Download Urban Competitiveness and Industrial Clusters in Mexico

Urban Competitiveness and Industrial Clusters in Mexico
Jaime Sobrino
1. Introduction
Mexico had an estimated population of 108 million of inhabitants in 2010, and
was the eleventh place among the most populated nations in the world and below
China, India, United States, Indonesia, Brazil, Pakistan, Russia, Bangladesh, Nigeria
and Japan. For the same year, the estimated Gross Domestic product (GDP) was 863
billion dollars, having position 13th, below the Unites States, China, Japan, Germany,
France, United Kingdom, Italy, Spain, Russia, Brazil, Canada and India. The
population geography and economic activities were characterized by their
concentration in few points of the territory, where 31% of the population and 45% of
the GDP were in the five main metropolitan areas.
This population concentration and economic activities in few points of the
territory is a tendency shown in most of the nations of the world, not only in Mexico,
but in each of them is the result of complex historical processes where location factors
that explain economic activities, growth dynamic and population distribution are
interrelated. From them, the distribution of natural resources, physical-geographical
aspects, behavior of demographical variables, distribution of public investment,
tendencies and fluctuations in the economic activity, the evolution of social and
political processes, territorial policy, international financial markets tendencies, and
the global processes inside the nations are the most important (Dicken, 1992; Garza,
2000).
The geographical concentration of the economic activity is the result of
increasing scale outputs that occur both inside the productive units and by external
elements (Krugman, 1992). The specialized literature recognizes that the economic
activity is concentrated in the territory in two stages. In a first stage, the
physical-geographical conditions conditioned diverse accessibility niches and
differential transport costs; and in a second stage, the good use of the agglomeration
economies did (Hoover, 1948; Richardson, 1986). The location pattern of the
economic activities can be divided in three types, depending on the mobility of raw
material, factors and products: i) intensive in the use of mobile factors (footloose
industries); ii) producers of non-traded goods, and iii) those making intensive use of
natural resources. In general, economic activities directed to the use, extraction or
processing of natural resources tend to be located in the immediate proximity of their
raw material; producers of non-traded goods are mostly established closet o their
markets, and the location patterns in footloose industries show a clear preference for
their spatial concentration in the largest urban areas and metropolitan regions (Dávila,
2005).
Agglomeration economies referred to the cost reduction that occurs when an
industry or firm is located in a place and not in another; they describe all the external
economies that make good use of the productive units, derived of the particular
locational association with a spatial concentration of economic activity large scale
(Feser, 2002; Goodall, 1987; Malecki, 1997).
The agglomeration economies are
divided into location and urbanization economies. Urbanization economies are
external advantages to firms. They are diverse and diffuse, referring to the cost
reduction in a wide variety of firms according the increasing scale or population size.
These economies are originated by the creation and increase of productive
infrastructure and services for the population, quantity and diversification of the labor
market and the economic cycles of diverse economic activities. These urbanization
economies are also known as general production conditions (Garza, 1985), and their
evolution has been closely related to technological development, in a first moment
towards energy sources generation, then to motorized mobility of population and
goods, and recently to the transmission of information and knowledge flows. These
economies are part of the diversification in the productive structure of cities.
On their side, location economies are external advantages to the firm but internal
to the economic sector, and they occur when the spatial concentration of that sector
make less cost to the firm of the sector located there. It is related with the concept of
cluster, which means the spatial union of similar firms correlated with the production
processes they make and with the productive technique used or by the share use of
inputs (Porter, 1996). An industrial district is a cluster and a public or mixed entity
that manages the behavior and interrelations among enterprises (Rabelotti, 1997).
Location economies are originated by physical-geographical conditions, specialized
labor markets, specialized machinery, imitation, diffusion and sharing. Its advantage
is not related with scale but with the interaction among the diverse economic agents.
They generate specialization in the local economic structure.
The strategic importance of clusters has been strengthened by the following: i)
the range and speed of technological innovation; ii) the new orientation of public
policies, and iii) the impact of these reforms on the geographical localization of
economic activities. In spite of the greater mobility of goods and services, as well as
of production resources, companies still enjoy great advantages if they locate in
places where there is already a considerable concentration of economic activities;
these benefits are associated with agglomeration economies and with various kinds of
externalities.
According to Dávila (2005), the available methods for grouping activities and
the potential conformation of clusters in territory may be classified in two types: i)
those called “perception of the industry”, which are based on the use of simple
indicators, like location quotients, or the application of interviews in firms, and ii)
those with a sounder analytical base using models and statistical techniques. The
principal weakness of the first type of methods is their limited ability to account for
the complex network of economic interactions, concentrating on the direct impacts of
economic changes, and ignoring the indirect effects.
In the second type there are four different techniques, all of them using
information on intersectoral economic transactions, which is provided in the
input-output tables and models? These are the following:

The interactive focus. It allows the productive chains and each of their links to
be characterized according to the different phases of the mathematical
algorithm used in the inversion of the Leontief matrix, whose final result is a
calculation of the direct and indirect multiplier for each economic activity, and
their elasticity to a change in the final demand (Mariña, 1993).

