Chapter 3. Towards a more inclusive Hidalgo: An integrated approach to territorial development

This chapter examines the territorial development dimension of the State of Hidalgo and suggests how to design urban and rural policies to improve regional development outcomes. It starts with an overview of the well-being conditions in the state. Then, it analyses urban and regional development through metropolitan governance, mobility and spatial planning policies. The third section analyses rural policies, focusing on the agricultural sector and the non-farming opportunities such as tourism. Finally, it reviews the state of the natural capital in the State of Hidalgo.

    
Key findings and recommendations

Key findings

  1. 1. Well-being in Hidalgo ranks below national and international levels when it comes to work-life balance, education and access to services, though security is an asset in the state.

  2. 2. Road infrastructure and accessibility are poor and highly uneven between south and north. While the south is well connected to the rail national system, national ports and Mexico City, the northern municipalities do not have direct access to external markets.

  3. 3. The state is experiencing a rapid urbanisation process concentrated in few municipalities in the south, although the urban population remains relatively low. Between 1990 and 2015, the urban population growth in Hidalgo (2.7% annual average) was above the growth rate of Mexico (2%) and Latin-American countries (1.9%). Nevertheless, the current level of urbanisation in the state (57%) remains far below the Mexican level (79%). Hidalgo’s proximity to Mexico City along with its topographic characteristics has led the people’s concentration around the 3 metropolitan areas of the state: Pachuca, Tula and Tulancingo. In 2015, the metropolitan areas housed 65% of the urban population in the state and, between 2000 and 2014, their population grew almost twice as fast as the rest of the state.

  4. 4. The urbanisation process has generated a rapid expansion of urban land in metropolitan areas but has followed a low, dense urban growth with high sprawl. From 2000 to 2015, Pachuca ranked in the top 5 states with the highest population growth (2.9% annual average) and as the first with the largest urban land growth (43%) among Mexican and OECD metropolitan areas. In Pachuca, just 43% of inhabitants live in the urban core, far below the average of Mexican metropolitan areas (84%) and OECD metropolitan areas (70%). In fact, since 2000, the population in the commuting area of the Pachuca Metropolitan Area has grown faster (3.8% annual average) than in the core (2.6%).

  5. 5. The Pachuca Metropolitan Area is the powerhouse of the state and is experiencing rapid economic growth, albeit still recording relatively low levels of job creation, labour productivity and income. It concentrates the largest share of business (26%) and employment (24%) in the state. In the 2000-14 period, Pachuca experienced the third fastest economic growth (4.9% annual average) among OECD metropolitan areas below 1 million inhabitants. However, it still faces challenges to improve labour productivity (the 7th lowest amongst OECD comparison) and tackle unemployment growth (the 2nd highest unemployment growth amongst OECD).

  6. 6. There is a lack of urban and environmental law enforcement at different levels of government. The law framework in Hidalgo acknowledges the importance of developing and updating planning instruments for urban and environmental governance. Nevertheless, big challenges persist:

    • The State of Hidalgo still relies on an outdated urban plan from 1979.

    • At the local level there, just 7 out of 84 municipalities have conducted an urban development plan.

    • 26 municipalities are not covered by an ecological management plan.

    • Just one-fifth of municipalities have updated their cadastres, while the rest have, on average, documents of more than 15 years old.

  7. 7. Co-ordination and involvement of key actors is a challenge for urban governance. Urban projects are in many cases conducted without following environmental guidelines. For instance, in Pachuca, between 2001 and 2016, 30 out of the 69 housing projects approved by the local government did not have an environmental impact assessment. Likewise, the Secretary of Transport and Mobility (SEMOT) is still weak, lacks formal mechanisms to get involved in urban plans and the technical and skilled staff for efficient operation.

  8. 8. The phenomenon of poverty in the state is concentrated in rural areas with an important ethnic and ageing component. Despite its rapid urbanisation process, a large share of the population in Hidalgo still lives in rural areas (46%) and most of the territory is classified as rural (97% of localities are rural areas). Rural areas are characterised by a high share of indigenous people (above 80% of the indigenous population in the state) and an ageing population (three-quarters of the farmers in the state are more than 60 years old). Hidalgo ranks as the seventh state with the highest poverty rate in the country, with the highest rates located in rural municipalities. The extreme poverty in non-metropolitan areas (13%) is 10 times higher than in metropolitan areas (3%). The vast majority of the areas where indigenous people live lack connection to the main water supply (88% of the areas) and sewage (90%).

  9. 9. Rural policy in Hidalgo is mainly focused on the agricultural sector, following a paternalistic approach and with a lack of consideration for synergies with other sectors. The support provided to producers and farmers is unidirectional and based on subsidies and in-kind contributions. Although some programmes focus on involving producers in the post-production process, the general approach of the State of Hidalgo remains largely based on assistantship. It lacks a territorial approach with a long-term strategy for job creation and business development in rural areas.

  10. 10. The tourism sector has a strong potential to empower communities and help preserve natural resources in Hidalgo. However, the tourism policy lacks integration with other sectors, co-ordination among municipalities, professionalisation and quality data. Although Hidalgo aims to enter into new niche tourism markets (i.e. ecotourism, medical tourism), it does not have a clear branding and needs a strategy of complementarities with local assets.

  11. 11. The State of Hidalgo has been gifted with a diverse natural endowment, yet the natural resources are being overexploited and polluted. Hidalgo is among the top ten states with the lowest index in environmental management and conservation in Mexico and ranks among the five states with the lowest allocation of public resources to environmental issues. Wastewater treatment, protected areas, solid waste management and forestry conservation are the main challenges.

Introduction

Attaining inclusive growth in Hidalgo is a challenge since the state registers important levels of inequality and poverty with a clear north-south divide. The concentration of population and economic growth in the southern part of the state has generated an uneven development process with respect to the rural areas in the centre-north mountainous region. Rural areas concentrate higher poverty and labour informality rates with an important ethnic and ageing component as well as a lower access to public services and markets, which hampers the competitiveness of the state as a whole.

Urban areas have expanded rapidly in the south, yet with a lack of urban planning and policy co-ordination. In order to reap the benefits of agglomerations, improve the well-being of citizens and attain sustainable growth, a better urban governance is needed. Ensuring a sustainable development path for Hidalgo requires establishing the necessary conditions to unlock productivity opportunities while taking into account the environmental dimension. In this respect, well-defined rural and urban policies can help improve the situation of local communities by enhancing connectivity to markets, improving the delivery of public services and generating productivity growth in farming and non-farming activities. Given the rapid urbanisation trend in Hidalgo, these policies will need to be synchronised and implemented with an integrated vision of rural and urban areas.

This chapter starts with an overview of the well-being conditions in the state. Then, it examines urban and regional development through metropolitan governance, mobility and spatial planning policies. The third section analyses rural policies focusing on the agricultural sector and non-farming opportunities. Finally, it reviews the state of the natural capital in Hidalgo.

Hidalgo faces various challenges on quality of life

Hidalgo is below international and national standards in well-being. According to the 11 dimensions measured in the 2016 OECD Regional Well-Being Framework, Hidalgo ranks below all dimensions of well-being except one (jobs) when compared to OECD regions. Compared to Mexican states, Hidalgo ranks below life satisfaction, housing, access to services and income dimensions (Figure 3.1).

The largest gaps in Hidalgo appear in:

  • Education: It is essential to promote innovation and economic growth in the territory. In 2016, the share of labour force with at least secondary education in the state (39%) was the 8th lowest across Mexican states (46% average) and far below the average in OECD regions (74%).

  • Housing: Housing costs often represent the largest expenditure on household income. Furthermore, the increase in such housing costs might push less wealthy households out of certain neighbourhoods, especially in attractive areas. When measuring housing by the average number of rooms per person, Hidalgo scores (0.9) below the average of both OECD regions (1.8) and Mexican states (1.0). Particularly, in the case of Pachuca, the imbalance between demand and supply and the migration inflow have boosted housing and rental prices, pushing out low-income dwellers far from the centre (Government of Hidalgo, 2017[1]).

  • Access to services, which depend on the state of physical and information and communications technology (ICT) infrastructure, remain scarce and deficient in Hidalgo. People living in the northern municipalities of the state experience a significant gap in access to essential services including schools and hospitals. For instance, people living in several northern municipalities have only access to 1 school within a 60-minute commute, while people in Pachuca or other southern municipalities can reach more than 100 schools in the same travel time (see Chapter 1). Access to the Internet is unavailable for most of the rural population in the north of the state. Hidalgo is the 8th state with the lowest share of households connected to broadband (25%), below the average of Mexican states (34%).

  • When it comes to road infrastructure, the road network in the state is composed mainly of unpaved rural roads with the modern roads located in the south of the state. Rural roads account for more than half of the network (51%), which is above the average of the country (43%). Furthermore, some municipalities, mainly outside metropolitan areas, do not have paved highways (19 out of 84 municipalities) and many lack direct connections to tertiary roads (INEGI, 2016[2]).

Figure 3.1. Comparison of well-being dimensions, 2016
Figure 3.1. Comparison of well-being dimensions, 2016

Note: Each well-being dimension is measured by one or the average of two indicators. Indicators are normalised to range between 10 (best) and 0 according to the following formula: (indicator value - minimum value across all OECD regions)/(maximum value across all OECD regions - minimum value across all OECD regions) multiplied by 10. In the cases where high values of an indicator mean worse well-being (for example unemployment), the indicator is normalised with the same formula subtracted by 10.

Source: OECD (2016[3]), Regional Well-Being (database), http://dx.doi.org/10.1787/region-data-en.

Despite the former challenges, Hidalgo ranks high in security in comparison to Mexican states. Personal and property security are important factors in creating a sound business environment in a region. Insecurity tends to reduce trust and social cohesion, reducing incentives to make long-term investments, which are important elements of any development strategy. Hidalgo’s homicide rate in 2015 was the 3rd lowest in the country (8 homicides per 1 000 people).

Despite its proximity with Mexico City, Hidalgo benefits from a better environmental (14.8 µg/m³), measured by the level of air pollution (PM2.5) experienced by the population, than other states in the Hidalgo in the centre of the country (16 µg/m³, on average)1. It underlines the Hidalgo’s comparative advantage with respect to its neighbouring states.

Other dimensions where Hidalgo performs relatively better than the average of Mexican states is health and jobs. However, these dimensions are mainly built on variables and focus on quantity rather than quality, which might lead to misleading conclusions for the state. The jobs dimension, based on the average of unemployment and employment rate, includes informal jobs for the case of Hidalgo, which calls for caution when comparing the quality of jobs. In the case of health, the dimension measures life expectancy and mortality rate. Although the state ranks well in this dimension, as seen in this chapter, quality and effective access to healthcare vary greatly throughout the territory, with rural municipalities facing numerous challenges to access services.

Urban development

The importance of cities and their corresponding metropolitan areas to the regions and national economies makes them key players in a territorial development agenda. Urban areas have become the focus of a wide range of public interventions in the face of increasing globalisation and competition for investment. Generally, the concentration of firms and people in specific areas yield important economic advantages such as economies of scale, better matching and functioning labour markets, spill-over effects and more technological progress. However, city size come with urban problems such as congestion, urban sprawl, higher land prices, larger environmental cost (pollution) and higher inequalities (OECD, 2015[4]). While benefits from urbanisation are mainly driven by market forces, costs must be mitigated by public policy.

