From lab to market: A rising number of private companies are reaping the benefits of investing in R&D activities

As Mexico works to improve its research capabilities and infrastructure, a big contribution is coming from international investors. Industrial and technological firms have been establishing research facilities in the country, bringing fresh investment into the sector and exposing Mexican human resources to international know-how. The increase in the number of foreign research and development (R&D) departments also supports the government’s long-term goal of enhancing Mexico’s science and research infrastructure.

Rising Private Spending

According to the government’s Special Programme for Science Technology and Innovation, Mexico plans to increase its annual spending on research and experimental development from 0.56% of GDP in 2014 to 1% of GDP by 2018. But linked to government policies to support public R&D activities is also the will to raise the level of private R&D. Government figures point to private sector contribution accounting for 36.65% of total investment in research and experimental development activities in the country in 2014. The goal is to have the private sector account for 40% by the end of the current presidential term in 2018. “The Mexican private sector remains very conservative in R&D investment as they prefer to invest on more traditional profitable businesses, of which they already know the risk level. So this makes it hard for new business to get financing, especially in terms of innovative technologies,” Rodrigo Gallegos Toussaint, director for climate change and technology at the Mexican Institute for Competitiveness, told OBG.

Foreign Research Investment

Mexico’s proximity to the US market, lower costs and qualified human resource capabilities have attracted an increasing number of companies willing to invest in research and development activities. Mexico’s growing cluster for automotive and aerospace manufacturing in particular has opened the way for specialised manufacturers to invest south of the border. In 2006 General Electric opened one of its biggest R&D facilities in Querétaro. Also in Querétaro, Delta and Aeromexico joined forces to open a $40m maintenance and technological centre for the aviation sector. Other sector giants, such as Eurocopter, Safran and Zodiac, have also been investing in manufacturing capabilities in that part of the country.

Firms based on developing tech products are also investing in R&D capacity in Mexico. Motorola opened an $8m engineering and design centre in the northeastern city of Monterrey in 2009. Oracle established a $20m software development centre in Guadalajara in 2011, creating 300 work positions, according to local media reports. In April 2014, German technology firm Bosh announced the opening of a $5m development and engineering centre in Gualadajara. The research centre will be opened at the city’s Creative Digital City, an IT complex developed with state and federal funds. A few months later in June, US-based drinks and food manufacturer Pepsi Co started work on its $22m research centre in the state of Nuevo León, which will employ 100 people, according to local media reports. In late 2014 Texas-based chemicals and advanced materials manufacturer Celanese also announced plans to open a research and development centre in Mexico. The facility will be geared towards the automotive, medical device, aerospace and petrochemical businesses. Coating manufacturers Axalta also inaugurated a technology and research centre in Mexico.

Science For Business

Foreign investors are also increasing the links between academic research and market–led innovation. A disconnect between these two fields has been one of the biggest weaknesses of Mexico’s research and innovation sector.

Companies opening R&D facilities in Mexico are eligible for financial support for research activities. Since 2009, the country’s strategy for supporting private research efforts has moved from tax incentives to cash grants. These can cover from 22% to 75% of total research costs, according to a 2014 survey by consultancy Deloitte. More importantly, public policy has put an emphasis on giving more support to projects that include universities and public research institutes.

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The Report: Mexico 2015

Research & Innovation chapter from The Report: Mexico 2015

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