The factor analysis method. Statistics factor analysis, using principal
components, is applied to select the economic activities with strong links in
the buying and selling of inputs, based on their similarities or complementary
features. Once the composition of the clusters has been defined, the presence
of the industries that integrate them is quantified, at the desegregation spatial
scale desired (Feser and Bergman, 2001).

Cluster analysis. This multivariate statistics method is used to define a set of
variables, which serve to select industries with similar features in their buying
and selling inputs patterns (Hill and Brennan, 2000).

Graphic analysis. Uses Graphics theory to determine the productive chains
formed by complex networks of industries, and organize them hierarchically
in terms of their different levels of synergy (Verbeek, 1999).
To find the appropriated procedure for identifying the clusters, six basic criteria
should be put in mind: i) reliability; ii) capacity for producing results in short term; iii)
cost of application; vi) information and data availability; v) flexibility in visualizing
clusters at different geographical scales (urban, regional and national), and vi)
pertinacity for public policies. As an example, Ni Pengfei (2007) followed eight
criteria for defining the industrial clusters in China: i) to read a lot of papers about
Chinese industrial clusters, and select those that have been researched by scholars and
experts; ii) to search on internet for government websites, trade union websites, and
industrial clusters in different cities; iii) to call local economic, trade or political
offices in more than 280 cities; iv) to visit relevant trade unions; v) to get statistical
data about industrial clusters; vi) to confirm the geographical distribution of them, and
vii) to make the industrial cluster maps and databases.
The term competitiveness has been recurrently used to quantify and qualify the
integration degree of nations and territories in the stage of globalization. The
competitiveness of a country is defined as the nation’s ability to grow successfully
and increase its participation in the international commerce (Bannok, Baxter y Davis,
1998); this ability depends on tree basic elements: i) microeconomic performance of
firms; ii) formulation and implementation of clear and explicit public policy for
commercial exchange promotion y iii) existence of an urban system capable of
supporting the location of productive investment.
The success in the economic performance of a territory has been united with the
socio-political evolution of its population, making a connection between the success
in the insertion to world market and the improvement in the life conditions of
population, with the institutional governance and the search of sustainable
development (Buck, Gordon, Harding y Turok, 2005). These interrelations are,
however, not automatic, because each of them is a circuit inside societal evolution,
and in many cases they move on at different speeds and without clear leagues among
them.
Urban competitiveness is the degree in which a city, compared to others in
competence, is capable of attracting productive investment which is expressed in the
generation of employment and income increase, and at the same time, increase and
consolidate its cultural amenities, recreational attractions, social cohesion, governance
and an adequate environment for its population (Global Urban Competitiveness
Project, 2005). This concept means, in first place, that competitiveness is a relative
term, because it compares performance or actions in a territory based on what other
territories do o do not do. In second place, it quantifies and qualifies the potential of
that territory not only for the attraction of investment, that may be public or private,
but also to retain its population by offering labor opportunities and life quality, and
even to work as a destination of internal and international migration flows.
The success in the attraction of productive investment is subject to a series of
factors called competitive advantages (Begg, 1999; Kresl, 1995). Those advantages
are grouped in those related to size, or scale, of the city and its geographical position,
and those based on the quality of the interrelations among local agents (Sobrino,
2006). Among the firsts are the accumulation of infrastructure and services, labor
market characteristics, access to internet or the number of direct flights to the rest of
the cities in the world. Among the second are: the role of local government in
economic promotion, formation of public-private relationships, formal and informal
associations among business persons and the diffusion knowledge channels for
putting the technological innovation actions in motion.
Competence among cities dictates either their productive specialization or a
complement of their economic activity. Local economic agents should configure the
economic image of the city by taking advantages of the existent location, scope and
urbanization economies. The abundance of labor is a factor that influences firms’
decisions in a first moment, but then other elements are relevant such as capital
concentration, existence of infrastructure and services and the conditions for
knowledge generation and the adoption of technological innovation. In relation to this,
Paul Krugman points out the topic of competitiveness from the performance of
productive units in particular sectors (Krugman, 1996), while Michael Porter suggest
that clusters of activities are essential to support economic growth and local
productivity increase (Porter, 2000). These arguments make clear the dichotomy
between diversity and specialization in cities and the relationship between local
economic structure and urban growth. On the one hand there are arguments
supporting the idea that diversification, as a process, is related to growth and that a
diverse economy should be more stable than a specialized one (Duranton and Puga,
2000; O’Donoghue, 1999). On the other hand there are positions in favor of a
specialized local structure to promote growth and competitiveness, upon the concept
of cluster (Koo, 2005; Porter, 1996).
Based on the previous paragraphs, this paper has the objective to analyze the role
of industrial clusters in the growth and competitiveness of the largest cities in Mexico.
