences in investments between one and another may not be as great as in other states", Cecilia Carrillo informed.
She also stated that this year, there would be changes in federal agencies directly impacting the IMMEX program, changes in labor issues -such as outsourcing, teleworking, pensions, etc.- and tax changes or changes in customs matters in the program's processes. "Modifications will come with a view to improve or grow. We have to prepare ourselves and be aware of the changes and inform ourselves beforehand to prepare the industry," he said.
In this sense, she recommended exporting companies to focus on their strengths, on their operation, and to continue with production plans considering the commercial circumstances that exist in their market.
On the other hand, she highlighted that the sectors linked to foreign demand could improve employment generation in the state in the short term, according to an INEGI study. In addition, two-thirds of the employment that recovered this year comes from the export manufacturing industry of IMMEX companies.
The director of Index pointed out that, this year, they expect to have a performance like that of 2019, since demand has not ceased. "We expect a favorable economic recovery: that by the end of 2021, we can say that we are as we were before and that we are on the right track," she mentioned.
Foreign Direct Investment
There are currently 238 projects under negotiation for Foreign Direct Investment (FDI) in the state, of which 65 are at an advanced stage. The main countries of origin are the United States, representing 32% of the total; China, with a 21% representation; France, with 5%; and the United Kingdom, Canada, and South Korea, with 4% each.
The aforementioned is possible thanks to the competitive advantages that contribute to the positioning of Nuevo León as an attractive destination to invest and do business, highlighted Lorenzo Aguilar Camelo, undersecretary of Investment and Industrial Development. Among the main advantages are "its highly trained human capital, its modern infrastructure, its privileged geographic location, quality of life, among many others," said the official.
He announced that to promote FDI, a project in which they have worked together with the private initiative and the academic sector, will start operations in January 2021: Invest Monterrey, an investment promotion agency for the state, which will boost the economic development of the region.
On the other hand, he pointed out that, given the current global dynamics, the state has become very attractive for investments in distribution centers, mainly for companies that have significantly increased their online sales.
The home appliances sector
According to the latest 2019 INEGI census, released in 2020, the production of home appliances in Mexico was 21,471 million dollars, representing a growth of 171% since 2014. In addition, Nuevo León is the first producing entity in the sector: it represents 21% of the production at a national level, which translates into 4,436 million dollars.
Betsabé Rocha, director of the Nuevo Leon Home Appliances Cluster (CLELAC), pointed out that, in 2020, they focused on building community and communication among members. Because the refrigeration and cold chain items were considered essential, suppliers dedicated to supplying white goods were able to operate with the proper protocols.
"The most critical months were April and May. By July, we had a rebound that exceeded the 12,155 million dollars in exports to the United States that we had during 2019," Rocha highlighted.
She also pointed out that, thanks to the social responsibility and human capital committee's work, they were able to exchange good practices to achieve the 3% annual turnover that some of their associates have. Along the same lines, she predicted that cost analysis, finance, and continuity plans are the areas that will need the most training this year.
"Today, more than ever, we have to be competitive," said the CLELAC director. Among the growth opportunities, she highlighted nearshoring; since due to the volatility in tariffs and logistical complications, companies will look for more supply options near them within a radius of 400 kilometers.
"It is no longer about depending on China; there are many opportunities for suppliers to enter as option b and c for certain companies where they did not see an opportunity before. Once again, Mexico is the ideal trade platform for the most important consumer, which is the United States," she said.
In addition, companies need to "focus efforts on strengthening their competencies in terms of B2B, e-commerce and industry 4.0 to make processes more efficient, to quote quickly and to be flexible when faced with changes".
On the other hand, she noted that she has a positive expectation in terms of employability. "We did not lose as many jobs as in other sectors. By 2021, we can increase 10% of what we had during 2020." In addition, she highlighted the relevance of preparing for the arrival of important white goods companies, mainly Asian, which see Mexico as an option to establish their operations.
To conclude, Betsabé Rocha encouraged industry participants to continue working as a team. As one of their projects for the year, she announced that they would offer a Diploma Course on Supplier Development based on a diagnosis of what anchor companies are looking for; in this course, companies will be evaluated on levels of competitiveness aligned with international standards.