In most OECD countries, the large majority of the population is already living in cities. Metropolitan areas (defined as urban agglomerations with more than 500 000 inhabitants) in OECD counties account for roughly half of the population and more than half of the gross domestic product (GDP). They also tend to have higher GDP per capita than their respective national averages, higher labour productivity and faster growth rates. Overall, roughly two-thirds of the OECD population lives in urban agglomerations with more than 50 000 inhabitants.

Hidalgo is experiencing a rapid expansion of the metropolitan areas, but without proper planning

Urban population in Hidalgo remains relatively small. Hidalgo’s level of urbanisation (57%) is still far below the Mexican level (80%) and the average of Latin-American countries (81%). Furthermore, according to the OECD classification, Hidalgo has the 8th lowest share of the population living in predominantly urban areas (14%) across Mexican states (46%) (see Chapter 1). In fact, the number of Hidalgo’s localities classified as urban represents just 3% (out of the 4 714 localities in the state), while rural localities remain the majority (97%).2

Nevertheless, Hidalgo is undergoing a rapid urbanisation process. Despite its late urbanisation dynamic with respect to the rest of the country (Pérez, 2018[5]), the state’s urban growth is now catching up (Figure 3.2). Between 1990 and 2015, Hidalgo recorded an average urban population growth of 2.7%, which is greater than the urban growth rate of both Mexico (2%) and Latin American countries (1.9%).

Figure 3.2. Urbanisation rate and urban population growth
Figure 3.2. Urbanisation rate and urban population growth

Note: The urban population growth index (100=1980) is calculated with the average annual growth rate.

Sources: United Nations (2018[6])World Urbanization Prospects: The 2018 Revisionhttps://esa.un.org/unpd/wup (accessed July 2018); (INEGI, 2016[7])

The urbanisation in Hidalgo has been characterised by the rapid population growth in the south of the state. Historically, Hidalgo’s proximity with Mexico City along with its topographic characteristics (a mountainous northern area and a large valley in the south), have led people to concentrate in a few municipalities located in the south-centre of the state, mainly Pachuca de Soto, Mineral de la Reforma, Tizayuca, Atitalaquia and Tulancingo. Between 1970 and 2000, the number of urban localities on the aforementioned southern municipalities increased by a factor of ten, much higher than in other parts of the state (Vargas-Gonzalez, 2011[8]).

Overall, the population dynamic has promoted the formation of urban agglomeration mainly around three urban poles in the south: Pachuca de Soto, Tulancingo and Tula, which are the centre of the three metropolitan areas in the state (namely, Pachuca, Tulancingo and Tula), according to Mexico’s classification (Box 3.1). In 2015, these 3 metropolitan areas were home of 65% of the urban population in the state, which represents more than one-third of the state’s population (37%). Pachuca Metropolitan Area on its own is the largest urban area, accounting for 20% of Hidalgo’s population, more than twice the share of Tulancingo (9%) and Tula (8%).

Box 3.1. Definition of metropolitan areas

Two definitions of Mexican “cities” will be used throughout this report: metropolitan areas (zonas metropolitanas) as defined by Mexico and OECD functional urban areas (FUA). The latter will be used mainly when it comes to international comparisons, while the Mexican definition when it refers to an analysis inside the country. Both definitions have in common that urban agglomerations are not limited to the administrative boundaries of a city and thus allow a consistent analysis of urban dynamics, growth patterns and economic interconnections with surrounding areas over time.

Mexico’s definition of metropolitan urban areas

For Mexico, the Ministry of Social Development (SEDESOL), the National Population Council (CONAPO) and the National Institute of Statistics and Geography (INEGI) determine the extent of metropolitan zones (zonas metropolitanas). Their definition considers municipalities with an urban centre of at least 1 million inhabitants or urban centres of at least 50 000 inhabitants that (spatially or functionally) link at least 2 municipalities. These urban centres are combined with the surrounding, less densely populated, municipalities based on two aspects: first, if they are functionally linked (measured by accessibility) and exhibit a functional urban industrial structure (non-agricultural employment share); and second, if municipalities are considered in sub-national or national metropolitan planning.

Table 3.1. Hidalgo’s metropolitan areas and population share, 2015

Pachuca Metropolitan Area

Population in metropolitan area (%)

Tulancingo Metropolitan Area

Population in metropolitan area (%)

Tula Metropolitan Area

Population in metropolitan area (%)

Pachuca de Soto

46.2

Tulancingo de Bravo

63.3

Tula de Allende

50.5

Mineral de la Reforma

30.8

Cuautepec de Hinojosa

22.9

Atotonilco de Tula

15.4

Zempoala

8.3

Santiago Tulantepec

13.8

Atitalaquia

12.9

San Agustín Tlaxiaca

6.1

Tlaxcoapan

12.8

Zapotlán de Juárez

3.3

Tlahuelilpan

8.3

Epazoyucan

2.7

Mineral del Monte

2.6

Total (number of people)

570 405

261 888

220 087

Share in Hidalgo (%)

19.8

9.1

7.6

Source: Consejo Nacional de Población (2018[9]), Datos de Proyeccioneshttp://www.conapo.gob.mx/es/CONAPO/Proyecciones_Datos (accessed 15 July 2018).

The OECD-EU definition of functional urban areas

The OECD defines metropolitan areas as functional urban areas (FUAs) with at least 500 000 inhabitants. According to the definition used by the OECD (see (OECD, 2012[10]) for details), a functional urban area consists of an urban centre/city and its commuting zone. An urban centre is constituted by 1 or more municipalities that have more than 50% of their population living in high-density clusters. These urban centres are defined as areas with contiguous high-density grid cells with a minimum population of 50 000 (100 000 for Japan and Korea). The high-density threshold is at least 1 500 inhabitants/km² (1 000 for Canada and the United States). The commuting zone consists of surrounding areas where at least 15% of the employed residents commute into the urban centre.

The methodology makes it possible to compare FUAs of similar size across countries, proposing four types of FUAs according to population size:

  • Small urban areas, with a population between 50 000 and 200 000.

  • Medium-size urban areas, with a population between 200 000 and 500 000.

  • Metropolitan areas, with a population between 500 000 and 1.5 million.

  • Large metropolitan areas, with a population of 1.5 million or more.

The definition is applied to 30 OECD countries, and it identifies 1 197 FUAs of different sizes. For Hidalgo, OECD methodology identifies Pachuca as the only metropolitan area, while Tulancingo and Tula are medium-size urban areas.

Sources: Adapted from OECD (2015[11]), OECD Territorial Reviews: Valle de México, Mexico, http://dx.doi.org/10.1787/9789264245174-en; SEDESOL-CONAPO-INEGI (2015[12]), Delimitation of the Metropolitan Areas of Mexico, www.conapo.gob.mx/es/CONAPO/Zonas_metropolitanas_2010 (accessed 15 July 2018); OECD (2012[10]), Redefining “Urban”: A New Way to Measure Metropolitan Areas, http://dx.doi.org/10.1787/9789264174108-en.

Hidalgo’s metropolitan areas are driving population growth

The municipalities within metropolitan areas are experiencing the fastest population growth in the state. From 2000 to 2015, the population in the 3 metropolitan areas grew almost twice as fast as the rest of the state (2.4% vs. 1.3% annual average) (Figure 3.3). In fact, Mineral de la Reforma (in Pachuca) is the municipality that recorded the highest population growth in the state during the last 25 years (9.7% annual average), 8 times higher than the rest of the state’s municipalities. Since the future patterns of urban population in Mexico are set to be concentrated towards the centre and north of the country (Fondo Metropolitano del Valle de México, 2011[13]), the urbanisation trend in the south of Hidalgo is set to keep growing in the coming years (Government of Hidalgo, 2017[1]).

Some municipalities around the metropolitan areas have also experienced rapid urban growth (Figure 3.5). In recent years, population across OECD metropolitan areas has also grown rapidly in areas outside the central district and with lower densities (Veneri, 2015[14]). This is the case of municipalities around the metropolitan areas of Tula (Tezenotepec de Aldana and Tetepanco in the north) and Pachuca (El Arenal in the north) (Figure 3.4). Another important pole of urban growth in the south but outside metropolitan areas has been the southern municipality of Tizayuca (depicted as the bottom-blue municipality in Figure 3.4), which recorded the second highest population growth in Hidalgo between 1990 and 2015. Tizayuca has always been a bridge between Hidalgo and Mexico City and is, in fact, the only municipality from another state that belongs to the metropolitan area of Valle de Mexico (ZMVM).3 This phenomenon underlines the need for Hidalgo to develop forward-looking urban policies that address the effects of rapid population growth within metropolitan areas but also in surrounding districts.

Figure 3.3. Population Growth in Hidalgo’s metropolitan areas and non-metropolitan areas, 2000-15
Figure 3.3. Population Growth in Hidalgo’s metropolitan areas and non-metropolitan areas, 2000-15

Source: INEGI (2016[7]), Population Census, http://www.beta.inegi.org.mx/proyectos/ccpv/cpvsh (accessed 28 May 2018).

Young, educated migrants have fuelled urban growth, though ageing is set to become a challenge

The rapid urbanisation growth in Hidalgo has occurred in parallel with inflows of people migrating to urban areas. Rural-urban migration is being driven by the search of higher incomes, quality of life and education opportunities. Most of the rural migrants in Hidalgo are located in urban municipalities with higher quality of life indicators (Franco, 2012[15]). Urban areas have also received migration inflows from municipalities of other states. Hidalgo is the sixth largest net receiver of inter-state migration in the country (see Chapter 1). The majority of such migrants has come from the state of Mexico and Mexico City (66%) mainly due to Hidalgo’s lower housing prices and higher (Pérez, 2018[1)). This is the case of Pachuca de Soto that hosts one-third of the interregional migrants arriving in the state.

Figure 3.4. Population growth per municipality, 2000-15
Figure 3.4. Population growth per municipality, 2000-15

Source: Consejo Nacional de Población (2018[9])Datos de Proyecciones, Mexico,  http://www.conapo.gob.mx/es/CONAPO/Proyecciones_Datos (accessed 15 July 2018).

Migrants in Hidalgo are young and generally educated. The share of educated people within the migrant population in Hidalgo (94.3% with at least primary education) has been higher than the share of established dwellers (89%) (Franco, 2012[15]). The migrant population has also been relatively young, between 2010 and 2015, 77% of immigrants were of working age. These demographic dynamics represents a challenge but also an opportunity for the state. While migrants may add to a higher educated labour force in the state, they also put pressure on the current high labour supply. In 2014, more than three-fifths of the population in the 3 metropolitan areas of Hidalgo (66%) was of working age, with Pachuca hosting the highest proportion (68%). In fact, Pachuca ranks as the 5th youngest metropolitan area, measured as the proportion of elderly over the working-age population, among OECD metropolitan areas with less than 1 million inhabitants (Figure 3.5).