For that, the second part of this paper presents a brief review of the economic growth
in Mexico during the globalization era. In the third part, the industrial clusters of the
Mexican economy are explained. The empirical relationship between urban
competitiveness and local industrial cluster for the largest Mexican cities is explored
in the fourth part. The conclusions and some policy recommendations are drawn in
the final remarks part.
2. Economic change in Mexico during the globalization era
Between 1980 and 2010, the Mexican GDP, grew from 206 to 863 billion dollars,
in current prices. For the first year, Mexico was the 11th nation, below United States,
Japan, Germany, France, United Kingdom, Italy, China, Canada, Spain and Argentina,
and it shared 1.9% of the planetary GDP. For the second year, the rank of Mexico fell
to the 13th position, above Argentina but below Russia, Brazil and India; its share in
the world GDP was 1.6 per cent. In constant prices, the average rate of growth in the
Mexican economy was 1.9% in the 1980’s, 3.5% in the 1990’s and 1.5% during the
first decade of the new century. The low growth in the eighties was generated by the
end of the imports substitution model and the important imbalance in the public
finance, which forced a substantial change in the economic policy towards the
adoption of a neoliberal model.
The economic situation improved in the nineties, in
great measure by the exports impulse and the firm of NAFTA. For the first decade of
the new millennium, the growth was low again, influenced by the global crisis
initiated in September 2008; in 2009 there was a very rough decrease, -7.3%, the
second most important contraction for a year in one century, only above the -15%
occurred in 1932. The percent share by sectors and industries appear in table 1.
Table 15.1 Mexico: Gross domestic product by sector and industry, 1980-2010
Percent share
The economic restructuring revealed quantitative and qualitative changes in the
what, how, for whom and where to produce, derived by an reorientation in the
economic policy of the country or by talking advantage of the internal scale or global
circumstances (Dicken, 1992). The main elements of the productive restructuring of
Mexico in the era of globalization are the following: i) manufacturing industry has
been the thermometer of national economy trend because of its low dynamism in the
1980’s and in the first decade of the XXI Century reveled low growth of the national
GDP; ii) the destiny of production was mainly adjusted by manufacturing industry
because in 1980 only 4% of its production was exported and it grew to 48% in 2010;
iii) exports were concentrated in the United States, representing 85% and causing
synchronicity of the Mexican economic cycle with that of the United States; iv)
producer services had a significant performance creating a value chain between these
activities and manufacturing industry; v) telephone services achieved the greatest
relative growth, producing that the owner of the main firm in the country, Carlos Slim,
became the richest person in the world, and vi) the farming sector showed low growth,
as a response of the NAFTA impacts, where opening commerce to farming products
was included, and which generated greater comparative advantages to the Unites
States in relation to Mexico and Canada in that sector.
Territorial restructuring is shown in the following way: in 1980 Mexico City had
a population of 14.5 million people (22% of the national total), it generated 38% of
the total GDP of the country and 44% of the manufacturing GDP. For 2005, its
population was 19.2 million people (19% of the country) and its economic
contribution fell to 29%, both for the total GDP and the manufacturing industry GDP.
Restructuring in Mexico City consisted in a change from manufacturing industry
towards services, especially to producer services. This megacity showed
deindustrialization, which means the absolute lost in production and in employment of
manufacturing industry, after being a significant component of its economic structure
(Knox y Agnew, 1998). This decline was the result of the combination of internal
factors to the metropolis (agglomeration diseconomies), internal factors to the country
(lack of an industrial policy and break up of productive chains for the use of import
inputs), and external factors (derived from globalization and larger dynamism in
superior activities of the service sector, such as financial services, to consumer and of
telecommunications).
Deindustrialization in Mexico City was accompanied by a new geography of
industrial production in the country. In 1980, manufacturing had 2.1 million people,
where 911 thousand were concentrated in Mexico City. For 2003, manufacturing
employments were 4.2 million, they duplicated, but in Mexico City they reduced to
801 thousand, which had 110 thousand less than in 1980. Three of each four new
employments generated in manufacturing industry between 1980 and 2003 were
located in the 87 most populated cities of the country, while the remaining one
employment was generated in the group in small cities and rural areas. In the main
cities, thirteen of them concentrated half of the new employments.
Figure 15.1 Mexico: cities with greater generation of manufacturing employment,
1980-2003
The largest industrial dynamism occurred in the cities from the North Frontier of
the country, where five cities were in the frontier band with the United States; the
West region had some success, where there is the second most populated metropolis
of the country, while in the Center region, where Mexico City is located, there was
only one representative. These cities had increase in employment from 575 thousand
in 1980 to 1.6 million in 2003. On their side, the South and South East were those
with the minor degree of industrialization.
3. Industrial clusters
From 1980 to 2008, the total Gross Production of the manufacturing industry
increased from 116 to 491 billion dollars, in current prices, while the employed
population did from 2.1 to 4.5 million people. The destination of production change
notably because in 1980 only 4% of goods were exported while in 2008 it grew to
47%; in other words, the goods produced for national consumption grew from 111 to
260 billion dollars, while exports did from 5 to 231 billion dollars. Exports by type of
good showed an elevated concentration in some sectors because the groups of
electronics, automotive and metalworking provided 81% of the total exports (Figure
15.2).
