Wine and brandy are also produced. There is some mining in the mountainous area and the city is a spa health resort, noted for its mineral waters and vineyards. Its industries include railroad repair and the manufacture of textiles. The companies in town are just as likely to be owned by Japanese and Americans as Mexicans.

Aguascalientes city was built on an ancient, intricate system of tunnels constructed by Chichimec Indians. The city was officially ‘founded’ in 1575 by King Phillip II of Spain, as an outpost on the lucrative silver route between Mexico City and Zacatecas. Railroad development in the late 19th century gave Aguascalientes commercial importance and it remains a strategic rail hub linking Ferromex and TFM lines to Mexico City and Ciudad Juárez. Enviably located at the centre of the Guadalajara-Monterrey-Mexico City commercial triangle, Aguascalientes’ 2300km of roads put the state within easy reach of Mexico’s main cities, seaports and US border towns.

Advertisement

Today, the city boasts modern industrial and technological infrastructure including 11 parks and industrial developments with first-class services, a 30-mile long industrial corridor and 1865 acres of industrial developments.

Soon after he took office, President Vicente Fox outlined the Puebla-to-Panama Plan (PPP), which is designed to narrow the gap between Mexico’s south and the richer north, which had widened under the North American Free-Trade Agreement (NAFTA) during the 1990s. The State of Aguascalientes became a role model for PPP by initiating road building, power and infrastructure schemes, social projects, increasing security, environmental protection and improved disaster-prevention.

Stimulating business

Housed in the 17th century neo-classical palace on Patria Plaza, the governor of Aguascalientes, Luis Armando Reynoso Femat, has become a key ally of Mr Fox in what he calls a “spirit of improvement”. Mr Reynoso believes in the important role of his government in “stimulating transparency and a strong governmental institution in order to ensure business competition”.

To help achieve the dynamic transition Mr Reynoso and his team are “lightening the regulatory load to stimulate economic growth – that is the way we build a better place to invest, and so a better nation”. He says he is well on the road to achieving his aims by “improving health, reducing poverty and fighting permanently against corruption and impunity”. Signs of his success are already clearly visible: the average life expectancy in Aguascalientes is now 76 years (well above the national average) and average income per capita is close to $11,000, higher than in Chile or Argentina.

Long FDI tradition

As the traditional economy of Aguascalientes shifts from encouraging a traditional agricultural economy towards a flourishing industrial sector, attitudes begin to change and a new political culture emerges based on better education, equal rights, gender equality, self-determination and economic and material security. Aguascalientes is rapidly developing an economy that depends on the export industry, attracting workers from all over Mexico who wish to succeed in the new economic climate.

This change has taken place in the past 20 years when the urban population grew from 59% to 71% and industry related employment increased from 16% to 25%. During this time, more than 100 multinationals have located in the state, with a total of $4500m in foreign investments coming mainly from the US, Japan, Spain, France and Germany. The main investment sectors are automotive and auto parts, textile and apparel, electric and electronic, metal-mechanic and food industries.

A staggering 70% of Japan’s investment in Latin America is now located in Aguascalientes – a trend that looks likely to continue. Nissan’s Aguascalientes Plant in Mexico recently announced a $45m upgrade to its Sentra facility, allowing Nissan to produce a new 1.5 litre Renault-powered subcompact model. Currently, Nissan’s plants build 300,000 cars and 100,000 trucks a year. The planned extension will add 100,000 subcompacts to the mix.

The authorities of Aguascalientes believe that to create an urban society they must include anyone or any idea that will stimulate economic growth and national wealth. Jörn Becker, general manager at Coroplast, a German holding company established in Aguascalientes in 1997, says he chose the state to be its Mexico headquarters because of the “good security, very good infrastructure and very friendly business environment, including various incentives for subsidising foreign industry”.

