Guadalajara - Economy

Economy

Guadalajara has the third largest economy and industrial infrastructure in Mexico, and contributes 37% to the state of Jalisco's total gross production. Its economic base is strong and well diversified, mainly based on commerce and services, although the manufacturing sector plays a defining role. It is also ranked in the top ten in Latin America in terms of gross domestic product and the third highest ranking in Mexico. In its 2007 survey entitled "Cities of the Future", FDi magazine ranked Guadalajara highest among major Mexican cities, and designated Guadalajara as having the second strongest economic potential of any major North American city behind Chicago. FDI Magazine also ranked the city as the most business-friendly Latin American city in 2007.

Most of Guadalajara's economic growth since 1990 has been tied with foreign investment. International firms have invested here to take advantage of the relatively cheap but educated and highly productive labor, establishing manufacturing plants which re-export their products to the United States, as well as provide goods for the internal Mexican market. Exports from the city went from 3.92 billion USD in 1995 to 14.3 billion in 2003. From 1990 to 2000, socio-economic indicators show that quality of life improved overall; however, there is still a large gap between the rich and the poor, and the rich have benefited from the globalization and privatization of the economy more than the poor. International investment has not only affected the labor market in the Guadalajara metro area but also that of the rural towns and villages that surround it. Guadalajara is the distribution center for the region and its demands as such have led to a shifting of employment from traditional agriculture and crafts to manufacturing and commerce in urban centers. This has led to mass migration from the rural areas to the metropolitan area.

As for the municipality's finances, in 2009, Moody's Investors Service assigned ratings of Ba1 (Global scale, local currency) and A1.mx (Mexican national scale). During the prior five years, the municipality's financial performance had been mixed, but has begun to stabilize in the last two years. Guadalajara manages one of the largest budgets among Mexican municipalities and its revenue per capita indicator (Ps. $2,265) places it above the average for Moody's-rated municipalities in Mexico.

The city's economy has two main sectors. Commerce and tourism employ most: about 60% of the population. The other is industry, which has been the engine of economic growth and the basis of Guadalajara's economic importance nationally even though it employs only about a third of the population. Industries here produce products such as food and beverages, toys, textiles, auto parts, electronic equipment, pharmaceuticals, footwear, furniture and steel products. Two of the major industries here have been textiles and shoes, which are still dynamic and growing. Sixty percent of manufactured products are sold domestically, while forty percent are exported, mostly to the United States. This makes Guadalajara's economic fortunes dependent upon those of the U.S., both as a source of investment money and as a market for its goods.

However, it is the electronics and information technology sectors here that have given the city the nickname of the "Silicon Valley of Mexico." Guadalajara is the main producer of software, electronic and digital components in Mexico. Telecom and computer equipment from Guadalajara accounts for about a quarter of Mexico's electronics exports. Companies such as General Electric, IBM, Intel Corporation, Freescale Semiconductor, Hitachi Ltd., Hewlett-Packard, Siemens, Flextronics, Oracle, TCS and Jabil Circuit have facilities in the city or its suburbs. This phenomenon began after the passage of the North American Free Trade Agreement (NAFTA). International firms started building facilities in Mexico, especially Guadalajara, displacing Mexican firms, especially in information technology. One of the problems this has created is that when there are economic downturns, these international firms scale back.

The city also has to compete with China, especially for electronics industries which rely on high-volume and low wages. This has caused the city to move toward high-mix, mid-volume and value-added services, such as automotives. However, its traditional advantage of proximity to the U.S. market is one reason Guadalajara stays competitive. Mexico ranked third in 2009 in Latin America for the export of information technology services, behind Brazil and Argentina. This kind of service is mostly related to online and telephone technical support. The major challenge this sector has is the lack of university graduates who can speak English.

Most of the economy revolves around commerce, employing 60% of the population. This activity has mainly focused on the purchase and sale of the following products: food and beverages, textiles, electronic appliances, tobacco, cosmetics, sport articles, construction materials and others. Guadalajara's commercial activity is second only to Mexico City.

Globalization and neoliberal reforms have affected the form and distribution of commerce in Guadalajara since the early 1990s. This has led to tensions between traditional markets, such as the Mercardo Libertad, and retailers such as department stores and supermarkets. Local governments in the metropolitan area used to invest in and heavily regulate traditional markets but this is no longer the case. To attract private corporate investment, regulatory control eased and most commercial developments now are controlled by private concerns. The city is the national leader in the development and investment of shopping malls. Many shopping centers have been built, such as Plaza Galerias, one of the largest shopping centers in Latin America, and also Andares. Galerías Guadalajara Website covers 160,000 m2 (1,722,225.67 sq ft) and has 220 stores. It contains the two largest movie theaters in Latin American, both with IMAX screens. It hosts art exhibits and fashion shows, and has an area for cultural workshops. Anchor stores includes Liverpool and Sears and specialty stores such as Hugo Boss, Max Mara and Lacoste. Also Best Buy opened its first Guadalajara store here. It's on the third floor and has its own additional private entrance on the top floor of the adjacent parking lot. Another Best Buy will open shortly in Ciudadela Lifestyle Center (Moctezuma and Patria), which will be the chain's third largest in the world, according to company publicity.

Also there is Andares which is a shopping mall located in Zapopan. This outdoor and indoor shopping center is Guadalajara's most exclusive shopping mall and is set in Puerta de hierro which is the most exclusive neighborhood in the city. It was opened on November 19, 2008 in a blaze of consumer frenzy that has affected the city in recent years. The $530 million dollar complex features luxurious world class residencies designed by famous Mexican architect Sordo Madaleno, a luxury Ritz-Carlton hotel and the shopping center complex which features elegant corridors, outdoor restaurants and cafes, anchored by upscale department stores as Liverpool (store) and El Palacio de Hierro. In addition, the corridors and indoor mall features dozens of upmarket clothing stores.

A large segment of the commercial sector caters to tourists and other visitors. Recreational tourism is concentrated in the historic center of the city. In addition to being a cultural and recreational attraction in its own right, the city also serves as an axis to other nearby attractions such the seaside cities Puerto Vallarta, Manzanillo and Mazatlán. Other types of visitors include those who come here to attend seminars, conventions, expositions and other events in fields such as academia, entertainment, sports and business. The city has a number of venues and luxury hotels for this purpose, The best-known venue is the Expo-Guadalajara, a large scale convention center situated among luxury hotels. This venue was constructed in 1987 and is considered the most important venue of its kind in Mexico. Despite the impact of the international economic crisis in 2008 and 2009, tourism and hotel occupancy rates have remained strong.