Despite the current young generation, the ageing population is set to become a key challenge for Hidalgo. The proportion of elderly population over the working age population for the 3 metropolitan areas will double in the next 15 years, passing from 8% in 2015 to 16% in 2030 (Government of Hidalgo, 2017[1]). Such an increase will add high pressure to public services provision such as healthcare and social security. Hidalgo must, therefore, start putting in place forward-looking policies to prepare urban areas for the demographic change, which involves planning inclusive cities with better access to public transport and amenities.

Figure 3.5. Share of elderly population in metropolitan areas, 2014
Figure 3.5. Share of elderly population in metropolitan areas, 2014

Source:  OECD (2018[16])Metropolitan  Areas, OECD Regional Statistics (database), https://doi.org/10.1787/region-data-en.

Pachuca is experiencing low-density and sprawl urbanisation, with a high share of fragmentation

Sprawling low-density cities move population away from jobs and services, and in turn are less attractive to individuals and firms (Dobbs, 2012[17]). Urban sprawl also creates congestion, challenges the provision of public services and represents a cost to the environment, reducing several dimensions of well-being in cities.

Hidalgo’s urbanisation growth has also implied an expansion of urban land, mainly from the metropolitan areas. Between 2000 and 2014, urban land (measured as built-up areas) in Hidalgo increased by 26% (7 230 hectares) with half of such growth driven by the expansion of 2 municipalities in Pachuca Metropolitan Area: Mineral de la Reforma and Pachuca de Soto (Cano Salinas et al., 2017[18]).

Pachuca is experiencing one of the highest growth rates of population and urban land in Mexico and the OECD metropolitan areas. From 2000 to 2015, Pachuca registered the second-fastest population growth (2.9% annual average) among Mexican metropolitan areas (1.7%) and the fourth fastest among the OECD metropolitan areas (0.8%).4 Such population growth has also come with high urban size expansion. Pachuca registers the fastest build-up growth in urban areas (43%) among Mexican (23%) and OECD metropolitan areas (15%) (Figure 3.6).

Figure 3.6. Population and built-up area growth in OECD metropolitan areas, 2000-15
Figure 3.6. Population and built-up area growth in OECD metropolitan areas, 2000-15

Source: OECD (2018[16])Metropolitan  Areas, OECD Regional Statistics (database), https://doi.org/10.1787/region-data-en.

The rapid increase in urban land has led Pachuca to growth with low density and high sprawl. Pachuca’s population density (406 inhabitants/km²) is below the average of both the Mexican metropolitan areas (640) and OECD metropolitan areas with less than 1 million inhabitants (624). In terms of the degree of spatial concentration within the metropolitan area, since 2000, the population in the commuting area of Pachuca Metropolitan Area has been growing faster (3.8% annual average) than in the core (2.6%). By 2015, just 43% of inhabitants of Pachuca lived in the urban core, far below the average of both Mexican metropolitan areas (84%) and OECD metropolitan areas (70%) (Figure 3.7). The sprawl in Pachuca has mirrored the phenomenon at the national level where a housing model towards single-family, owner-occupied homes and the patterns of irregular settlements have explained the high growth of the urban areas’ periphery (see Box 3.2).

Congestion and sprawl are already producing negative effects in Hidalgo’s metropolitan areas. Congestion pollution is a growing problem across a wide number of OECD metropolitan areas and attempts to mitigate it have come to the forefront of the policy debate due to its negative impact on quality of life. Globally, 16% of lung cancer deaths and about 26% of respiratory infection deaths in 2016 can be attributed to exposure to fine particulate matter (PM 2.5) ( (World Health Organization, 2016[19])). In the case of Hidalgo, according to the 2016 National Review of Air Quality, none of the 3 metropolitan areas of the state met the norms of Ozone, PM10 and PM2.5 in 2016 (INECC, 2017[20]). Pachuca is the third metropolitan area with the highest level of Ozone5 in Mexico and Tula ranked as the second city with the highest annual average levels of PM2.5 (also affected by the proximity to the Miguel Hidalgo de Tula refinery).

Figure 3.7. Concentration of population in the city core, 2014
Share of population living in the core areas over the total metropolitan population, selected OECD metropolitan areas
Figure 3.7. Concentration of population in the city core, 2014

Source:  OECD (2018[16])Metropolitan  Areas, OECD Regional Statistics (database), https://doi.org/10.1787/region-data-en

Box 3.2. The challenge of urban sprawl in Mexico

Urban sprawl has consequences for mobility, contributing to rising motorisation rates and making the provision of efficient, quality public transport alternatives more challenging and costly; this is an issue that cities across Mexico face.

According to data in the Registro Único de Vivienda (RUV), in 46 of Mexico’s 59 metropolitan zones, more than 70% of homes registered in the new housing registry between 2006 and 2013 were built either in the outskirts or the periphery. Moreover, roughly 90% of the housing stock consists of individual homes, which continue to make up the majority of all new development. On the other hand, many other factors have contributed to: rising income levels and lower transport costs; a fiscal and regulatory bias towards single-family, owner-occupied homes; the prevalence of irregular settlements, hampering effective urban growth management; municipal capacity gaps and ineffective local land use controls for urban development; and a high level of municipal fragmentation within metropolitan areas, making co-ordinated land use and transport planning across neighbouring jurisdictions a challenge.

Poor land-use planning and permitting practices – as well as the absence of adequate land available to low-income populations – results in the location of many settlements in risk-prone areas, such as river banks and unstable hills, with devastating social and economic costs when disaster strikes. These challenges are all the more relevant given that, globally, Mexico is one of the areas with the most frequent occurrence of severe earthquakes and tropical storms (OECD, 2013[21]). There has been a 4-fold increase over the past 40 years in the average annual occurrence of disasters (OECD, 2013[22]). In late 2013, for instance, Hurricane Manuel left over 10 000 households in severe crisis in Acapulco, where many developments had been approved by local governments in flood zones.

Socio-economic segregation – in terms of income and education levels, as well as access to basic services like electricity, water and drainage – is also present, albeit different, across metropolitan zones. In some cities, low-income groups tend to be located on the outskirts, a trend that is fostered by lower land prices in peripheral areas. In other cases, there is a clear geographical divide (north/south; east/west) within the metro zone.

Sources: OECD (2015[23]), OECD Urban Policy Reviews: Mexico 2015: Transforming Urban Policy and Housing Finance, http://dx.doi.org/10.1787/9789264227293-en; OECD (2013[21]), OECD Reviews of Risk Management Policies: Mexico 2013: Review of the Mexican National Civil Protection System, http://dx.doi.org/10.1787/9789264192294-en; OECD (2013[22]), OECD Environmental Performance Reviews: Mexico 2013, http://dx.doi.org/10.1787/9789264180109-en.

Pachuca also experiences high municipal fragmentation. Pachuca is the 3rd most fragmented metropolitan area in the country with an average of 1.6 municipalities per 100 000 inhabitants, well above the country average (Figure 3.8). OECD research has shown that metropolitan cities in OECD countries with a higher level of governmental fragmentation experience lower economic growth per capita. Likewise, OECD analysis finds that for a given population size, a metropolitan area with twice the number of municipalities is associated with around 6% lower productivity (OECD, 2015[4]).

Figure 3.8. Average number of municipalities per 100 000 inhabitants, 2014
Figure 3.8. Average number of municipalities per 100 000 inhabitants, 2014

Source: OECD (2018[16])Metropolitan  Areas, OECD Regional Statistics (database), https://doi.org/10.1787/region-data-en

The rapid urbanisation and expansion of urban land, mainly driven by the three metropolitan areas in the south, requires close attention from the state. While slow urbanising countries or regions can develop and adapt to changes over time, rapid urbanisation requires massive investments in local and inter-city infrastructures and modern social structures in a short time (see (Glaeser, 2013[24])and (Henderson, 2010[25])). Hidalgo should hence pay attention to the type of growth of its cities and develop forward-looking scenarios of settlement patterns to create appropriate urban policies.

Despite the rapid economic growth, Hidalgo’s metropolitan areas still perform below their potential

The metropolitan areas of Hidalgo are the economic centre of the state. With just slightly more than a 3rd of the population, the municipalities of the 3 metropolitan areas concentrate most of the economic establishments (48%) of the state and the employed population (42%). In particular, Pachuca Metropolitan Area is the main powerhouse, concentrating on its own the largest share of business (26%) and employment (24%) in the state, and it hosts the main political and academic institutions.

Pachuca metropolitan is experiencing rapid economic expansion and is closing the productivity gap with other Mexican metropolitan areas. Between 2003 and 2013, Pachuca recorded the 3rd highest GDP growth (4.9% annual average) among OECD metropolitan areas below 1 million inhabitants (1.9%) and the 4th among Mexican metropolitan areas (3.3%). During the same period, the labour productivity in Pachuca outpaced by a factor of 10 the growth rate (1.22% annual average) of Mexican metropolitan areas (0.22%) and the OECD comparable sample (1.01%).

Nevertheless, the Pachuca’s rapid economic growth has fallen short in boosting job creation, income per capita and labour productivity levels (Figure 3.9). Metropolitan areas and dynamic medium-sized cities across the OECD have strong potential for job creation and innovation, as they are hubs and gateways for global networks such as trade or transport. In many OECD countries, labour productivity (measured in terms of GDP per worker) and wages also increase with city size (OECD, 2015[4]). In the case of Pachuca, economic expansion was not able to absorb the high population growth. Between 2003 and 2013, unemployment increased faster (9.8% annual average growth rate) than its labour force (4.8%), leaving an important share of the working-age population without employment (4%). In fact, the Pachuca’s unemployment growth (10%) was the second fastest among the OECD comparable metropolitan areas (1.9%) and Mexico. Furthermore, despite having closed the gap, Pachuca’s labour productivity ranked in 2013 as the 7th lowest among both Mexican metropolitan areas and OECD metropolitan areas below 1 million inhabitants.

Additionally, the benefits of Pachuca’s economic growth and urbanisation have not been equally distributed. In many OECD countries, urban income inequality has been rising faster than overall income inequality, due to skills’ distribution and the capturing of top earners, with income inequality increasing with city size (OECD, 2018[26]). In Pachuca, the gap between the average income of the population in extreme poverty and the one of the population out of poverty is higher than at the state level (0.13 vs. 0.10, data for 2010) (CONEVAL, 2010[27]).

Figure 3.9. Pachuca’s performance compared with Mexican and OECD metropolitan areas
Figure 3.9. Pachuca’s performance compared with Mexican and OECD metropolitan areas

Note: Growth rates are from between 2003 and 2013. The rest of the indicators refer to 2013. GDP per capita and labour productivity are calculated with constant prices (in USD PPP), base year 2010. Pollution is the estimated population exposure to air pollution PM2.5 (µg/m³) for the average period 2012-14.

Each point represents the performance of Pachuca as a share of the average metropolitan regions.

Source: Own calculation based on OECD (2018[28])Metropolitan Areas (database)http://dx.doi.org/10.1787/a8f15243-en.

But inequality also goes beyond income. In the OECD the multidimensional living standards – a composite measure of income, jobs, health and inequality – are on average higher in metro areas. Benefiting from an early stage of urbanisation, the State of Hidalgo should ensure that economic growth in urban areas is shared with all population. The state can further promote the development of statistics at the local level (localities) within cities so as to follow up the bottlenecks for inclusive growth.