Oscar Luis Figueroa Sánchez, general manager at Flextronics Corporation, agrees. The region has “an excellent working environment with a highly qualified workforce and very capable bilingual professionals, most of them graduated from local universities”, he says. Flextronics Aguascalientes, a plant with 1200 workers offering services of electronic manufacturing, keeps a close relation with its labour union and also with the state government. “Flextronics values the geographical location of the city, which offers a strategic location in the centre of the country, close to Mexico City, the US border and the main seaports,” says Mr Sánchez.

Private sector plans

Aguascalientes is geographically, politically and socially well positioned to go full-steam ahead in the 21st century. The region is well aware that its future rests on export capacity. That is why world business leaders, who have already located in the state, share its common vision. Together with the local business community, an industrious labour force and imaginative policy makers, they have laid the foundation for a prosperous and happy society. Aguascalientes has already attracted many prominent international blue chip companies, such as Xerox, Nissan, and Texas instruments – all have found in Aguascalientes the ideal environment for efficient and quality growth.

In a state where 97% of the population has piped water, 95% drainage coverage and 94% water treatment efficiency, current water policies continue to encourage private-sector participation. According to the State Hydraulic Plan: “Addressing underdevelopment requires huge investments that in turn require private-sector participation, together with public-sector participation.” As a result, private-public sector partnerships have now become common throughout the state. More than $90m has been invested in the city of Aguascalientes alone to increase the capacity to treat and distribute drinking water.

French-based Vivendi – the world’s largest water company – joined with Ingenieros Civiles Asociados (ICA) to form a joint venture called Operación y Mantenimiento de Sistemas de Agua (OMSA). The joint venture now holds the full concession for water services in Aguascalientes.

Stable labour market

There has been no industrial action in Aguascalientes in 40 years and the state government has never had cause to take legal action against a foreign multinational. With an efficient legal system coupled with successful decentralisation over the past 20 years, the region has 8000 employees with high technological skills plus an annual budget of $500m with $30m invested every year in IT.

More than 40% of the state’s population is economically active (400,000 people) and 15,000 young professionals enter the labour market every year. The market is a young one, with 74% of the population below 34 years old and the average age being 21.

With about 48 training centres running administrative, industrial and IT courses, close ties have been forged between companies and universities to deal with the labour supply and demand. In Aguascalientes, the number of science and engineering college graduates has nearly tripled over the past decade – it has the highest number of university students per capita in Mexico outside Mexico City with over 30,000 students enrolled at 18 universities. Literacy stands at 97% and the average schooling rate is now 8.6 years with the target of the current administration set to reach 12 years of schooling for all the population in Aguascalientes. There are also many more students opting to study abroad and returning with valuable skills applicable at home.

The right training

To give an example of what the right training can do, consider Tecnomec Agrí cola, a maker of farm and earth-moving equipment in Aguascalientes. “We never had a tradition of exporting. NAFTA definitely changed that,” says founder José Leoncio Valdés. It was hard going at first. “We couldn’t get in to see people in the US because we were from Mexico and they figured we were unreliable,” recalls the 55-year-old engineer. Then in 2000, Mr Valdés dispatched his son José to earn a degree in engineering and business administration at Massachusetts Institute of Technology. On his first spring break, young José conducted a weeklong session with Tecnomec managers. He used Lego blocks to build a replica of the factory and figure out how to track inventory, boost quality, and control waste better. Tecnomec soon boosted productivity by 21%. Now its exports total well over $1.5m a year, nearly a quarter of annual sales.

Cutting red tape

Ventanilla Unica (One Window) is what the locals call the new system designed to slash costly bureaucracy in Aguascalientes. This means that all new business permits, authorisations, information requests etc, at state or local level are now done in one place, at one time, in one day, cutting weeks of red tape. Since 1997, Aguascalientes has reduced start-up business response times from 30 to 13 days for businesses qualified as not risky or not requiring construction. Businesses located in shopping centres can start within two days. Medium risk businesses have cut their start-up time from 56 to 10 days, and high risk from 85 to 30 days, giving preference to businesses in industrial parks, where the discharge permission for residual water is granted directly by the industrial park involved.

