The new political leaders of Mexico City, the world’s second largest megalopolis after Tokyo, want to give the city an international profile worthy of its size.

The Japanese capital’s metropolitan area has a population of 35.2 million people, while greater Mexico City has 19.4 million inhabitants. New York is ranked number three at 18.7 million people and Sao Paulo number four at 18.33 million.

Advertisement

According to the latest figures from Mexico City, the city’s conurbation had a total GDP of $315bn, adjusted for purchasing parity, in 2005, making it the eight largest city in the world in economic terms. Again, Tokyo came in at number one with a GDP of $1190bn, followed by New York at $1130bn, Los Angeles at $640bn, and Chicago at $460bn.

Mexico City is the intellectual and financial capital of Mexico, and one of the most important cities in Latin America, alongside Sao Paulo and Buenos Aires. The city has Latin America’s busiest international airport, Benito Juarez, which handled 25 million passengers last year. It has almost 130,000 companies and 579 universities.

Budget boom

Mexico City’s government has responsibility for the Federal District, which is the central area of the Mexico City metropolis, made up of 8.7 million people. The metropolitan area’s other 10.7 million inhabitants live in the state of Mexico (which is the country’s biggest state with 14 million people). This year, the Federal District has a total budget of almost $9bn, 3.6% greater than last year and the highest in the city’s history.

Around half of the budget comes from local property and payroll taxes, while the other half comes from transfers from the federal government.

Dramatic change

Mexico City minister of finance Mario Delgado Carrillo, whose ministry is in charge of the city’s finances and attracting foreign investment, says: “Mexico City is changing dramatically. In 1980, this was mostly an industrial city. Some 51% of the city’s GDP came from industry and only 23% from services. This year 51% originates from services and 17% from industry.

“Heavy industry has left the city and today it is mostly made up of services and light industry. About 65% of the whole country’s financial services sector is concentrated in the city.”

Of the total of $15.93bn of foreign direct investment that came into Mexico in 2006, some 46% was invested in the Federal District, he says. “We would like to increase FDI in the city by 10% a year.”

Construction growth

“The real estate and construction sectors have been very attractive to foreign investors and have been growing dramatically. The financial sector has been flourishing and many international companies in this field have been investing here, including HSBC, Santander, Citi and BBVA. Much of it involves greenfield development.”

About 80% of all Spanish FDI in Mexico comes to the city. He says one example of the city’s importance is the fact that 45% of the entire profits of the Spanish bank, BBVA, comes from Mexico City.

He adds: “Mexico City is such a huge marketplace. The Federal District accounts for 23% of the country’s GDP while greater Mexico City makes up 31% of the national GDP.

“There is huge potential in the financial services sector. Banking products are expensive in Mexico. Some 30% of Chileans have bank accounts but only 15% of Mexicans [this number is higher in Mexico City]. There is huge potential for this industry to grow, for there to be more competition, and for credit to expand.”

Mexico’s massive population gives it a big advantage over Miami or Sao Paulo, for example, he says. In terms of its connectivity, Mexico City’s international airport is the tenth best in the world.

Mr Delgado says the city is a bridge between the US and Latin America, and that this huge strategic advantage must be fully exploited. Some 80 per cent of Mexico’s investment in science and technology is made in the city. It has 579 institutions of higher education and 20% of all the country’s telephone lines.

The city’s GDP is growing at between 2% to 3% a year while inflation is just 3% to 4% a year.

He says that the North American Free Trade Agreement (Nafta) has benefited the northern states of Mexico more than Mexico City.

Foreign investment

“We want to encourage foreign investment in the city through two ways: fiscal incentives and the right investment environment,” Mr Delgado adds. “We would like to create two main investment corridors in the city, one around Paseo de la Reforma and the other around the historical centre. Depending on the size of the investment, we will reduce property and payroll taxes. We also want to lower the charges on administrative procedures. In some cases, all taxes will be waived.

“We want to put the right electronic infrastructure for business in place. All taxes will be able to be paid online.” According to the World Bank, the city used to be in 62nd position worldwide in terms of the ease of opening a business, but today it is in 43rd position, he points out.

Split responsibility

Mr Delgado says that the federal government has responsibility for the airport and telecommunications systems and education, but that the city government is in charge of the metro system.

“We want to be involved in all sectors that affect the city,” he adds. “Infrastructure is of the utmost importance for us. The city’s main responsibilities today are public transport, the water system, and security, including the police.”

He says the metro carries 4.5 million passengers every day and a new metro line – line 12 – will begin operating next year. Ten new lines of articulated buses, called Metrobus, are being planned, with two new lines coming on stream every year.

Mr Delgado adds: “The international airport is pretty saturated today. It needs to be expanded. That is a federal government responsibility. Not everywhere in the city has access to mains water; we want to ensure that that is the case. We are looking into making Mexico City a wireless city as well, so that people can access the internet wherever they live or work.”

He says that improving the city’s standards of education is one of the biggest challenges. “This is a very unequal city. Too many young people are outside of the educational system. We want to bring them back in and ensure they are equipped with new skills. New technology is so important. We must guarantee that families with the least means are able to access education for their children.”

Crime drop

Mr Delgado says that the city’s crime rate has been dropping for the past 10 years and that the new city government plans to place 20,000 additional policemen on the streets.

“I am very optimistic about this city. It has great potential,” he says. “We must convert the old economy into the new economy. The city’s development must be closely related to new technology and to global trends in every way.” An advisory council for the city, made up of local businesses, is being set up to help it become more competitive. “More and more, we will be involved in promoting the city at an international level,” says Mr Delgado. Cities that are being targeted as sources of investment include New York, Los Angeles and Madrid.