Chihuahua's Economic Model and Challenges

This chapter examines the economic growth and productivity trends in Chihuahua and Mexico. It starts by showing the reader Mexico’s slowdown in economic growth and lagging productivity levels. The reader will be able to see Chihuahua’s contribution to national performance thus, Chihuahua’s challenges are relevant not only for regional progress, but for Mexico’s overall performance. The chapter shows that Chihuahua has gone from being a region that was fast approaching OECD average levels of per capita GDP to be part of the groups of regions that can be considered as lagging and underperforming. Growth decomposition and growth-accounting techniques are used to pinpoint the main factors holding Chihuahua back from fully exploiting its growth potential. Despite being one of North America’s leading manufacturing hubs and the lead exporter in Mexico, Chihuahua’s outward development model has rendered the region vulnerable to external shocks. The chapter then analyses each of the three long-run economic growth determinants in Chihuahua and pinpoints the main challenges to improve investment, human capital and innovation levels in the state. The chapter ends with a discussion on foreign direct investment trends in the world and Chihuahua and relates multinational enterprise development with specialisation and cluster development in the region and sheds some light on the lack of integration of local firms to global-value chains.