8 467
27 473
78 649
8 728
49 397
58 168
Electronics
Automotive
Metalworking
Iron and steel
Food products
Others
Source: INEGI, 2010.
Figure 15.2 México: Exports by manufacturing groups, 2008
As it was mentioned previously, a cluster of activities refers to the geographical
concentration of interconnected firms that compete and cooperate among them. The
strategic importance of clusters has been strengthened by: i) the range and speed of
technological innovation; ii) the interlinks among the economic agents; iii) the
orientation of public policies for their promotion, and iv) the impact of them in the
geographical localization of economic activities.
In order to know the industrial clusters in México, in this paper I use the results
made from the Center for Socioeconomic Research (CISE) at the Autonomous
University of Coahuila, Mexico and the methodology according to Feser and
Bergman (2001), which uses information from an input-product matrix for 57 brands
of activity from mining, manufacturing, construction and electricity industries, or the
secondary sector. The first step is to get the purchases and sales coefficient matrices
for each brand. The second is the formation of a mixed matrix, integrated with the
coefficients with the highest index of correlation for each intersector flow; a factor
analysis is applied to allow the identification of industries that make up each of the
industrial clusters in the Mexican economy. The third step is the selection of those
brands belonging to each cluster by a loading coefficient, which fluctuates between 0
and 1; the brands can be classified as primary, secondary and tertiary to the cluster.
There are some brands belonging to two or more clusters; these brands are “hinges”.1
According to CISE, 13 industrial clusters do exist in Mexico. In the GDP for each
cluster only the primary brands are accounted. According with the methodology,
1
Those interested readers about the methodology, results and research reports of industrial clusters in Mexico may download the GIS and program to his computer, consulting www.cise.uadec.mx almost the 100% of the secondary brands were integrated into a cluster.
The most important cluster was energy and derivates, sharing 42% of the total
secondary GDP and integrated by the following activity brands: i) extraction of crude
petroleum and natural gas; ii) extraction and beneficiating of other non-metallic
minerals; iii) refining of crude petroleum and petroleum products; iv) basic
petrochemicals, and vi) electricity. This cluster produces the primary and secondary
energy for the country. Mexico is an example of a nation with very important
paradoxes in the energetic topic. It is a net export country, but with lacks of an
integral and long term policy in this aspect. The energetic supply of the country is
based on oil, but its production and proved reserves have diminished year after year.
The primary energy sources have been localized in the region with the lowest level of
development, where there is an important net regional exchange with no benefits for
that territory. The consumption of energy per inhabitant increases as the city size
increase, but there has been no promotion of a national policy of urban transport. The
people living in rural areas maintain the firewood burn as their fundamental source of
energy. In cities, there are two contrasting forces: the largest the size the greater
efficiency in the use of energy in economic activities, but the largest the city the
greatest consumption of energy per inhabitant as well.
Table 15.2 Mexico: industrial clustrers
On the other side, the most important clusters for manufacturing exports were
electronics and parts, and automotive. This clusters shared 59% of the manufacturing
exports in 2008 and 15% of the secondary GDP in 2003. The Electronics and parts
cluster is integrated by the following primary brands: i) stone quarrying and extraction
of sand, gravel and clay; ii) other wood and cork products; iii) plastic articles; iv)
glass and glass products; v) household electrical appliances, and vi) electronic
equipment and appliances. This cluster is dominated by maquiladoras (assembly
plants) with a very low degree of national integration for inputs; the only added value
of those enterprises is the salaries to the occupied personal. The assembly plants
program in Mexico started in the 1960’s, and it was promoted during the 1990’s
because of the trade opening economic strategy; assembly plants are located mainly in
border cities with United States. The automotive cluster is integrated by two brands: i)
automobiles, and ii) bodies, motors, parts and accessories for automobiles. This
cluster is dominated by transnational enterprises such as General Motors, Volkswagen,
Nissan, Ford and Chrysler; the automobile production until the 1970’s was for
domestic demand, with an important national integration and the plans were
concentrated in Mexico City and its regional crown. With the globalization phase, the
companies changed the strategy towards foreign markets, using more import inputs
and with a territorial restructuring towards northern cities.
Table 15.3 Mexico: industrial clustrers city distribution
Cities are propitious spaces for clusters because of the supply of agglomeration
economies in terms of urbanization, localization and scope economies. Enterprises are
able to get inputs, funds, information and knowledge living together, reaching
productivity quotes and generating wealth to the city. In order to know the territorial
distribution of industrial clusters in Mexico a double threshold method was used to
identify subcenters of employment, which are proposed by Giuliano y Small (1991).
