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‪Boomtowns spur economic growth in Mexico‬

April 6, 2014 at 11:16 AM EDT
‪Mexico is now the third biggest trading partner of the United States. But with poverty afflicting half of the country's 120 million people, the country faces an uphill battle toward future prosperity. Correspondent Martin Fletcher reports from Querétaro.‬
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MARTIN FLETCHER: When it comes to Mexico, the news is often of drug cartels…violence…illegal immigration…

But there’s another story in Mexico…America of course has long been a magnet for Mexican workers, but more and more job seekers are coming here to the state of Querétaro. It’s one of Mexico’s smaller states, about an hour’s drive from the capital. It’s a relatively crime-free area. Socially, politically it’s been stable for a long time, and more and more international companies are flocking here.

Of all the cities in the world, this small Mexican town had the highest growth last year in foreign direct investment — that’s money invested directly into local business. And its population is growing rapidly too.

With its colonial center, a UNESCO World Heritage Site, and its new industrial parks, the poster child for Mexico’s burgeoning new economy is here in Querétaro.

Oscar Aguilar, a local journalist, reports on the growth of the town, and the companies investing here.

OSCAR AGUILAR: Bombardier, American Airlines, Aeromexico, Samsung, Honda.

MARTIN FLETCHER: Siemens, General Electric as well.

OSCAR AGUILAR: Yes, yes.

MARTIN FLETCHER: So this means a lot of jobs for the people?

OSCAR AGUILAR: A lot.

MARTIN FLETCHER: Those new jobs are attracting Mexicans seeking stability and safety — like Aguilar himself. He was a journalist in the state of Sinaloa, 700 miles away, until –

OSCAR AGUILAR: The teammate that I had died because of the drug dealers.

MARTIN FLETCHER: How did he die?

OSCAR AGUILAR: They arrived into their house, they broke into their house and shot him into the head. Him, his wife, his two daughters, and the two grandmas that were living there. I said no I don’t, I ain’t gonna expose my life.”

MARTIN FLETCHER: He moved to Querétaro with his wife Anel and daughter, Tammy.

OSCAR AGUILAR: How was your day? Give me my kiss. My kiss. Good.

Queretaro means a town that gave me a job, gave me stability, and gave me an opportunity to grow with my family.

MARTIN FLETCHER: Safely?

OSCAR AGUILAR: Safely.

MARTIN FLETCHER: It’s believed at least 70,000 people have been killed in Mexico’s drug wars since 2006.

But Querétaro, nestled in the country’s interior, has been relatively untouched. Although a drug lord was killed here recently — it has one of the lowest murder rates in the country and it’s far from states like Sinaloa and Chihuahua that have the highest incidents of homicide.

And now new government reforms aim to bring economic stability and safety beyond small pockets like Querétaro — and extend them to Mexico’s 120 million people.

MEXICAN FINANCE SECRETARY LUIS VIDEGARAY: Perhaps no other country has had such a successful year as we did last year in terms of changing things in the Mexican economy: in energy, telecommunications, the fiscal front, financial reform. We did many things that better the prospects of growth for Mexico.”

MARTIN FLETCHER: Manufacturing is booming, especially for export. Take the auto industry. Next year, Mexico should become America’s number one source for cars, exporting more to the United States than Japan or Canada.

And last year Mexico’s 47-year-old president Enrique Peña Nieto began his term of office with a dramatic series of reforms to open up the Mexican economy even further.

In the energy sector, Peña Nieto broke the 75-year state oil monopoly, with a constitutional amendment allowing private companies to invest in the industry.

On education, the government broke the teacher union’s hold on school staffing, by passing a bill to stop the sale and inheritance of teaching jobs.

And for the broader economy, Peña Nieto and his allies increased competition, by passing new tax and banking reforms.

The president hopes his reforms bring more success stories like that of Bombardier, the Canadian company that makes the Learjet. Their facility is just a 30 minute drive from the center of boomtown Querétaro.

PILAR ABAROA, COMMUNICATIONS MANAGER, BOMBARDIER AEROSPACE MEXICO: In 2005 there was nothing here. It was a green field.

MARTIN FLETCHER: Bombardier invested half a billion dollars in this division in Querétaro – its 45 employees here have grown to 1,800. Two dozen more aviation companies joined them in the area.The new Lear jet 85 should be delivered by the end of this year.

PILAR ABAROA: We’re manufacturing from here to here – which is the front fuselage, and we’re manufacturing around from here to here, which is the aft fuselage, and we will do the wings assembly too.

MARTIN FLETCHER: Parts manufactured in Mexico, trucked to Wichita, Kansas for assembly, for a company headquartered in Quebec, Canada.

More centers of growth like Querétaro –- that’s the goal of the new government’s economic reforms.

Though Mexico’s economy slipped in the last quarter of 2013, economists expect growth to rebound. And this February the credit agency Moody’s upgraded Mexico to an A rating — on hopes Peña Nieto’s government will put those reforms into action.

Those reforms you’re mentioning have been signed into law, but have yet for the most part to be implemented.

LUIS VIDEGARAY: Absolutely.

MARTIN FLETCHER: And the distance from signing a piece of paper to implementing it is a long way.

LUIS VIDEGARAY: Well reform is change, and there’s always resistance to change.

MARTIN FLETCHER: Already the teacher’s union has launched a series of bitter protests,

While analysts — like political scientist Denise Dresser — believe the billionaire leaders of industry will not easily give up their power.

DENISE DRESSER: What Peña Nieto would like to see is a more competitive, level playing field form of economic development. But the vested interests are very strong. And those vested interests are not going to give up without a fight.”

MARTIN FLETCHER: Can Peña Nieto carry out his reforms? What is sure is that he is deflecting Mexico’s narrative away from this, the drug war, which recently saw a significant development:

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From drugs and thugs to manufacturing hubs. That’s the story the government wants to tell. And there’s a lot of truth in the story of Mexico’s industrial growth.

Demand for Mexican made goods has helped drive the manufacturing sector in the country.

Mexico’s trade with the United States amounts to half a trillion dollars a year, and both sides want that to grow.

Mexico’s already America’s third largest trading partner after Canada and China. And Mexico’s advantages over China are clear – it’s closer, so has lower transport costs. And its labor costs are static, while China’s are growing.

And it’s not just factories that are growing here.

Back in Querétaro, Roberto Ibañez manages a growing, state-of-the-art business park — helping put a new face on Mexico, encouraging commercial investors.

ROBERTO IBAÑEZ: We have a commercial center in here, we have two hotels.

MARTIN FLETCHER: Twenty-four companies rent space here, half from overseas.

ROBERTO IBAÑEZ: I have Pepsi Cola, Ericsson, I have Axa Insurance Company.”

MARTIN FLETCHER: Eighteen hundred people work here, and growing fast.

ROBERTO IBAÑEZ: I am going to build nine more buildings.

MARTIN FLETCHER: And how many of those buildings have already been rented out?

ROBERTO IBAÑEZ: Three. I already have three rented.

MARTIN FLETCHER: Still, skilled labor is key to Mexico’s continued growth. So Querétaro’s leaders established an aeronautical university in a vast hangar next to the city’s air field, less than a mile from Bombardier. All its employees trained here.

A hundred graduates a year find jobs in Mexico’s growing aviation industry. And their key market is North America.

This the students’ first exam after three weeks of school. The plane should stay in the air for four seconds…

It’s a work in progress — like the Mexican economy.