In sum, the enduring low level of urban population gives Hidalgo a unique opportunity to translate rapid urbanisation into economic benefits and well-being. This requires well-planned urban development and forward-looking policies to address urbanisation costs (congestion, pollution, inequality) and reap the benefits from agglomeration economies (increase labour productivity and income per capita). This also involves better governance co-ordination within metropolitan areas, in particular among environmental policies and public works, to control urban sprawl and reduce negative economic effects from municipal fragmentation. Given the pace of urbanisation in Hidalgo, planning service delivery and land-use in urban areas must be one of the priorities for urban policy.

Hidalgo’s urban policy acknowledges most of the challenges in urban areas…

An effective system of metropolitan governance can provide the right conditions to take advantage of economies of agglomeration and reduce public policy fragmentation. Developing efficient policies on transport and land use in coherence with environmental norms will increase urban areas’ attractiveness and capacity to generate wealth.

The State Development Plan of Hidalgo has set the goal of developing an integrated approach for urban policy (Government of Hidalgo, 2016[29]). While urban policies in Hidalgo have traditionally focused on providing public services for the urban population, the new administration’s approach combines the traditional focus with a broader strategy of development. This vision places planning and mobility at the heart of urban development and recognises the need for a sustainable urban growth with resilience and inclusive development (for the main strategies see Table 3.2). An example of this is the creation of the Secretary of Mobility and Transport, which is an effort to integrate urban mobility in cities.

The law framework on urban policy of the State of Hidalgo acknowledges the importance of co-ordination among different actors. The main law framework for urban issues is:

  • The 2007 Law of Human Settlement, Urban Development and Territorial Planning (LAUHDOT). It is the backbone document for urban policy in the state, which provides the regulation for metropolitan areas and establishes co-ordination roles and participation mechanisms for urban development and territorial planning.

  • This law was reinforced with the 2009 Law of Co-ordination for the Metropolitan Development of the State of Hidalgo, which provides the conditions and guidelines for the co-ordination among different levels of government and authorities to govern the metropolitan areas.

Table 3.2. Hidalgo’s objectives and strategies for urban development

Objectives for urban development

Strategies (selected)

Promote the updating and adaptation of all planning instruments, such as urban development programmes

- Update and complement urban development plans at the state, regional and metropolitan levels

- Promote schemes so that the municipalities generate a municipal programme of urban development

Promote densification of urban areas

- Establish urban buffer zones through zoning of land uses and included in urban planning instruments

Increase the sustainability and connectivity of public spaces in cities

- Develop inclusive equipment for all social groups, with special attention to the elderly

- Promote the improvement of the urban image for all settlements

Generate a pool of sustainable urban projects

- Promote the creation of a municipal catalogue of urban projects in the town councils

Plan the sustainable development of the metropolitan areas through the implementation of programmatic and normative instruments

- Application of normative instruments for the planning of human settlements

Encourage sustainable motorised mobility through the incorporation of technological alternatives for the different means of motorised transport

- Promote the use of hybrid and electric vehicles, together with the necessary facilities and infrastructure

Strengthen and promote efficient non-motorised sustainable mobility alternatives for the population

- Develop and evaluate cycle routes and cycling infrastructure projects

- Encourage the inclusion of sustainable urban mobility schemes in the municipal traffic regulations

Source: Government of Hidalgo (2016[29]), State Development Plan 2016-22

The state has a predominant role in the territorial co-ordination of urban areas, while the local level undertakes the implementation part. The main actors at the state level to plan and co-ordinate urban development are:

  • The Secretary of Public Works and Territorial Planning (SOPOT). This is the main actor, entitled to conduct, implement and oversee the compliance of policies on territorial planning and urban development. Among the state’s objectives on urban development, it is mainly in charge of promoting the update of urban development plans, densification of urban areas, increase the sustainability and connectivity of public spaces in cities, and the sustainability of urban areas and human settlements.

  • In terms of environmental policy, the Secretary of Environment and Natural Resources (SEMARNAT) regulates the urbanisation process through the Ecological Management Land Plan that defines where urban areas can keep expanding and protects the natural resources of the state.

  • The Secretary of Transport and Mobility (SEMOT). The State of Hidalgo created this secretary in 2016 with the aim to make cities more accessible to people and implement an integrated public transport system, with a long run plan of single transport card for all the transport modes. Among the state objectives, it is in charge of promoting sustainable motorised mobility and the efficient use of non-motorised sustainable mobility. The SEMOT aims to improve sidewalks and expanding the network of both the Bus Rapid Transit system and public bicycles.

  • The Metropolitan Commission specifically addresses the governance in each metropolitan area. The LAUHDOT ordered the creation of this body for each metropolitan area. These commissions aim to lead the planning and the administration of urban areas as well as define – along with the SOPOT – the Territorial and Urban Development Plan. The commission has as members not only the municipal government belonging to the metropolitan area but also other municipal governments considered crucial for the urban area. In the case of Pachuca, for example, besides the seven municipal governments inside the metropolitan area (see Box 3.1), another four municipalities around the metropolitan area (Tizayuca, Tolcayuca, Villa de Tezontepec and Mineral del Chico) belong to the commission. The governance of metropolitan areas has been a key tool to reduce municipal fragmentation. For instance, the long territorial conflicts among both Pachuca de Soto and Mineral de la Reforma on responsibility and ownership of public services, public security and property tax were to a large degree mitigated with the creation of the metropolitan area of Pachuca and the Metropolitan State Council in 2009 (Pablo Vargas-González, 2011[30]).

  • The Metropolitan Fund (Fondo Metropolitano). In Mexico and in Hidalgo, the federal government funding for metropolitan areas is channelled through this fund (the funding is part of the national budget devoted to subsidising state and municipal action on urban development. The operational rules for the Metropolitan Fund require the creation of a Metropolitan Development Council (Consejo para el Desarrollo Metropolitano, CDM) in order to receive funds (OECD, 2015[11]). In Hidalgo, the Metropolitan Fund has financed healthcare, transport infrastructure as well as maintenance and expansion of sewage and green areas across the three metropolitan areas (Pachuca, Tula and Tulancingo).

… but some issues remain

Metropolitan areas in Hidalgo lack a comprehensive urban development programme that works hand in hand with other strategic sectors and across different state secretaries. Most urban projects in the state are done under a sectorial strategy conducted by a single agency. For example, projects on housing and public works or concerning public spaces are mainly planned and implemented by the SOPOT, with little or no co-ordination with other agencies. The lack of complementarities among urban programmes can lead to negative impacts on the environment and land use as well as create public opposition to urban projects.

The lack of co-ordination stresses the lack of Metropolitan Development Plan. Metropolitan areas of Hidalgo do not have such a plan (Government of Hidalgo, 2017[1]), which creates problems for short- and long-term planning with lack of co-ordination and inefficient use of investments. The state should consider creating a Metropolitan Planning Institute, in charge of developing the concept behind the metropolitan area and supporting the creation of the metropolitan plan. It can also promote participatory planning and process geographical information and data. It should represent the metropolitan area in spatial planning matters and be funded by all municipalities in the metropolitan area and the state. The model of the IMEPLAN in Guadalajara, Mexico, is of interest (Box 3.3).

The investment decisions of the resources from the Metropolitan Fund risk following political interests with a small involvement from local governments. Given that the resources of this fund are not earmarked to an urban development plan, the selection of the projects to be financed could be based on political decisions rather than on priorities of the broader metropolitan area. Furthermore, the final decision of projects comes mainly from the state level, with many projects from municipal governments discarded due to technical weakness. These issues have in some cases created local government opposition to the selected projects, as was the case with the 2017 decision of using metropolitan funds to build a new TUZOBUS station that produced tensions among the state, Pachuca de Soto and Mineral de la Reforma. Improving the capabilities of municipal governments and their involvement in investment decisions on this fund will ensure sustainability in the metropolitan investment. Hidalgo should also further promote co-investments among municipalities to develop joint projects within the metropolitan area.

Furthermore, co-ordination with other metropolitan zones of the country could be more efficient. Interaction among metropolitan areas is a crucial dimension for a well-managed urban development. The proximity and economic interaction between the south of Hidalgo and the metropolitan zone of Valle de Mexico (ZMVM), the country’s largest market and home to 20 million inhabitants, have already yielded to co-ordination mechanisms that are worth enhancing. For instance, Tizayuca participates in decision-making processes and co-ordinates urban plans for the ZMVM. Furthermore, in 2017, the state joined the Metropolitan Development Council of ZMVM with the aim to co-ordinate policies, investments and large infrastructure projects related to both areas. However, enhancing this co-ordination is not placed high within the objective of urban development in the state. Hidalgo should thus aim to increase joint projects with benefit to urban areas and surrounding municipalities in the state.

Box 3.3. The governance tripod of Guadalajara Metropolitan Area (GMA)

The Guadalajara Metropolitan Area has a long history of metropolitan governance. In the 1990s, its main political body was the Council for Metropolitan Development and the main regulation was the 1976 General Law for Human Settlements. Since then, the system has become more open and horizontal. As of today, the system embraces a broad range of stakeholders and comprehensive planning instruments.

The political body of the governance system is the GMA Metropolitan Co-ordination Board (MCB). Created in December 2012, it is an inter-municipal collegial organ for political co-ordination. The members are the mayors of the municipalities that constitute the GMA and the Governor of the State of Jalisco. Among the objectives of the MCB is to set the Metropolitan Agenda, the instrument that establishes priorities, objectives, strategies and actions for the metropolitan area.

The Metropolitan Planning Institute (IMEPLAN), operational since July 2014, is the technical organ of the metropolitan co-ordination system. It is an inter-municipal decentralised agency with legal personality and own assets. Its main objective is to develop and propose to the board the technical instruments for metropolitan planning, carry out research and studies, and propose alternative co-ordination mechanisms within the system. The main structural tools designed and developed by IMEPLAN are: The Metropolitan Development Programme; the Metropolitan Land Use Plan and the Map of Metropolitan Risks. The Metropolitan Citizen Council (MCC) is an intermunicipal advisory organ for citizen participation. The honorific membership can be held by grassroots leaders, representatives of non-governmental and professional organisations, scholars, researchers and private sector leaders. Every metropolitan municipality has up to three seats to appoint to the council and members are elected by a public and open call among civil society. The objective of this entity is to monitor and follow up on metropolitan matters and to report citizen complaints. In addition, the MCC can organise, receive, discuss and channel proposals from civil society regarding the metropolitan co-ordination system.

The metropolitan co-ordination system is based on co-operation and collaboration. After decades of slow concrete implementation and few successes in sectorial intermunicipality arrangements, the GMA is paving the way as an example – if not an inspiration – at the national level. Its laws, institutions and stakeholders are maturing to collaborate within formal frameworks defining a 25-year vision, together with tools for implementation.

Source: GIZ/UN-Habitat (2015[31]), Case Study: Metropolitan Governance, Guadalajara Metropolitan Area, Mexico, https://unhabitat.org/case-study-metropolitan-governance-guadalajara-metropolitan-area-mexico/.