This method defines subcenters of employment to those places that had a magnitude
and density beyond the average of the urban area. In this case, cities were a cluster is
located were obtained from production density in the cluster activity branches, with a
value of 0.7 or more in their location quotient, and also with the production magnitude,
with at least 2% of the cluster GDP (Table 15.3; Figure 15.3)
Figure 15.3 Mexico: location of selected clusters
Clusters had different geographical patterns (Figure 15.3). Cluster 3, energy
and derivates, had the lowest geographical concentration, with only three cities, and
on the other side, clusters 2, iron and steel, and 8, automotive, had the greatest
diversity in space both with 12 cities. There was a strong association between the
number of cities and their share in the GDP of the cluster; the three cities in the
energy and derivates cluster concentrated only 13% of its GDP, meanwhile the 12
cities of the automotive cluster produced 77% of the cluster GDP.
Mexico City, Monterrey and Guadalajara are the largest cities of the country
and they have also the most diverse industrial structure. There were 13 clusters in
Mexico City, and in the other two metropolitan areas only the cluster energy and
derivates was omitted. In terms of industrial cluster diversity, the following were two
border cities and other two located in the central region. In general, there was a
relation between the number of cluster in the economic structure of the city and its
share in the total secondary GDP.
In summary, Mexico City, Monterrey and Guadalajara had the greatest
diversity in its industrial structure and they are also the largest cities in the national
urban system. The geographical pattern of clusters 2, iron and steel, and 8, automotive,
was similar, indicating important links between these activities. Cluster 5, electronics
and parts, was located in the largest and in border cities. In the case of the chemical
cluster, some specialized cities are located near the sources of oil extraction and the
petroleum refiners.
4. Urban competitiveness
In the economic sphere, strategic planning of urban centers has generally
recourse to the concept of competitiveness for local economic promotion. Urban
competitiveness is the degree in which a city, compared to others in competence, is
capable of attracting productive investment that generates employment, increase
income, and enhance and consolidate the quality of life and social cohesion of its
residents, the institutional governance and an adequate environment (Global Urban
Competitiveness Project, 2005). Cities compete for the attraction of productive
investment either public or private, and of national or international capital (first
moment of competitiveness). These investments contribute to the accumulation of fix
city capital and can be oriented to build infrastructure and equipment (fix social
capital), or for the production of goods and services (fix private capital).
The success in the attraction of investment is based on a series of factors, or
competitive advantages (second moment of competitiveness), which can be divided
into: i) related to size, and ii) based on quality (Sobrino, 2006; Turok, 2005). Those
related to size (territorial and distributive) operates under the concept of
agglomeration economies generated by the scale, the scope and the complexity of the
urban area. Cities do not require a particular organization to offer these advantages,
neither the cooperation among economic units or social agents. On the other side,
competitive advantages based on quality (entrepreneurial and institutional) have to do
with the collaboration among firms, the participation of local governments in the
economic promotion of the city and the coalitions among social agents. These
advantages are not defined by population size or the economic importance of the city
but by the exercise of planning strategies, formal arrangements and informal
proposals. Their creation, maintenance and improvement depend on the necessary
cooperation between people, levels of government and territories.
The concept of urban competitiveness infers, in first place, that competitiveness
is a relative term, because it compares the performance or the actions of a territory in
relation to activities that other territories are or not doing. In a second place, it
quantifies and qualifies the potential of that territory not only for the attraction of
productive investment, that may be public or private, but also to retain its population
by offering labor opportunities and quality of life, and also for working as a
destination of internal and international migration flows.
In the specialized literature there are various proposals to empirically quantify
and qualify the competitive performance of cities. All of them are benchmarking type
exercises; this is the collection of statistical information about the economic, political,
social and environmental variables, and their processing through a statistical model
for the creation of an index. These works are valid and valuable because they emerge
from an urban competitiveness concept accepted in the specialized literature and
introduced available statistical variables. However, the best index is not the one that
has a larger number of variables or uses the most sophisticated model but that which
provides the analytical elements for an integral study of the competitiveness of a
territory.
This document uses the methodology suggested by Ni Pengfei (2007) to build a
competitiveness index. The advantage of this model is that it uses a minimal number
of variables. The index is build with five variables: i) logarithm of GDP; ii) growth
rate of GDP; iii) logarithm of GDP by inhabitant; iv) average occupation rate, and v)
level of quality of life.
The first variable represents the scale of the urban economy, its participation in
the national market and the potential creation and good use of the competitive
advantages related to size. The second exemplifies the potential performance for the
attraction of productive investment. The third estimates the degree of economic
efficiency of the city and the good use of competitive advantages based on quality.
The fourth illustrates the impact of the attraction of productive investment in the
behavior of the labor urban market, and its potentialities to receive migratory flows.
The fifth interprets the access of population to collective satisfiers. The
competitiveness index was made for the 87 largest cities (Table 15.4).
Table 15.4 Mexico: competitiveness ranking for selected cities, 1998-2003
The competitiveness position of a city depends on the interplay of its productive
units performance, the actions and coalitions among the economic agents, the
available material conditions for the productive process, the generation and good use
of knowledge and technological innovations, the market areas to acquire inputs and
distribute products and the existent industrial structure.
