Competitiveness in Queretaro

Published in Plaza de Armas (www.plazadearmas.com.mx), March 14^th 2011.

During CANACINTRA’s National Convention, developed in Querétaro last week, there were different references about the competitiveness of the State, including a statement of the  organization’s national president during the closing ceremony.

What does being competitive mean? World Economic Forum defines it as the set of institutions, policies and factors that define a country’s productivity level. The Mexican Institute of Competitiveness (IMCO) defines it as the ability to attract and retain investments and talent. These elements create conditions to have a faster growth in a region in the long term, and therefore, it improves income levels and the well-being of a society.

According to World Economic Forum’s Report, that evaluates more than 130 countries, Mexico has kept the same grade since 2006. This stagnation in the grade has caused the loss of 14 places in the ranking, since Mexico has gone from place 52 to 66. It is true that each year, the Report considers more countries, but the reason of the fall is that other countries are having important improvements and increases on their grades, leaving Mexico behind.

The area where Mexico has had its main improvement is in macroeconomic stability (due mainly to a healthy government budget balance, problem that has affected recently different economies), and the area where the country has lost more places is in the financial market development (since it is not easy to raise money by issuing shares on the national stock market and we have a rather ineffective regulation and supervision of securities exchanges).

Now, within the country, two studies were published the last year: one from IMCO and the other from Instituto Tecnológico de Monterrey (ITESM), one of the most important private education systems in Mexico. Both evaluate over 100 variables in different areas: economic, legal, political, infrastructure, environment, education, health, international relations, labor market, etc. In both studies, Querétaro ranks on 3^rd place, behind Distrito Federal and Nuevo León. These are the strengths and weaknesses of this state according to both studies (there are other identified features, but I will only list those that appear on both evaluations):

Strengths	Weaknesses
·         GDP growth, particularly in services ·         Reliability and citizen’s participation in public elections ·         Good debt grade ·         Safety ·         Increase in fixed and mobile telephone lines	·         Unemployment ·         Income inequality ·         Roads ·         Bad use of water ·         Foreign direct investment

The studies were made mainly with information from 2008, but we see that some of the weaknesses persist, like unemployment, since the State is above the national average. The challenge is important, since 2010 Population Census showed that Querétaro is the sixth State with the biggest immigration in the country. Although it may have a positive effect in the potential of economic growth, it also implies the development of infrastructure and the creation of jobs. We will see how this balance is developed in the future, but so far, the State’s good competitiveness condition allows us to foresee positive perspectives.

Evolution of competitiveness for Queretaro:

	2001	2002	2003	2004	2005	2006	2007	2008
IMCO	5	4	4	6	4	3	3	3

Source: 2010 Competitiveness Index, IMCO

	1995	1997	1999	2001	2003	2007	2010
ITESM	8	4	8	8	10	12	3

Source: 2010 Mexican States competitiveness, EGAP, ITESM

Understanding the businesses’ profile in Queretaro

Published on Plaza de Armas, newspaper from Queretaro, February 21st 2011. (www.plazadearmas.com.mx)

During the last year and the beginning of this, we’ve heard a lot about the arrival of new investments to Queretaro from big companies, mainly focused in the aerospace industry: Bombardier with a factory for planes, Safran with 2 factories for plane’s components, DHL with its new hub at Intercontinental Airport, General Electric’s Engineering Center inaugurated last week, and plans for installing the first biotechnology cluster as well as talks with Sikorsky United Technologies to install a plant for helicopters, just to mention a few.

Definitely, these are good news, and the results are that Queretaro practically recovered from the 2009 fall, according to preliminary figures.

But let’s make a detailed analysis of the different characteristics of the businesses present in the State, and what opportunities they create. The most recent figures are from 2009 Economic Census, and it establishes the presence of more than 56,300 economic units from the private sector and government’s partially-owned companies, that bought 232 billion pesos in goods and services during 2008 (an economic unit is an organization dedicated mainly to one kind of activity on permanent facilities).

Half of that purchases concentrates on almost 250 organizations that belong to 2 big sectors: the manufacturing sector (mainly those companies with more than 100 people in the  transportation equipment building industry, food industry and chemistry industry), and in the wholesale commerce sector, with a big concentration in the raw materials industry for agricultural, forestry and industry. In other words, only 0.4% of the economic units represent 50% of the consumption of goods and services in the State!

This high level of concentration makes these organizations very attractive due to the high volumes of goods and services they buy; but these are also organizations with strong negotiation leverage, and lots of suppliers at their doors, that generates a very competitive dynamic for which you must have a clear differentiation strategy.

But, let’s not forget about the rest of businesses that still have the need of 100 billion pesos in goods and services that someone must deliver. It is definitely a complicated segment due to its pulverization and, very probably, low institutionalization levels (86% of the economic units in the State have 5 people or less), but you can establish niche strategies to facilitate the delivery and you can have a better negotiation position.

You must work to have a clear understanding and evaluation of your potential markets, with the purpose to identify the opportunities and how to seize them. This will allow you to be effective in your commercial efforts and to develop the right strategies.