Mobility requires special attention

In any urban context, efficient transport flows within cities facilitate the movement of goods and people in ways that can integrate neighbourhoods and minimise environmental damage through the reduction of vehicle emissions. The quality of cities’ transport infrastructure not only determines the level at which economic growth can be translated into the national economy as a whole but is also a crucial factor in attracting foreign investors in cities and elevating the quality of life of urban residents. In particular, accessible urban transport is an essential component in facilitating urban mobility for low-income households, allowing them to access better job and education opportunities.

Hidalgo’s road networks and restricted access to public transport provides limited conditions for mobility and commuting within and across its main urban areas. Most of the commuting to work is done by public transport, yet around one-third of public transport in Hidalgo operates illegally (Government of Hidalgo, 2017[1]). The high proportion of illegal transport puts passengers and the environment at risk. The second most common transport mode to work is on foot (Figure 3.10). Given the low density of Hidalgo’s cities, the high proportion of travel on foot underlines the difficulties that people face to reach the workplace.

Figure 3.10. Transport mode to work in Hidalgo, 2015
Figure 3.10. Transport mode to work in Hidalgo, 2015

Source: INEGI (2015[32])Inter-census Surveyhttp://www.beta.inegi.org.mx/proyectos/enchogares/especiales/intercensal/ (accessed 15 July 2018).

Pachuca has the only large-scale transport system in the state, the TUZOBUS. It is a one-line Rapid Transit Bus system created in 2015 that covers 18 km and conveys 110 000 passengers daily, with 33 stations and 19 feeder bus routes (Government of Hidalgo, 2017[1]). Despite its extension, the system covers only around 10% of the total daily commutes in Pachuca. There is hence a need to promote an integrated transport system that also reduces the share of illegal transport, which in some areas of the city amount to one-third of the public transport supply.

Another challenge for urban mobility in the state is the increase in the rate of motorisation. The motorisation rate is currently high in Hidalgo (382 vehicles per 1 000 people) when compared with the national average (341). With a rapidly growing economy and an expanding urban land area, more people will likely shift to private vehicles for their daily commute, raising congestions costs and putting further pressure on the environment. Against this backdrop, a holistic urban agenda is needed to promote the shift from cars and ensure a broader use of public transport.

The newly created Secretary of Mobility is a step in the right direction but it must be strengthened

While the State of Hidalgo acknowledges the importance of an independent agency to oversee and co-ordinate transport policy related-projects, the economic and institutional capacity of the SEMOT are incipient and remain weak. This newly created secretary does not count with the institutionalised mechanisms, and capacity to become fully involved in urban planning. SEMOT lacks also staff and resources to conduct high-quality data analysis and long-term planning for an efficient operation. If Hidalgo aims to achieve an integrated urban development in line with environmental protection, it should further strengthen the role of SEMOT by considering the following:

  • Strengthen financial and staffing capacities for SEMOT to further develop and co-ordinate “integrated public transport” in cities. The SEMOT can ensure that the integrated public transport system includes the co-ordination of all aspects of public transport provision (bicycles, BRT, public and private transport). It should include optimised routing and synchronised timetables between different lines and modes of transport. While this is an important precondition for a good public transport system, it is not sufficient to guarantee effective transport services. SEMOT should be able to ensure that public transport is efficiently operated and its functioning monitored through a clear institutional framework.

  • Further expand the co-ordination powers of SEMOT in urban (and non-urban) projects. The co-ordination and participation in the urban development of a governmental entity responsible for transportation and mobility are critical to ensure that policies tackle metropolitan-wide challenges in a harmonised way, particularly for cities that expand in size (OECD, 2015[4]). This secretary can play an important role in urban planning through the co-ordination of different sectors and urban policy agendas, for example:

    • Land use policies and housing (SOPOT and SEMARNAT): The co-ordination between transport and land use can protect the space required for public transport infrastructure from other developments. It also yields to efficacy on the construction of new transport projects by meeting the demand, for example on far-away housing projects.

    • Transport accessibility (Secretary of Social Development and Secretary of Labour): Transport projects should also be oriented towards improving accessibility and reducing segregation. Transport subsidies or alternative modes of transport (particular vehicles or special routes) can benefit from co-ordination with social and labour policies (a current draft law on transport mobility for Hidalgo includes indigenous transport modes).

    • Business attraction (SEDECO): When co-ordinated with economic projects (new industrial park or business areas), transport planning can also increase their economic impact, the well-being and business environment of the urban area.

    • Public investment (Secretary of Finances – SHCP): Co-ordination between transport and fiscal mechanisms can accomplish the dual role of reducing congestion and increasing local revenues for infrastructure projects. Implementing a fee for using certain roads and streets during a period of time is not only a way to obtain additional resources to finance improvements in infrastructure and transport, but also to deal with traffic and its environmental consequences. Congestions charges in cities like London are a good example of this (it brought a decrease in the use of private vehicles by 30%) (OECD, 2015[11]).

To promote this co-ordination, Hidalgo should:

  • Create incentive structures for co-ordination among secretaries within the State Development Plan. This can involve shared and transversal objectives with performance indicators that measure co-ordination (see Chapter 4).

  • Promote vertical governance arrangements between the local and national level. For this matter, enhancing mechanisms for co-operation with the Federal Ministry for Transport and the Ministry of Environment would benefit transport projects in the state.

SEMOT can also play an important role in improving community involvement in mobility projects. Some of the construction projects of new stations of TUZOBUS have generated protests in the community due to the lack of socialisation. That is the case of the station of Central de Abasto, in the wholesale market, where local business went to strike, arguing the lack of communication on the project and its negative economic impact in the area. The state has set the goal of creating new routes and stations of TUZOBUS to better connect the metropolitan area. However, the new constructions have been carried out by the SOPOT with little involvement of the communities in its planning and little co-ordination with SEMOT. To be successful, the transport systems' expansion in the state requires raising citizen awareness and alignment with spatial and land use planning.

Land use planning

The governance and use of land affect a wide range of factors from the availability of food and clean water and the length of daily commutes, to the long-term sustainability of urban and rural communities, including the possibility for climate change adaptation and mitigation (OECD, 2017[33]). It is critical for land use planning to analyse how governments regulate land use and address public and private investment, the mechanism to allocate competencies across levels of government and the way land use is taxed in the territory.

A complex institutional environment for land use planning in Hidalgo

Mexico has a hierarchical planning system with several plans designed and implemented at each level of government. Land use policy in Mexico is legally based on two spatial approaches, territorial and ecological, which are supported by two main laws – the General Law on Human Settlements Territorial Planning and Urban Development (LGAHOTDU) and the General Law of Ecological Balance and Environmental Protection (LEEPAE) – and across the three administrative orders: federal (general), state (regional) and municipal (local). In Hidalgo, the regional legal framework derived from the national laws for land use is as follows:

  • The State Planning Law for the Development of Hidalgo.

  • The 2007 Law of Human Settlement, Urban Development and Territorial Planning (LAUHDOT), which defines the regulation related to territorial planning (last update in 2018).

  • The Law of Ecological Balance and Environmental Protection of the State of Hidalgo (LEEPAEH) and corresponding regulations, which norms ecological land management. In the environment, there are two specific sectorial laws: the Law of Sustainable Forestry Development and the Law of Management and Prevention of Waste

  • The 2003 Law of Cadastre of Hidalgo.

The national government is an influential actor related to land use. According to the constitution, all land and water in Mexico belong to the nation and the national government is in charge of providing legislation to operationalise this principle (OECD, 2017[33]). It prepares the framework legislation that structures the planning system and is responsible for environmental issues and housing policy.

At the state level, the two most important plans mirror those at the national level: the State Spatial Development Plans and the State Ecological Spatial Plans. At the local level, three common types of plan exist: the Municipal Development Plan provides guidelines for urban development by following those established at the national level, while the Urban Development Plan and the Development Plan for Population Centres are comprehensive plans that contain zoning regulation for the built-up territory (Table 3.3).

Table 3.3. Organisation of land-use planning in Mexico

Administrative level

Overall planning

Territorial planning

Environment planning

Areas of regulation (selected)

Federal or national

National Development Plan (approved by parliament)

National Plan for Agricultural,

Territorial and Urban

Development

General Ecological Spatial Plan (approved by regulatory decision);

Sectoral Programme for the Environment and Natural Resources

- Guidelines for land-use policies in urban and rural areas

- Management plan of protected natural areas

State or regional

State Development Plan

State Plan for Sustainable Land Management and Urban Development

State Ecological Spatial Plans

- Designated state-protected areas

- Use of land, zoning and construction

- Small-scale land-use plans

Municipal or local

Municipal Development Plan

Municipal Urban Development Plan (PMDU); Population Centre Urban Development Plan (PMDUCP)

Local Ecological Zoning Programme (POEL)

- Planning frameworks for ecological and territorial development of municipalities

- Main land-use plans for urban centres

- Issuing building permits

- Land administration (taxes, information, land-use change)

Sources: OECD (2017[33]), Land-use Planning Systems in the OECD: Country Fact Sheets, http://dx.doi.org/10.1787/9789264268579-en.

In Hidalgo, the state level focuses on priorities for sustainable land and resource management, while municipal governments establish key areas for growth and infrastructure investments. Municipal governments also develop land-use plans that control land-use changes, manage cadastres and decide whether to issue building permits. Exceptions to this rule are mining and water extraction activities, which are regulated by national governments (OECD, 2017[33]). For territorial planning purposes, Hidalgo has grouped the 87 municipalities in 17 operative regions (Annex 3.A1).

The implementation of the land policy is conducted through spatial planning programmes. In the case of the environment, Hidalgo has the Ecological Land Management Plan for the state, and ecological management plans are meant to be developed for the 17 operative regions and municipalities. In the case of land use planning, the programmatic side of this policy is addressed in the State Plan for Urban Development and Land Use Planning. These programmes are elaborated by the respective governance institutions: Land Management Councils and Ecological Management Committees, where the authorities of the three branches of the Mexican government meet sectoral representatives, academics and citizens to ensure compliance with the programmes. In terms of metropolitan areas, Hidalgo is lacking a Metropolitan Development Plan for its metropolitan areas.

The SOPOT of Hidalgo is the main institution responsible for conducting and overseeing the compliance with the norms and laws related to land use planning and the implementation of the urban development plans. For the environment, SEMARNAT oversees the implementation and update of the ecological land management plans.

Overall, the State Development Plan of Hidalgo has acknowledged the importance of well-designed and comprehensive territorial planning by setting three main objectives (Table 3.4):

Table 3.4. Territorial plan strategy in Hidalgo

Objectives

Strategies

Further develop territorial ecological planning in the state and municipalities

- Elaborate, update and promote the development of integral territorial plans

- Promote the development of municipal territorial plans (i.e. PMDU and PMDUCP)

- Create a virtual platform to display the tools for territorial planning

Promote a sustainable rural development through proper territorial planning

- Define the technical bases that allow the sustainable use of the rural resources

- Promote the sustainable development of marginalised communities by increasing the productivity of natural resources

- Promote sustainable exploitation of existing forest resources

- Promote resilient rural communities

Guarantee a sustainable urban development in line with environmental protection

- Promote the updating and adaptation of all planning instruments, such as urban development programmes

- Promote densification of urban areas

- Increase the sustainability and connectivity of public spaces in cities

- Generate a pool of sustainable urban projects

- Plan the sustainable development of the metropolitan areas through the implementation of programmatic and normative instruments

Source: Government of Hidalgo (2016[29]), State Development Plan 2016-22.