The One Window system offers and negotiates 36 state procedures in one fell swoop, including planning permission, municipal licence, registration of brands and patents, phonetic searches and social security registration. From this year, Aguascalientes is also offering a 30% reduction on property tax, VAT, construction licences and land tax.

Since 2000, the Centre of Economic Studies of the Private Sector (CIDE), has ranked Aguascalientes number one in Mexico for business opinion, regulatory framework, government grants and business response time.

War on corruption

The state has worked hard in the past five years to reduce corruption and unnecessary fiscal and regulatory costs and bureaucracy, while establishing agile and transparent public procedures to thwart those who choose to break the law. The result has been a 10% increase in GDP.

The local administration of Aguascalientes has managed to crack down on most forms of criminality, which has spiralled out of control in many other Mexican states. In July, the UN Development Program (UNPD) issued a report highlighting Mexico’s high crime rate and giving suggestions on how to combat it. According to the UN analysis, while Mexico’s high crime rate is cause for serious concern, Aguascalientes is the safest state in the country, reporting a maximum of 271 thefts for every 100,000 residents. Aguascalientes was praised by the UNPD for its crime reduction strategy involving community participation and a focus on education, rehabilitation and job training. It was also singled out for having the lowest level of kidnapping and homicides in Mexico.

Safe location

Alberto Albarran Valenzuela, general director of World Emblem of Mexico, says he located in Aguascalientes because “it is the safest in the country with one of the lowest corruption levels”. Besides being extremely pro-entrepreneurial, “the local government’s position is very objective”, he says. “The unions here work with companies, not against them, and all the negotiations, deals and agreements are done professionally taking into account what is the best for the company.”

Another reason that Mr Valenzuela cites for choosing Aguascalientes is the “long textile tradition with ample experienced workforce, raw materials plus the availability of spare parts and repairmen”. Unlike the rest of Mexico, the state does not charge him 2% tax on payroll – equivalent to 2% of the total amount paid to employees. Mr Valenzuela says Aguascalientes provided him with the lowest average salaries out of the three cities he considered for his project.

Aguascalientes also has the lowest cost of living. The city has a local customs office, which is a huge advantage for speeding up exports. Aguascalientes has one of the largest textile and clothing industries in Mexico, employing nearly 20,000 workers in about 600 separate businesses. The manufactured goods principal destinations are the US and Canada.

Although globalisation continues to spread into Aguascalientes, the local Mexican society, customs, religion and tradition remain preserved. As the state continues to expand, it remains a spontaneous culture in which unique ideals and beliefs remain strong, making it a wonderful place to visit. Tourism has thrived throughout the state and Aguascalientes city, which has the largest per capita cultural infrastructure in Mexico.

Prospects for tourism

Not a city to settle solely for its own symphonic orchestra, it also has eight museums, four theatres and many cultural centres offering opera, ballet, plays and shows, classical dance, music, plastic arts, painting, literature and scenic arts, and 50 movie cinemas (the highest per capita in Mexico). With a strong sporting tradition, the state also has over 50 first-class facilities for 64 sports, including major Mexican league football, baseball and basketball.

The potential for tourism is massive. One of the biggest crowd-pullers is the National San Marcos Fair. Dating back to 1604, it is the oldest annual fair in Mexico. This illustrates perfectly how the new and the old Aguascalientes intertwine: the fair is now a major commercial, industrial and agricultural exposition held during the last two weeks of April and the first week of May.

Globalisation

Armando Jimenez, minister for economic development in Aguascalientes, has no doubt that the economy is taking off. “We all have a responsibility within the government to continue fostering this globalisation involvement process,” he says. When the conquistador Hernán Cortés reached Mexico, he burned his boats to prevent his crewmembers from fleeing. “With NAFTA, we burned our boats and threw ourselves into globalisation,” says Mr Jimenez. “There is no turning back.”