According the nature of the manufacturing goods, production can be directed to
final or intermediate demand. Final demand goods are consumed internally or can be
exported; therefore competitive advantages for geographical localization are
associated to the spatial distribution of population and the accessibility of the
productive unit. On the other side, goods for intermediate demand can be consumed
by other industries or exported, and their distributive competitive advantages are
related to the integration of the firm to input-output nexus, both form the sectorial and
the territorial perspective, helping the formation of activity clusters.
The relationship between urban competitiveness and industrial clusters can be
analyzed from two indicators: i) the range of competitiveness and number of clusters
existent in the local economic structure, and ii) competitive performance of cities that
share a cluster of activities. The first indicator permits to evaluate the association
between type of urban industrial structure (specialized or diversified) and its
economic performance, while the second associates the cluster to its territorial
dynamism.
In general, Mexican cities showed an association between diversified industrial
structure and competitive performance; it means that the more diversified is the city
the best is its competitiveness ranking (Figure 15.4). In other words, Mexican cities
competitiveness performance were supported more for urbanization economies and
scale-based competitiveness advantages, and less for location economies and
quality-base competitiveness advantages, linked to a specialized industrial structure.
Based on the result of the adjust function, the competitive performance of Mexican
Cities improved substantially when it passed from two to six clusters in its economic
structure, while the diversification from six to 10 clusters produced a loss in
competitiveness, which then increase again to sum up more than 10 clusters.
However, this pattern does not make invalid the existence of cities with a
favorable competitiveness performance and an elevated productive specialization,
although they are few, only four (Aguascalientes, Chihuahua, Morelia and Saltillo),
which only have an important specialization in the automotive cluster in common. On
the other side, there were four cities that confirm the rule (Coatzacoalcos, Orizaba,
Tlaxcala y Xalapa), characterized by an elevated productive specialization and a low
competitive performance; cities with a concentrated industrial structure in traditional
activities and that have not achieved a productive restructuring towards more dynamic
activities.
Clusters
Competitiveness rank
0
20
40
60
80
0
2
4
6
8
10
12
14
Figure15.4 Mexico: urban competitive performance and industrial structure
In relation to the territorial dynamism of clusters, their performance was
differentiated during the period 1998-2003, situation that permitted their division into
four groups: i) clusters that have significant urban competitiveness performance; ii)
clusters that had a poor urban competitiveness performance; iii) clusters associated to
an important variation in the urban competitiveness performance, and iv) clusters
related to the urban competitiveness performance (Figure 15.5).
The first group is formed by three clusters: 2, iron and steel; 7, textile and
wearing apparel; 8, automotive. Specialized cities in those activities had, in average,
the best competitiveness performance and with low variation among them in relation
to their ranking; those cities made good use of the competitive advantages of the
country for the production of automobiles, textiles and wearing, production oriented
to export, and at the same time they generated chains between clusters of iron and
steel, and automotive. These activities had the highest territorial dynamism.
140
10
120
100
15
80
60
20
40
Electronics
Non-ferrous
Metalworking
Leather
Food
Beverages
Paper
Chemical
Energy
0
plastic
Automotive
wearing
Textile and
Iron and steel
25
Rubber and
20
Figure 15.5 Mexico: urban competitive performance by clusters
In the second group there were three clusters, antagonistic to the previous ones,
where their specialized cities got the lowest competitiveness index rankings, in
average, and with low variation among them. The clusters are: 10, rubber and plastic;
6, energy and derivates; 3, chemicals products. These clusters show interrelation
among them but their production and productive chains were severely affected by the
commercial opening in the productive structure of cities and of the country as a
whole.
Clusters 9, paper and paperboard; 13, beverages; 4, food products, and 12, leather
and footwear integrate the third group and the specialized cities in them showed and
elevated variation among their competitiveness performances; that is, that there were
successful and not successful cities specialized in those activities. The four clusters
use the farming sector for their primary inputs and keep sell-buy interrelations among
them. The competitive performance of specialized cities in those farming activities
depended on the good use of the competitive advantages for the purchase of inputs,
formation of productive chains among clusters and success to distribute their products
in the internal market.
Finally, the clusters 1, metalworking; 11, non-ferrous metals and parts, and 5,
electronics and parts are characterized by their location in cities that achieved, in
average, an important competitive performance, although with a high degree of
variation among those cities. Input-output links among clusters are also present, but
not with similar values respect to the other groups, especially in electronics cluster
where the productive process is dominated by import inputs. These clusters have
achieved a successful insertion in the export market, then, the competitiveness
performance of those cities was determined by their degree of insertion to global
markets.
5. Final remarks
Globalization has generated an economic and territorial restructuring in Mexico.