While the state strategies on territorial planning clearly recognise the existing bottlenecks on land use planning, their implementation still represents a question mark for the state. The actions proposed do not specifically define the means to increase collaboration among government levels and sectors (housing, transport, environment) and lack mechanisms to enforce the development of urban and ecological plans at the local level.

Co-ordination and enforcement are the main challenges in land-use governance

The division of governmental responsibilities for enforcing land use planning in Mexico creates gaps in the implementation phase. While the legally binding provisions of urban development programmes give responsibility to the three administrative levels of government (federal, state and municipal), the responsibility of planning implementation lies mainly on local governments (licences and construction permits). The quantity of regulations contained in the LAUHDOT indicates that the urban system and planning issues are abundantly addressed. However, the process of identifying and punishing irregularities is not very clear due to the excessive number of actors and government levels involved in the procedures to comply with established standards.

Ecological and urban plans are mandatory by law (LAUHDOT and LEEPAEH), but a big challenge for territorial planning in Hidalgo is the execution and update of those plans. The LAUHDOT underlines urban and territorial development plans as key instruments for the state and municipalities to define and ensure well-managed urban development. Nevertheless, the guidelines are not followed, not even at the state level, leaving territorial plans and instruments of land use planning outdated or missing.

Urban plans. These plans contain detailed planning rules, based on urban development laws and regulations. The State of Hidalgo does not count with an updated urban plan and relies on the 1979 State Plan for Urban Development. At the local level, 7 out of 84 municipalities have developed an urban development plan and just 5 have construction regulations. Lack of updated urban plans coupled with low capacities at the municipal level are generating gaps in the zoning at the local level, which in turn yields to chaotic urban growth.

Ecological management plans. These plans define, among others, the protected areas and the agricultural and forestry zones in the area and harmonise urban growth with environmental conservation. The Environmental Management Plan at the state level is nearly 18 years old (2001). Looking at the operative regions of Hidalgo (the division for territorial planning purposes), 7 out of the 17 operative regions in the state have conducted an ecological plan and 2 municipalities have each developed their own plan. Overall, there are 58 out of 84 municipalities (69% of the state territory) covered by an ecological land management plan. It is not surprising that the remaining municipalities are located in the north central part of the state. It is, however, worth noting that a region missing a plan is Valle de Tulancingo, which is a highly urbanised area that contains the metropolitan area of Tulancingo. The execution of these plans is also mitigated by a difficult relationship among municipalities, and ejido representatives with the federal government.

Urban governments fail to apply environmental considerations in their urban development projects. Metropolitan agencies and local governments do not always follow the guidelines of ecological territorial planning when it comes to implementing urban projects. From the 34 housing projects authorised by the Ministry of Public Works between 2001 and 2016, only 18 had an assessment of environmental impact (SEMARNATH, 2017[34]). In the particular case of Pachuca, between 2001 and 2016, 30 out of the 69 housing projects developed by the Pachuca’s Secretary of Urban Development, Housing and Mobility did not include an environmental impact assessment (SEMARNATH, 2017[34]).

Cadastres are also outdated and poorly developed in the state. A modern cadastre is an integrated database system that holds information on land registration and ownership, physical characteristics, and environmental, socio-economic and demographic data (Lincoln Institute, 2004[35]). A lack of precise, up-to-date or digitally available cadastre data may create a variety of challenges that affect land management, such as title disputes, enforcement of planning decisions, problems in the collection of property taxes and in the planning of infrastructure, such as water and sewage pipes, electricity and telecommunication lines (OECD, 2017[33]).

Hidalgo has long searched for developing cadastres across the territory. In 2013, the state created the Cadastral Institute of the State of Hidalgo, which promotes information and communications technology (ICT) to improve cadastre development and monitoring. It created a Web portal to register and update the cadastres (Sistema Integral de Gestión Catastral) and train civil servants on the development and use of the cadastre.

Nevertheless, just one-fifth of municipalities in Hidalgo have currently updated their cadastres, while the rest have on average documents more than 15 years old. There are ten municipalities in the state without access to the Web portal to register and monitor cadastres (Sistema Integral de Gestión Catastral). The limited financial resources, the lack of institutional capacity and their lack of understanding of the benefits represent some of the barriers for municipal governments in Hidalgo to update the cadastres.

In Hidalgo, outdated cadastres have had negative impacts in the fiscal revenue at the municipal level. It has negatively affected the collection of own resources (property taxes account for almost three-thirds of municipal tax revenue, see Chapter 4) and the amount received from federal transfers (local revenue growth is one of the main criteria to distribute federal transfers to subnational governments, see Chapter 4). With a good land registration system, the government could also support financially other sectorial projects such as housing, parks, hospitals or transport infrastructure (Box 3.4).

Box 3.4. Land value capture: Funding the Crossrail project in London

As an overall provider of public transport, Transport for London (TfL) was created in 2006 and reports directly to the Mayor of London. TfL has wide-ranging responsibilities that include rail-based infrastructure, but also a range of regulatory responsibilities involving streets – these include implementing the city’s congestion charge, as well as providing for bicycle routes and pedestrian infrastructure. London has been active in launching innovative transport initiatives that have required substantial investment. Accordingly, the city has looked to value capture strategies to render these measures cost-effective. One advantage has been the continuing rise in commercial property values, which has greatly enhanced the value of TfL’s own real estate holdings. In addition, the rising trend has enabled the city to use a supplement to an existing property tax on commercial buildings as a powerful value capture mechanism.

The Business Rates Supplement (BRS) has been especially important in financing a significant proportion of the construction for the new 21-km Crossrail project. This large infrastructure development will provide an entirely new east-west rail linkage across the city. The project also draws revenues, as well as from the BRS, from a tax on new commercial development that will gain value from proximity to the Crossrail line. While this tax has proved to have some sensitivity to the ups and downs of construction activity, it also represents an effective value capture device. More generally, TfL is making ongoing efforts to persuade the government of the United Kingdom that all business rates paid in London should be devolved to local and regional governments for direct provision of services – which potentially could offset a decrease in the infusion of funds from outside London – although the outcome of this advocacy has yet to be determined.

Source: Salon, D. (2014[36]), “Location value capture opportunities for urban public transport finance”, White Papers Prepared for the Transit Leadership Summit, London, Vol. 101(12), Institute of Transportation Studies, University of California, Davis.

Given Hidalgo’s rapid urban and population growth, outdated territorial plans and lack of law enforcement jeopardises the natural capital of the state and the sustainability of urban development. To address those challenges, Hidalgo should undertake the following actions:

  • Enhance the co-ordination mechanisms between SEMARNATH and other levels of government to ensure the sustainability of urban projects and strengthen regional environmental preservation programmes. This includes better integration of the environmental planning with urban plans. In this matter, the Federal Strategy for Ecological Land Management 2013-18 established ten action lines, which include promoting integral planning of the territory, considering the ecological land management and land use planning to achieve a sustainable regional and urban development. Furthermore, co-ordination between urban development and transport infrastructure, which should be jointly planned (SOPOT, SEMOT and SEMARNAT) to ensure new infrastructure projects fully correspond to needs of the urban areas (i.e. urban sprawl).

  • The state should ensure urban and environmental plans are developed and updated across the territory. For this matter, two considerations are important:

    • SOPOT and SEMOT should have sufficient staff to provide assistance and monitor the evolution of the territorial plans. Under the subsidiarity principle, the state could do the plans of some municipalities if sufficient personnel are made available.

    • Provide technical assistance, and in some cases financial aid, to municipal authorities to prepare the urban and environmental plans. Currently, there exists co-ordination covenants between National Ministry of Agriculture, Territorial and Urban Development (SEDATU) and some municipalities, which can be expanded to all the territory.

  • Involve communities in the development of urban and territorial policies. While the law in Hidalgo promotes the involvement of civil society in urban plans, the legal framework gives a smaller role to civil society participation (Edgar Demetrio Tovar García, 2011[37]). During the development or update of the land-use framework, citizen participation is mainly done through sporadic public consultation fora. Hidalgo could consider the creation of a permanent body to give input to territorial development issues. A Citizen’s Council with technical and academic representation can create social control over development and updates to territorial and environmental plans. The Metropolitan Citizen Council in Guadalajara Metropolitan Area can be a good example for Hidalgo ((GIZ/UN-Habitat, 2015[31]).

Ejidos represent another challenge for land use planning in the state (Box 3.5). Ejidos make up 43.7% of the territory of Hidalgo. They are defined as communal land, which cannot be sold; however, ownership titles can change hands if allowed by the Assembly of Ejidatarios. This has allowed the appropriation of land by real estate developers and the illegal construction of housing on land that may not be suitable for this purpose. It has also brought numerous issues related to cases whereby one person buys the titles for a piece of land, but such title will not be recognised by the next Assembly of Ejidos. Likewise, in some cases, the same plot of land ends up belonging to several people due to an unrecorded transfer.

Ejidal land property requires for the State of Hidalgo to improve co-ordination on land-use planning. Given that Ejidos have the autonomy on their own land-use, state infrastructure projects involving these areas have to be well socialised and co-ordinated with the Assembly of Ejidos. Lack of co-ordination can lead to delay in projects and even cancellation due to disagreement with Ejidos land-owners. This is, for example, the case of the private construction of the gas pipe in Tula, which goes through seven ejidos and suffered moratoriums (more than two years) due to legal reclamations from the ejidos government – even after having conducted a consultation process.

Notwithstanding this fact, Hidalgo has had positive cases of construction projects on Ejidos land. Some water parks have been developed through a community agreement process leading to the engagement of several families and becoming a sustainable source of income for them. The state should further replicate or showcase the successful cases of Ejidos and support the owners of this type of land with capacity on land management and governance.

Box 3.5. Mexico urban planning complexities related to the ejidos

Land tenure arrangements and the process by which agricultural land is converted to urbanised land in Mexico have left a complex legacy for modern-day housing and urban development. Three types of property exist in Mexico: private property, which accounts for around one-third of the country’s land area; social property, which makes up more than half of the country’s territory; and public/federal property, approximately 10% of the total, which includes national parks and waterways. Social property is comprised of both ejidos (around 90% of all social property) and comunidades agrarias (the remaining 10%). Ejidal land tenure, established following the Mexican Revolution, granted peasants perpetual rights to land for agricultural purposes without the possibility of selling, renting or mortgaging the land. A 1992 legislative reform modifying Article 27 of the Mexican Constitution altered the tenure status of ejido land. The reform authorised community landowners (ejidatarios) to sell, rent or mortgage the land, including to non-ejidal members, and to establish joint-venture contracts with private companies, essentially allowing for the privatisation of ejidal land. One of the ambitions of the reform was to give greater legal certainty to ejidatarios and to establish a legal framework that could result in increased land supply available for formal housing. Approximately 3 million households benefited from land regularisation following the 1992 ejido reform.

