OECD countries and regions are recovering from the effects of the global financial crisis. The recovery period provides an opportunity to rethink the foundations for inclusive and sustainable growth. For example, boosting economic productivity needs to go hand in hand with rising well-being for workers and citizens. This is also true for the Mexican state of Hidalgo. Since the global financial crisis and after a long period of economic stagnation, Hidalgo’s economy started to close the gap with national standards in output and productivity. The state has undertaken a number of policy reforms to improve the business environment, attract foreign investment and modernise its public sector.

These gains should be further leveraged over the medium and long term to ensure Hidalgo mobilises its growth potential and can harness the benefits of globalisation. The state has a number of competitive advantages benefiting from a strategic location just north of Mexico City and a relatively safe environment (the third lowest homicide rate in the country). It also benefits from a comparatively good environmental quality within Mexico, low costs of production and a demographic premium in OECD comparison.

Yet the state must mitigate a number of bottlenecks it faces for development. They include a high labour informality rate, a high share of low-skilled labour force and underperforming cities. Moreover, low levels of tax collection and high socio-economic disparities between the south of the state, where the three metropolitan areas are located, and the municipalities in the northern and mountainous area remain pressing challenges.

The Territorial Review of Hidalgo examines the economic, social and environmental challenges the state faces. The review assesses the state’s potential for further development and how its policies can be improved. The review highlights that Hidalgo has growth potential and untapped opportunities to transition towards high-value-added economic sectors that can generate quality employment by better linking its local businesses with global value chains and international firms. In order to attain sustained growth over the medium term, it must raise its productivity by developing a co-ordinated strategy to support small and medium-sized enterprises (SMEs) and a holistic innovation policy framework that can better integrate the activities of the academic, private and public sectors.

This review also identifies a number of recommendations to promote inclusive growth and reduce the north-south divide. These include development of a long-term strategy for business development in rural areas through the modernisation of agriculture and the promotion of off-farm activities. To raise well-being in rural areas, strategic spending from both the state and municipal governments linked to investment projects and in coherence with the development plan will be required. Improving accessibility to public services and expanding information technologies and the infrastructure connectivity, especially for the northern municipalities, is a cornerstone to ensure that the entire population participates in the state’s economic development. The implementation of these recommendations will help Hidalgo to maximise its contribution to the national economy and well-being.

This review is part of a series of OECD Territorial Reviews created in 2001 to support regional development at the multi-country, country, regional and metropolitan scale. It was approved by the Working Party on Rural Policy of the Regional Development Policy Committee [CFE/RDPC/RUR(2018)6] at its 21st session on 6 November 2018.

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