From the economic restructuring point of view, the neoliberal model was instituted in
the early 1980’s, following the principles of the International Monetary Fund, the
World Bank, and the United States Treasure Department, who defined a series of lines
of economic policy to be followed by nations, to receive financial help to alleviate
external debt, reorient their economic evolution and accelerate their incorporation to
the capitalist stage of globalization. These recommendations were known as the
“Washington Consensus”, where ten fundamental policies were included: 1) fiscal
discipline; 2) reorientation of public expenditure towards the areas of economic
promotion and income distribution: 3) fiscal reform; 4) liberation of interest rates; 5)
liberation of exchange rate; 6) commercial opening; 7) liberation of direct foreign
investment; 8) privatization of state enterprises; 9) deregulation, and 10) security of
property rights.
The commercial opening of Mexico was rapidly carried out: in 1980 the 70% of
the imported goods of the country were regulated by import licenses, while its amount
was reduced to 14% in 1988 and to 4% in 2005. On the other side, the weighted
average customs duty passed from 18% in 1980 to 6% in 1988 and to 4% in 2005.
Moreover, the total export represented 14% of the GDP of the country in 1980,
increasing their participation to 21% in 1988 and to 33% in 2005. In a collateral way,
Mexico was integrated to GATT in 1986 and in 1990 the country initiated diplomatic
and governmental negotiations with the United States and Canada to formalize a
commercial agreement. These negotiations were concentrated in six large areas: i)
access to markets; ii) commercial rules; iii) services; iv) investment; v) intellectual
property, and vi) solution to controversies (Arriola, 1994).
The integration of Mexico to the globalizing phase has been accompanied by
weaknesses of the productive restructuring: i) exports have evidenced a limited
capacity to promote national economic growth due to the high and increasing import
inputs component in the export goods, that is, an industrialization oriented to imports,
which was stimulated by federal government programs of financing and fiscal
incentives; ii) as a product of the previous, the formation and growth of industrial
clusters has been differential but in general has affected the national chains in favor to
the introduction of import inputs, without integrating a proactive industrial policy to
foment and promote specific activities: iii) partial labor productivity has registered a
null growth as a consequence of scarce productive investment and an industrial
organization dominated by monopole industries I almost all the clusters; iv) the labor
market has changes towards decline, not only in terms of real income diminish of the
occupied population but also in the deterioration on the labor conditions, which was
worsen by a null occupational regulation by the federal government, and v) there has
not been a good use of available human capital due to the low generation of new
employments, most of them with low qualification requirements, and no national
educational policy.
The pillars of a country’s competitiveness are microeconomic performance of
their productive units, existence of clear and long-term policy for national
macroeconomic performance and the existence of a consolidated urban system
capable of attracting productive investment. In Mexico, the greatest weakness has
been in the formulation and implementation of public policy directed to
competitiveness and economic growth. Therefore, the evolution in the productive
structure, in general, and that of the activity clusters has been left, in great measure, in
the hands of the neoliberal and globalized market and less in the success made by
some local governments for the promotion of their cities.
There is clear evidence in Mexico of the existence of industrial clusters, which
were mainly formed during the second half of the XX Century, based on an economic
policy of imports substitution and the implementation of concrete actions in relation
to industrial policy. With the commercial opening, the federal government abandoned
is role as the main actor in the formulation of public policy for their evolution, then,
the market took take role in the restructuring of iron and steel, electronics and
automotive clusters, and at the same time, affected chemical products, energy and
derivates, and rubber and plastic.
In relation to territorial restructuring, the most importance evidence has been the
deindustrialization of Mexico City and the new generation of manufacturing
employment, mainly in cities of the North Frontier of the country. In this territorial
restructuring, local factors have been operating and are related to agglomeration
diseconomies in Mexico City, internal factors associated to successful practices of
some local governments and economic agents for the promotion of specific cities, and
global factors related to the good use of centrifugal forces, in terms of differences in
transport costs to the new markets that can change the balance between the centripetal
and the centrifugal forces, and provide opportunities of growth to the cities that are
closest to the new market. These centrifugal forces are known as the Krugman-Livas
model (Krugman and Livas, 1992).
In spite of the deindustrialization in Mexico City, this is still the only one central
place for the location of the 13 industrial clusters existent in the country. Mexico City
is the most populated metropolis in the country and its economic structure has the
greatest diversification. Any strategy, line of action, or intervention criteria for the
economic foments and promotion of the metropolis should take into account the
following: i) experiences and necessary mechanisms to achieve a metropolitan
management; ii) implementation of efforts to elevate the metropolis competitiveness,
and iii) promote the competitiveness performance that generate improvement in the
levels of welfare of the population.
Any kind of planning for the urban economic growth, metropolitan or regional
should begin with the recognition of the future conditions of the national economic
growth because today the processes that explain economic growth are working mainly
at a national scale, and not at an urban scale; this means that the national context
impose both the limits and the opportunities to develop the economies that are part of
its national system of cities.
References
Arriola, C. (comp.) (1994), Testimonios sobre el TLC, Mexico, Diana-Miguel Ángel Porrúa.
Bannock, G., R. Baxter and E. Davis (1998), Dictionary of Economics, London, Penguin Books.
Begg, I. (1999), “Cities and Competitiveness”, Urban Studies, vol. 36, nums. 5-6, pp. 795-809.