Nevertheless, the 1992 reform seems to have been drafted “largely in ignorance of its potential urban impacts” (Jones and Ward, 1998[38]). Moreover, the reform was drafted in a broader context of decentralisation that transferred increasing competencies to municipalities, yet without a strong federal counterweight to guide policies aimed at incorporating ejidal land into urban areas. With ejidal land comprising just over 40% of all land in Mexico, most land available for urbanisation continues to be comprised of ejidal land on the urban periphery and beyond. Yet the process to privatise and, by extension, urbanise ejidal land is cumbersome, requiring: i) the measurement and allocation of parcels to each ejidatario; ii) the conversion of parcel rights into private property rights, requiring the approval of a majority of the ejidatarios; iii) confirmation that nobody with a legal right of preference (e.g. family member of an ejidatario) objects to the transfer or wishes to purchase the land; and iv) sale of land. Given the extent of ejido land in Mexico, the complexities of its urbanisation process represent a significant obstacle to legal and well-planned private development, encouraging circumvention of the law; these complexities have also made the process vulnerable to corruption.

Source: OECD (2015[23]), OECD Urban Policy Reviews: Mexico 2015: Transforming Urban Policy and Housing Finance, http://dx.doi.org/10.1787/9789264227293-en; Jones and Ward (1998[38]),

Rural development

Despite its rapid urbanisation process, a large share the population in Hidalgo still live in rural areas (46%) and most of the territory is classified as rural (97% of localities are rural areas). The rural economy has been an important contributor to the state’s economy through the mobilisation of its assets including its natural resources (oil, mineral), agriculture products and tourism. However, while the south of the region, where the three metropolitan areas are located, is more developed and benefits from better public service provision and accessibility, the northern part of the state, predominantly rural, suffers from high poverty levels, lack of connectivity and public services.

Despite the importance of the rural sector in Hidalgo’s economy and society, it tends to be associated just with the agricultural sector. Developing a new vision of rural development in Hidalgo may be necessary to allow for the diversification of the rural economy, which can unlock economic opportunities for local communities.

Although rural areas generate significant wealth, the people living there are generally poor

Agriculture is important in the state for social and economic reasons. More than half of the land in the state is dedicated to agriculture and farming activities (55%) (Figure 3.11) and the sector employs 19% of the state’s working population, covering activities such as agriculture, farming, fishing and forestry. The state is the first producer of barley and alfalfa and ranks among the top producers of maguey (wild agave) and corn in the country. The state has also the oldest silver mine district in Mexico (Saavedra and Sánchez, 2008[39]) and the second biggest Mexican refinery. As shown in Chapter 1, manufacturing activities related to mining (e.g. refinery, processing) represent 43% of Hidalgo’s manufacturing GVA.

Figure 3.11. Use of land in Hidalgo, 2017
Figure 3.11. Use of land in Hidalgo, 2017

Source: Sectoral Plan of Environment and Natural Resources, (2017[40]) Sectoral Plan of Environment and Natural Resources.

Most of the land in Hidalgo is under Ejidal and communal property (51.4%) and the majority of the productive land (98%) is managed by small and medium farmers (Government of Hidalgo, 2017[41]). This fragmentation of land has created a barrier to boost agricultural productivity and increase income per capita. Furthermore, most of the area sown rely on rainwater (74%) with a small proportion using irrigation systems (26%). There is also a north-south divide on agricultural land development with most of the mechanised agricultural land located in the south of the state, while in the northern areas the land mainly relies on animal traction for harvesting (INEGI, 2016[2]).

As mentioned above in this chapter, Hidalgo is undergoing a rapid urbanisation that has led to the concentration of population in a few municipalities in the south. This phenomenon has left some municipalities, mainly in the mountainous northern area of the state, with relatively low levels of population density (Figure 3.12). Nevertheless, while the largest poles of people agglomeration are located around the metropolitan areas in the south of the state, some municipalities in the northern area have a population density (i.e. Huejutla de Reyes-314 inhabitants/km²) that should not be undermined as an anchor for development in the area.

Poverty in Hidalgo is geographically located in the northern areas with lower population density (see Chapter 1).6 Hidalgo ranks as the seventh state with the larger extreme poverty in the country, with the northern municipalities experiencing the highest rates. Municipalities with sparse population and high dependence on one economic activity tend to be the most affected by poverty. In Hidalgo, the 20 municipalities with the highest poverty rates in the state (average of 80.1%) have a lower population density (92 inhabitant/km²) than the average of the state (205 inhabitants/km²) and the 20 municipalities with the lowest poverty rate (density of 449 inhabitants/km² and poverty rate of 36.6%).

Figure 3.12. Population density per municipality in Hidalgo, 2015
Figure 3.12. Population density per municipality in Hidalgo, 2015

Source: Consejo Nacional de Población (2018[9])Datos de Proyeccioneshttp://www.conapo.gob.mx/es/CONAPO/Proyecciones_Datos (accessed 15 July 2018).

In addition, poverty is related to a high share of agriculture activity. The 10 municipalities with the highest poverty rates in the state have an average of 45% of their working population in agriculture activities, above the portion of agriculture within the 10 municipalities with the lowest poverty rates (7%). Overall, the extreme poverty in the non-metropolitan areas of Hidalgo stands at 13% of the population, far above the 3% in metropolitan areas (own calculations based on CONEVAL (2015[42])). This gap (10 perceptual points) is high when compared with Morelos (8) (the Mexican state with a similar poverty rate in 2015) and Nuevo León (3), although lower than states with higher poverty rates such as Veracruz (11) and Chiapas (25).

Poverty in Hidalgo’s rural areas is associated with both income and social dimensions. Poverty in Mexico is measured with a multidimensional approach, taking both income and social deprivation into account.7 In Hidalgo, poverty from income deprivation (54%) is larger than social deprivation (21% of people) (see Chapter 1). At the local level, the bottom 20% of low-density municipalities have a higher income and social deprivation (average of 70% and 30% of the population respectively) than the top 20% of high-density municipalities (51% and 17% respectively). The higher rates of the social dimension of poverty in low-density municipalities are related to social security deprivation, utilities and education (Table 3.5). Needless to say, the municipalities with the highest level of social security deprivation (Huazalingo) and utility deprivation (Xochiatipan) are both located in the northern part of the state.

Table 3.5. Poverty by type of deprivation and municipal density, 2015
Populations affected by deprivation, percentage

Municipalities

by population density

Income deprivation

Social deprivation

Education

Health

Social security

Quality housing

Utilities

Food

Top 20%

(higher than 260.7 people/km²)

51

17

13.8

20.4

64.8

8.1

15.3

20.1

Bottom 20%

(lower than 53.2 people/km²)

70

29.9

28.1

12.7

80.9

12.1

42.7

22.3

Gap bottom 20% - top 20%

19.0

13.3

14.3

-7.7

16.1

4.0

27.4

2.3

Note: The top 20% and bottom 20% are the municipalities with the 20% of highest and lowest density level respectively.

Sources: CONEVAL (2015[42]), Measurement of Extreme Poverty, Mexico; INEGI (2015[32]), Inter census survey.

Alongside poverty, labour informality in Hidalgo is intertwined with rural municipalities. The nature of seasonal labour and the low enforcement of labour policies from the state level makes dwellers in rural areas prone to higher rates of informality. The labour informality rate in the bottom 20% of low-density municipalities (85%) is, on average, higher than the one in low-density areas (71%) and metropolitan areas (68%).

Furthermore, there is an important ethnic component correlated with poverty. Hidalgo is home to more than 1 million indigenous people (36% of the state’s population) which ranks it as the 5th state with the highest share of the indigenous population in the country. Almost 80% of indigenous people live in low density rural areas (less than the average state density – 188 people/km²), particularly in the mountains and in the jungle area where poverty rates are higher. Indigenous people experience a lower quality of life: 88% of indigenous areas have houses without mains water supply and more than 90% do not have a connection to sewage. The new generation is also experiencing important gaps with 16% of indigenous children below 5 years old suffering from chronic malnutrition in 2012 (the state’s average was 13%) and more than two-fifths (42%) of indigenous schools lacking access to water from the public network.

This issue also tends to occur in some OECD regions with a high share of indigenous people experiencing lower socio-economic outcomes. Some countries and regions are moving towards a new development framework based on economic development devolving responsibilities and more resources to local communities in order to promote bottom-up development processes. This approach also recognises the need for a stronger economic integration between indigenous and non-indigenous communities and programmes.

Hidalgo’s rural areas are also home to a high proportion of elderly population (three-quarters of the farmers in the state are more than 60 years old), which in turn own a big share of agricultural land (47%) (Government of Hidalgo, 2017[1]). In particular, the top 3 municipalities in the state with the highest proportion of elderly population (inhabitants aged 65 years or more) are predominantly low-density municipalities in the north of the state; Eloxochitlan (17% of elderly population), Huautla (16.9%) and Juárez Hidalgo (15.7%). This characteristic poses extra challenges for public services delivery in terms of the cost and type of services needed by older populations.

In summary, rural areas in Hidalgo tend to have high poverty rates related to both social and income dimensions, low population density, high specialisation in primary production activities with high labour informality and a large share of indigenous and elderly population. Improving service delivery to rural areas, especially low-density municipalities, and developing alternative sources of income for rural households is essential to address the south-north divide and in turn boost wealth in the state. To achieve this, Hidalgo should:

  • Promote joint projects among low-density municipalities to trigger agglomeration benefits and make the delivery of public services more efficient. Experiences like the revitalisation strategy in Japan can help Hidalgo to provide public services with economic sustainability (Box 3.6).

  • Promote the diversification of endowments and strategies to search for different income sources that attract people and investment. This will require further identifying the specific natural, cultural, economic and social assets and potentials of every municipality. As the next subsection will describe, the State of Hidalgo has made some efforts in this direction, but with a lack of co-ordination and clear objectives.

Box 3.6. Revitalisation of rural areas

The “sixth” industrialisation of Japan is a strategy that vertically integrates the primary, secondary and tertiary industries to turn agriculture, forestry and fisheries into value-added industries through co-operation between a spectrum of sectors and industries. To accelerate the strategy, Japan's Ministry of Agriculture, Forestry and Fisheries created the Industry Co-operation Network in December 2011. Its purpose is to offer opportunities to people from an extensive variety of areas such as agriculture and forestry, fisheries, manufacturing and finance, and include consumers, think tanks and researchers in order to interact and pool their knowledge.

This strategy exploits the growing capacity of rural resources in rural farming and fishing communities to add value for future economic growth. Among other things, rural resources are seen as sources of clean energy to reduce global carbon dioxide emissions and as components for the development of new materials for applications in medicine and healthcare.

The Seiwa area of the Mie Prefecture is a positive example of this strategy. It is a rural district with a population of about 5 000 and an area of 53.6 km², of which 70% is forested and about 13% is cultivated. The average farm size is roughly 0.4 ha and the main products are rice, tea, Chinese cabbage, cabbage, white alliaceous, wheat and soybeans. By the early 2000s, Seiwa found itself facing an ageing and declining population, a lack of successor farmers and the growth of abandoned farmland, which, in turn, contributed to the encroachment of wild animals in cultivated areas. In response, the ten small hamlets in the area formed the Seiwa Rural Resource Management Association, which has put in motion an impressive array of local projects.

