By Enrique Perret Erhard *
Many have defined competitiveness as the ability of countries, regions, or cities to attract and retain productive investment. This is true. For international companies to trust to put their long-term capital in a specific geographic area, it is necessary for it to be attractive and competitive. However, in recent years some cities and regions have focused on a slightly different concept of competitiveness: attracting and retaining global talent. This obviously entails a whole series of factors different to those we think about when attracting investment. To attract global talent (the way cities like Toronto, Miami, Hong Kong, or entire regions like Silicon Valley or even countries like Israel, Singapore or Estonia have done) a more person-centered approach is needed. Among the things to take into account are of course: high-quality universities, research incentives, entrepreneurship ecosystem, funding, mentoring, quality of life, air connectivity and a simple immigration system for international relocations.
At the end of the day these immigrants are planning to stay long-term wherever they relocate: buy a house, invest their money, educate their children and integrate into society.
Some countries have focused on attracting companies and investment, as has been the case with Mexico, which has managed to attract more than US $200 billion in plants during the past two decades, generating thousands of jobs. Meanwhile, other countries have focused on attracting the best talent available in the world, looking to build the companies of tomorrow.
What will pay more in the future? Given the global contraction of trade this year of 20% and the drop in foreign direct investment in 40% (according to the UN) we could say that investing on talent will pay more today.
Mexico is among the countries with the fewest foreign-born population. It is estimated that out of a total population of 125 million only less than 2 million people were born outside of Mexico’s territory, that is only 1.6%. Most of them are people born in the United States but who have Mexican parents. If we compare this percentage to other countries such as Spain (12.7%), Germany (12.7%) or Canada (21%), we realize that Mexico lacks the attractiveness for foreign nationals to grow and develop in the country.
Part of the problem is Mexico’s immigration system along with its domestic laws that discourage foreigners to work in Mexico. One example is the well-known Article 7 of Mexico’s Labor Law which restricts companies from hiring foreigners up to just 10% of their workforce.
On the contrary, the U.S. has facilitated the arrival of millions of foreigners to its territory for decades. The U.S. has been able to allow these immigrants to grow in the workplace, to put down roots and to become the entrepreneurs of the future. Despite recent restrictive policies and efforts by recent U.S. administrations (in particular the current Trump administration), legal immigration numbers to the U.S. are high. Until recently, hundreds of thousands of people arrive in the U,S. every year just through the H1B, J1 and H2B visa categories. In addition, 11 million undocumented immigrants live and contribute in the U.S. Cities like San Francisco, Miami, New York and Los Angeles have very high percentages of foreign-born population reaching up to 30% of their residents.
We all know the positive economic results from a policy of encouraging and welcoming the arrival of talent in terms of research, entrepreneurship, business, tax collection, patent generation and the creation of new industries.
Mexico is facing a unique opportunity in history to jump into the search for global talent. The Covid-19 pandemic opens the possibility that hundreds of thousands of people will be able to work remotely. At this juncture, they will be able to decide where they want to do it from: a crowded and expensive city in the U.S. or a colonial city in central Mexico. One can imagine a young professional living in an ocean-view apartment in Puerto Vallarta (paying up to 60 percent less rent), having the opportunity to surf in the morning and be just two hours away by plane from many large cities in the U.S.
It is not the first time that Mexico has considered attracting a group of people from the U.S. It did it with many Baby Boomers who nowadays call towns like San Miguel de Allende, Los Cabos and Ajijic home. This has been very positive for Mexico. Today, Mexico should not only focus on looking to attract retirees, but also seek an economically active professional workforce: technologists, entrepreneurs, fund managers, creators, filmmakers, software developers, consultants and lawyers.
Mexico has currently two Temporary Residence Visas that could be very attractive for both workers and international companies: the “Economic Solvency Visa” and the “Business Invitation Visa”. Mexico should promote and take advantage of them.
Additionally, the immigration restrictions on professionals that the U.S. has imposed in recent weeks create a window of opportunity for Mexico. Some cities like Tijuana, Guadalajara and Ciudad Juárez can take advantage of this. Cities and states could enter negotiations with the companies who need talent and bring it to Mexico. The country has an added advantage having the same time zones, and hundreds of direct flights to cities like Houston, Dallas, San José, Los Angeles, New York, and even Seattle. This should be looked as an immense opportunity to create a talent hub in the North American region. Mexico cannot afford to waste it.
Developing a powerful agenda to attract a global workforce to Mexico should not be a task limited to the public sector. The Mexican government must be capable of working hand in hand with private sector, academia, investment funds and other relevant actors in the ecosystem in order to attract the best talent in the world. In recent years, no high-value company has made the decision to move operations elsewhere just based on the offer of cheap land or local tax concessions. Adequate incentives are needed, and they do not just come from government.
It remains to be seen whether Mexican states and cities will live up to the new conditions of the world economy and the fierce race for competitiveness.
* Enrique Perret Erhard is the Director of The U.S.-Mexico Foundation, a binational non-profit organization dedicated to fostering bilateral cooperation and improving the understanding between the United States and Mexico by activating key people in the relationship that once were dormant. Twitter: @enriqueperret