The Mexican state of Durango is aiming to attract FDI primarily in five industrial sectors: textiles, forestry, food production, car-making and mining. The state government has decided to promote these industries because Durango already has clusters of companies in each sector.

The textile cluster is concentrated in the Laguna region, which surrounds the city of Gomez Palacio in the north-east of the state. This is an important industrial city that links with the city of Torreón, in Coahuila state, to form an urban conurbation. In Durango’s textiles sector, there are about 120 companies, which employ 32,000 people. Two of the most important firms are Siete Leguas and Manufacturera Libra.

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The state’s forestry and lumber sector accounts for 18,000 workers and has traditionally been the most important industry for the city of Durango. Corporación Durango, headquartered in Durango city, is one of the most important paper, carton and pulp producers in Latin America. Other companies in this sector include Forestal Alfa, Forestal Halcón and Masisa.

This sector is also important for the cities of Gomez Palacio and nearby Lerdo, which have a large number of lumber yards, triply factories, industrial packaging makers and fibre-board manufacturers.

 

Infrastructure boost

Jose Antonio Rincón Arredondo, president of Corporación Durango, says: “The state is improving one of the basic elements for the development of its competitiveness: infrastructure. Cutting transport times and reducing haulage costs is always important.”

Food production is the third most important cluster in the state. Durango stands out for its beef and poultry production, as well as being home to some of the country’s most important dairies. This sector has 550 firms and employs 12,500 workers. The most important firms are Tyson, Lala and Chilchota.

The fourth most important cluster in the state is car-making: companies produce items such as air-conditioning units for cars, heating systems, radiators, electric motors and engines. The main companies in this sector are: Armas, Industrias de Linamar, Sumitomo, Leoni, Johnson Controls, Tecnología Autoelectrónica de Durango (part of Yazaki Corporation), Elcom (also part of Yazaki Corporation) and Draka.

The state’s mining industry has been an important contributor to its economy for more than 400 years and it is the reason why Durango city was first founded in 1563.

Durango has become Mexico’s leading gold producer, the second most important for silver, third for copper and seventh for zinc. The state is also significant for the production of non-­ferrous minerals such as strontium carbonate, sandstone, onyx, marble, bentonite, wollastonite, sulphur, plaster, calcium carbonate, quartz, manganese, barite, fluorite, phosphorite, celestite and mercury.

The Laguna area is rich in non-ferrous minerals including onyx and marble. The main companies in the sector include San Luis, Acero Del Norte, Peñoles and Austin Bacis.

There are 113 mining districts and 48 plants: 32 are dedicated to the extraction of ferrous minerals and 16 to the extraction of non-ferrous minerals. Traditionally, the municipality of Santiago Papasquiaro, located in the south-west of the state, was the most significant gold-producing centre and of national importance.

The most important mines for ferrous minerals are Ojuela, Topia, Velardeña, Tayoltita, Cerro de Mercado, Bacís, Avino, Guanaceví, El Oro, Ciénega de Nuestra Señora, San Sebastián and La Platosa. In 2007, the total production of non-ferrous minerals and iron ore for the steel industry was $553m, accounting for 6.7% of total national revenue for this industry.

The state has 25 smelting plants with a capacity of 11,275 metric tonnes a day: 17 of them are operational with an installed capacity of 9520 metric tonnes a day.

Durango has two refining plants with an installed capacity of 1300 metric tonnes a day: one of these has a capacity of 500 metric tonnes a day and processes sub-products of silver, lead and zinc. The other, inactive plant, with an installed capacity of 800 metric tonnes a day, processes manganese ferro-alloy.

Patricia Cabello, vice-president of finance at ACV, a company that makes tubing for mines, the explosives industry and the dairy sector, says: “We export everything we produce. Our business in the metallurgical industry has not been as hit as hard as the car-making business. The business activity of this sector, which is mainly state-owned, is being maintained.”

The main advantage for Gomez Palacio, says Ms Cabello, is its geographical location, which is only five or six hours away from the international border crossing at Laredo between Tamaulipas state and Texas. Labour costs are very competitive in the state, compared with Guadalajara or Monterrey, for example, and it is easy to recruit talented and qualified staff.

Ms Cabello says: “We have received support from the government at a municipal and state level. They have provided us with land and made the paperwork easier. The government is well aware of the urgency of certain matters.”

 

Government support

Sensa Control Digital, which is moving its head office to Gomez Palacio, develops solutions for monitoring, measurement and automation for the electricity, petrochemical and construction industries. The company’s general manager, Rafael Villegas Vizcaíno, says: “In the wake of the global economic crisis, the Mexican national government has put in place a programme of support for businesses. In our case, this has meant that the level of demand for our products has remained constant.

“The state government has also helped us, so that we do not feel the full impact of the crisis. We have decided to move our operational headquarters to Gomez Palacio; the works are almost complete. We believe the city offers several key advantages: its location, which is of equal distance from the country’s most important ports on the Pacific and Gulf of Mexico coasts, and its proximity to the US border.

“Furthermore, there are many universities in the Laguna area and we have agreements with many of them that have enabled us to recruit their graduates. Durango is a state that aggressively promotes investment.”

 

Zoning in

The Connectivity Zone is a project to develop a protected, bonded warehouse, free-trade zone and industrial park, five kilometres from Gomez Palacio. The industrial park will include a 200,000-square metre (sq m) technical university. Already, 100m pesos ($7.6m) has been invested in the zone’s urban infrastructure, and Durango’s government is contributing 32m pesos for the development of an inland port, which should be completed in August.

Luis Garza, the Connectivity Zone’s general manager, says: “The Connectivity Zone is located here because it is where the railways and the highways meet. We have constructed a strategic bonded warehouse that will allow us to develop a free-trade zone.”

The zone adds economic value by enabling goods from Asia to be assembled in the zone before export to the US market. “Under the bonded warehouse model, we are going to complete all of the clauses of the NAFTA Treaty relating to a secure customs area. Products will be able leave here and not have to stop at the US frontier. Here, firms will assemble and package the products and send them directly to their clients in the US. And it is a free-trade zone, so firms located here do not have to pay taxes if the products are exported to countries with which Mexico has a free-trade agreement,” says Mr Garza.

Vijai Electricals Mexico, an Indian company that makes electrical transformers, has established a 15,000 sq m production plant in the Connectivity Zone. Francisco Ovejero Sanchez, the company’s operations director, says: “We decided to open the plant in the Connectivity Zone because of the geographical position: the new highway connects the Atlantic and Pacific oceans. The proximity to the US also helps. Regarding the establishment of the plant, we received approaches from a number of states. However, Durango offered us the best facilities, the land, and tax incentives.”

Durango’s strategic location in the heart of Mexico, its important new highways, its reputation for excellent education and its low labour costs mean that it is well-positioned to attract FDI in the five strategic clusters that it is promoting.