Buck, N., I. Gordon, A. Harding and I. Turok (eds.) (2005), Changing Cities, Houndmills,
Palgrave.
Centro de Investigaciones Socioeconómicas (2010), Los agrupamientos económicos del sector
industrial en México, (http://www.cise.uadec.mx/sistemas2.htm).
Dicken, P. (1992), Global Shift. The Internationalization of Economic Activity, New York,
Guilford Press.
Dávila, A. (2005), “Industrial Clusters in México, 1988-2002”, in R. Rabellotti, E. Giuliani and P.
Meine (eds.), Clusters Facing Competition: The Importance of External Linkages,
Hampshire, Ashgate, pp. 231.257.
Duranton, G. and D. Puga (2000), “Diversity and Specialisation in Cities: Why, Where and When
Does it Matter?”, Urban Studies, vol. 37, num. 3, pp. 533-555.
Feser, E. (2002), “Tracing the Sources of Local External Economies”, Urban Studies, vol. 39, num.
13, pp. 2485-2506.
Feser, E. and E. Bergman (2001), “National Industrial Cluster Templates: A Framework for
Applied Regional Cluster Analysis”, Regional Studies, vol. 34, num. 1, pp. 1-19.
Garza, G. (2000), “Tendencias de las desigualdades urbanas y regionales en México, 1970-1996”,
Estudios Demográficos y Urbanos, vol. 15, num. 3, pp. 489-532.
Garza, G. (1985), El proceso de industrialización en la Ciudad de México, 1821-1970, Mexico, El
Colegio de México.
Giuliano, G. and K. Small (1991), “Subcenters in the Los Angeles Region”, Regional Science and
Urban Economics, vol. 21, num. 2, pp. 163-182.
Global Urban Competitiveness Project (2005), Mission Statement and Activities of the Global
Urban Competitiveness Project, Ottawa.
Goodall, B. (1987), Dictionary of Human Geography, London, Penguin Books.
Hill, E. and J. Brennan (2000), “A Methodology for Identifying The Drivers of Industrial Clusters:
The Foundation of Regional Competitive Advantage”, Economic Development Quarterly,
vol. 14, num. 1, pp. 65-96.
Hoover, E. (1948), The Location of Economic Activity, Nueva York, McGraw-Hill.
Knox, P. and J. Agnew (1998), The Geography of the World Economy, London, Arnold.
Koo, J. (2005), “Knowledge-based Industry Clusters: Evidenced by Geographical Patterns of
Patents in Manufacturing”, Urban Studies, vol. 42, num. 9, pp. 1487-1505.
Kresl, P. (1995), “The Determinants of Urban Competitiveness”, in P. Kresl y G. Gunnar (eds.),
North America Cities and the Global Economy: Challenges and Opportunities, London,
Sage Publications, pp. 45-68.
Krugman, P. (1996), “Making Sense of the Competitiveness Debate”, Oxford Review of
Economic Policy, vol. 12, num. 3, pp. 483-499.
Krugman, P. (1992), Geografía y comercio, Barcelona, Antoni Bosch Editor.
Malecki, E. (1997), Technology and Economic Development, London, Longman.
Mariña, A. (1993), Insumo-producto: aplicaciones básicas al análisis económico estructural,
Mexico, Universidad Autónoma Metropolitana.
O’Donoghue, D. (1999), “The Relationship between Diversification and Growth: Some Evidence
from the British Urban System 1978 to 1991”, International Journal of Urban and
Regional Research, vol. 23, num. 3, pp. 549-566.
Pengfei, N. (2007), Urban Competitiveness in China, Beijing, Social Science Academic Press.
Porter, M. (2000), “Location, Competition, and Economic Development: Local Clusters in a
Global Economy”, Economic Development Quarterly, vol. 14, num. 1, pp. 15-34.
Porter, M. (1996), “Competitive Advantage, Agglomeration Economies, and Regional Policy”,
International Regional Science Review, vol. 19, nums. 1-2, pp. 85-94.
Rabelotti, R. (1997), External Economies and Cooperation in Industrial Districts. A Comparison of
Italy and Mexico, New York, St. Martin’s Press.
Richardson, H. (1986), Economía regional y urbana, Madrid, Alianza Universidad Textos.
Sobrino, J. (2006), “Competitiveness and Employment in the Largest Metropolitan Areas of
Mexico”, in J. Lezama and J. Morelos (coords.), Population, City and Environment in
Contemporary Mexico, Mexico, El Colegio de México, pp. 309-354.
Turok, I. (2005), “Cities, Competition and Competitiveness: Identifying New Connections”, in N.
Buck, I. Gordon, A. Harding and I. Turok (eds.), Changing Cities, Houndmills, Palgrave,
pp. 25-43.
Verbeek, H. (1999), Innovative Clusters. Identification of Value-adding production Chains and
their Networks of Innovation, An International Study, Doctoral thesis, Erasmus
Universiteit te Rotterdam.