José Luis Romo Cruz : Interview

Interview : José Luis Romo Cruz

How would you describe the government’s longterm economic priorities?

JOSÉ LUIS ROMO: Even with a diversified plan to attract investment, our priority is to generate a system that organically fosters growth by creating synergies between all companies: local and international, new and old. If investments that arrive are isolated, there will be no multiplier effect, which is crucial to wider economic growth. In terms of labour, our problem is the reverse of many other states: we have an abundance of human capital, but we are losing it to other states. Therefore, our ultimate economic goal is not necessarily investment but the job creation that results from it.

To this end, we have chosen four strategic sectors that will allow us to provide high-paid job opportunities to our population. The first of these is renewable energy, which thanks to Hidalgo’s high altitude and mild temperatures make it the perfect place to run solar panels efficiently. The second is sustainable mobility, where we already have significant investment in place through a joint venture to manufacture electric vehicles between China’s JAC Motors and Mexico’s Giant Motors. Even though electric car sales are still marginal, it is a sector with very positive long-term prospects. The third is agro-industry, as the growing Mexican and world populations means there will always be a need for foodstuffs, regardless of any prevailing negative macroeconomic environment. The chemicals segment is the last strategic industry, and due to its high value will boost research and development in the state, and complement existing pharmaceutical and chemical clusters close by in Mexico State and Mexico City.

What measures are in place to make Hidalgo more attractive to investors in the coming years? ROMO: In spite of impressive recent growth figures and foreign direct investment (FDI) inflows, Hidalgo remains one of the least developed states in the country. Many states in the central Bajío region have undertaken the same investment strategy for a number of years, which involved a combination of promoting the state and offering fiscal incentives such as free land or tax breaks.

However, because of Hidalgo’s lower levels of economic development, we have chosen to take a different path to attract and consolidate investment: institutional certainty. This began with a process of “cleaning house” to reform the state’s laws and bureaucracy to make it an attractive place to invest and manage business activities, by providing stability, security and a transparent framework. Many of the new regulations being implemented are highly advanced, and have been lauded by the federal government for their design. In terms of our institutional framework, this puts us in the same league as Nuevo León, often considered the most developed state in Mexico. This set of reforms can undoubtedly be attributed to the recent boost in FDI inflows, where Hidalgo was among the top-five Mexican states for investment in 2017.

How is a state like Hidalgo working to engage with a new economic reality in the face of increasing global uncertainty?

In the two decades since NAFTA was signed, the structure and power dynamics of the global economy has changed beyond recognition. Mexico has moved from the model of building maquiladora plans to churning out cheap goods for the US. To engage with that, In Hidalgo we have a distinctive growth model strategy to many of the other states. This involves developing a truly economically sustainable and integrated ecosystem through our strategic sectors. We have to build a solid and prosperous internal market that consumes as well as produces. In 2017 Hidalgo posted record investment in nominal terms, but it is noteworthy that less than 8% of this investment came from the US as compared with the year before. However the NAFTA renegotiation turns out, we will have to engage with the new post-NAFTA reality.