In an effort to enhance the landscape and protect farmland, the association organised maintenance of the canals and farm roads, including the planting of flowers on unused land, the creation of a biotope and the introduction of multi-use of irrigation water for community purposes (firefighting, environmental uses, etc.). Some farmland has been returned to a wild state, but co-ordinated land management has made it possible to do this efficiently and without harming the land that remains under cultivation. Household garbage is now composted. In an effort to do more than just preserve agriculture, the association has moved in the direction of the sixth industrialisation organising local festivals and building a market for distinctive local produce. This, in turn, has reinforced environmental performance, as the farmers found that it was better to market green produce than to use pesticides. This has also helped to promote green tourism in the area and to improve the quality of the water.

What began as a resource preservation exercise in the face of farm abandonment has thus led to a wide range of new activities. Though backed by the municipality, the association has not relied much on municipal or central government funds, though it has attracted sponsorship from Sharpe for some activities.

Source: Adapted from OECD (2016[43])OECD Territorial Reviews: Japan 2016http://dx.doi.org/10.1787/9789264250543-en.

The institutional framework of rural policy in Hidalgo

The State of Hidalgo has defined sustainable rural development as one of the main mechanisms to increase wealth and reduce inequality in the state. The Hidalgo State Development Plan seeks to develop a sustainable rural economy by delivering basic infrastructure and services in rural areas and offering direct support to producers in order to increase their efficiency and strengthen their competitiveness, through four medium- and long-term strategic objectives:

  • Promote the growth of productivity in the primary sector: implementing programmes of production and commercialisation, developing a production of alternative commercial crops and conducting a list of producers and the inventory of available agricultural resources.

  • Address the needs of the agricultural sector linked to climate change: implementing an insurance programme for climate risks on vulnerable products, promoting reconversion towards products of higher added value and lower water requirement and fostering sustainable management of inputs (water, land).

  • Reinforce the schemes and agribusiness to favour the reduction of trade cost: improving infrastructure systems for internal trade, promoting the association of small producers, supporting producers to reach different markets through training and market events.

  • Strengthen the producers to increase their competitiveness: promoting the modernisation of agricultural processes, encouraging links between higher education institutions and producers, and fostering phytosanitary measures.

These measures ultimately seek to address some of the most pressing challenges of the agricultural sector: i) regional imbalances in production systems; ii) deficient marketing channels with excessive intermediation; and iii) the atomisation of land tenure with little access to economies of scale due to poor organisation among producers.

The main responsibility for the implementation of rural policy in the state is incumbent on the Secretary for Agriculture and Livestock Development (SEDAGRO). To implement the former strategic objectives, SEDAGRO has launched six programmes to address basic challenges in agriculture (Table 3.6) and eight product-based strategies (Table 3.7) that aim to support a new strategy based on diversification and productivity. Overall, these programmes can be characterised by an approach of direct public intervention in the agricultural sector.

Table 3.6. Basic programmes to support the agricultural sector (selected details)

Objectives

Strategy

Characteristics

Number of beneficiaries

Programme of convergence with Federal entities

Increase productivity and competitiveness

Provide infrastructure and machinery to producers

- Deliver tractors, spray pumps and other tools

- Install irrigation systems

4 627 producers

Programme on irrigation

Strengthen irrigation units

Modernisation and rehabilitation of infrastructure

- Channel coating, tubing in crops

- Rehabilitate water wells

22 000 producers

Insurance for catastrophes

Reduce climate change risks

Insure agricultural products

- Insure for various traditional crops: droughts, floods and frosts

8 088 producers

Programme on food security

Increase food production

Support and train poor populations and communities in extreme poverty

- Deliver infrastructure, machinery and animals

- Generate individual gardens and family farms

10 216 households

Marketing of products

Increase competitiveness

Develop an advertising campaign and business events

- Create the brand “Con Sabor a Hidalgo

- Business events to link producers and retailers

253 projects and 1 810 producers

Agricultural health and safety system

Prevention, control and eradication of pests

Agricultural health strategies

- Direct assistance to producers affected by pests

- Training to eradicate pests

- Monitoring of farms and crops

258 877 producers

Source: Secretary for Agriculture and Livestock Development (2018[44]), Public policy and agricultural development, presentation.

The basic programmes promote the provision of subsidies by directly offering infrastructure, machinery and inputs. They guarantee minimum conditions for competitiveness such as health and safety systems, insurance for climate risks and modern irrigation. Concerning the strategic programmes, they aim to boost quality in strategic product and promote sustainability for farmers’ production. Programmes such as Contract Farming seek to overcome the challenges of low economies of scale and the extra costs for farmers with local brokers while ensuring a constant demand for the products. The security of medium- to long-term contracts allows farmers to plan production and make long-term investments and technology.

The basic and strategic programmes are evidence of the paternalistic approach of Hidalgo when it comes to rural policy. In some programmes, the Secretary of Agriculture farms agricultural products to then offer them for free or at a lower cost to farmers. Although some programmes focus on involving producers in the post-production process, such as the marketing of products programme, the general approach of the State of Hidalgo remains largely focused on assistantship. Offering direct in-kind subsidies, such as seeds, trees or fish can work to lift rural population out of poverty but it may also create dependent relationships in the medium and long run consequently hindering competitiveness and productivity.

Table 3.7. Strategic product-based programmes to support the agricultural sector (selected programmes)

Objectives

Strategy

Number of beneficiaries

Kilo per kilo

Generate saving to producers

Government gives 50% of required seeds to producers of corn, barley and oats

4 013 producers

Production of coffee and maguey trees

Promote quality products

Government grows trees and then transplants them on the farmers’ land

Not indicated

Fish production

Strengthen state aquaculture and improve food security

Food assistance and in-kind subsidy

Government sells fish at cost to producers

Not indicated

Genetic improvement of livestock

Promote genetic improvement of livestock

Government offers quality inputs for breeding

244 farmers

Credit without collateral

Offer credit and financial training

In partnership with state financial institution, government offers credit without collateral

782 people received credits

Productive reconversion programme

Promote change of traditional crops for others with higher added value

Reconversion of unproductive lands to mainly avocado

200 producers

Contract farming

Guarantee demand and fix price to producers

Government plays the role of intermediary, linking private companies and producers

Not indicated

Source: Secretary for Agriculture and Livestock Development (2018[44]), Public policy and agricultural development, presentation.

To modernise agriculture, a cultural barrier must also be attained by convincing farmers to access technology and adopt new production methods, rather than focusing on traditional practices based on self-consumption.

  • The Secretary of Agriculture has established strategies to disseminate the positive outcome of farmers involved in modernisation and marketing programmes. The state should support a further expansion of this practice.

  • Hidalgo may consider expanding social education programmes in rural communities on innovation and technology. Farmers can further benefit from training programmes to better understand the benefits of innovation and learn how to seize the opportunities that technology uptake can generate. Programmes such as the training on genetic improvement of livestock, agricultural health or marketing of products help to raise local awareness of the importance of ensuring production quality standards, increasing value and improving access to markets.

The certification campaign that Hidalgo is conducting with farmers has allowed them to open new markets. It enabled the dispatch of the first shipment of tomato aji to Texas in the United States, after 18 years since the last agricultural exportation to that state. Social education initiatives can also promote greater co-operation among producers, which could facilitate the approval of credit requests, prompt producers to learn from each other, allow groups of small farmers to market their output together to get a better price, and also introduce a more entrepreneurial vision linked to rural activities.

It is worth noting that most of the basic institutional programmes of SEDAGRO prioritise producers that live in marginalised and indigenous areas. Agricultural programmes such as food security embrace a social assistance component focusing on supporting the economic agents that reside in the different territories. The state should seek better co-ordination between local and federal programmes to target poor population: for example, it could search for greater synergies between social objectives and the federal programme Cruzada Nacional contra el Hambre. This programme, implemented in co-ordination with Mexican states, has an important focus on indigenous communities and includes five municipalities in Hidalgo (Huehuetla, Huejutla de Reyes, San Bartolo Tutopec, Xochiatipan and Yahualica). It addresses the multiple dimensions of poverty in rural areas ensuring permanent access to quality food for people in extreme poverty, promoting community kitchens, full-time schools, family gardens and cash transfer with coupons.

The mining sector needs to foster synergies with local communities and complementary sectors. Mines, such as the district Pachuca-Real del Monte, have played an important role in the territorial process by historically defining the first agglomerations of the population in the state (Saavedra and Sánchez, 2008[39]). In Hidalgo, the richness of the soil is coupled with abundant water resources and traditional workforce. The refinery of Tula is the Mexican refinery with the second largest capacity in the country. Despite the economic importance of the sector and its relationship with rural communities, the State Development Plan 2016-20 falls short on defining strategies to foster synergies between this sector and local communities or complementarity sectors.

Hidalgo does not have a fully-fledged rural policy, but a large number of programmes. This range of programmes may facilitate matching needs and policy responses. However, it can lead to the duplication of initiatives and lack of capacity for large scale projects. Yet SEDAGRO is the main responsible for the state’s rural policy, there are other sectorial programmes with a rural-specific focus:

  • Social development and healthcare: A large number of social programmes provide transfers to poorer households and invest in public services and basic infrastructure.

  • Public works: In 2016 the state set up some agreements with carriers from the northern region of the state in order to concession rural-mixed public transport, through a deferred payment scheme based on the purchasing power of each area.

  • Education: The state launched the Digital University of Hidalgo with the aim to generate a technological system that allows the expansion of higher education coverage in the state, offering educational services mainly to remote communities and vulnerable groups.

  • Health: Medical seminars have been held to bring prevention and medical care services to people from rural and remote communities, who usually cannot reach existing health centres.

The Secretary of Economic Development (SEDECO) has developed a strategy to close the north-south regional divide. By following a co-ordinated territorial agenda among state and municipalities, the State of Hidalgo has aimed to increase private investment along the territory. The strategy aims to attract private investment at the local level based on the potential assets of each municipality and encourages municipal governments to follow a private-led approach, focusing on businesses, monitor investments and promote the local economy. SEDECO identified the vocations and characterised the economic potential of each municipality.

Since the initiatives from different secretaries are not connected to a regional strategic framework or governance arrangement, policies are not complementary. This problem is apparent in the lack of connection between economic development and social programmes, which will need to be addressed in order to make further progress in reducing rural poverty and growing rural economies. For instance, some of the basic programmes led by Secretary of Agriculture, such as the food security programme, prioritise those who live in marginalised and indigenous areas. These programmes could have a greatest impact if co-ordinated with programmes set up by the Secretary of Social Security at the state level or with the programmes led directly at the federal level (i.e. the aforementioned Cruzada Nacional contra el Hambre).

Hidalgo’s various programmes promoting rural development are insufficiently co-ordinated. The Secretary of Agriculture is responsible for a large number of programmes and it does not have the capacity or the power to co-ordinate a broad rural development agenda. Lack of the appropriate profiles, resources and strategic vision from the state makes it difficult to conduct horizontal comprehensive plans across levels of government. Most programmes have therefore focused solely on the immediate relief of poverty and production increase rather than embarking on a more comprehensive policy that deals with the factors generating development and mitigating poverty.

There is a general need for strong leadership, a clear vision and greater co-ordination among policies and programmes. Rural development should enhance a whole-of-government approach in which programmes are co-ordinated and scaled up. It is crucial to develop a multidimensional policy that delivers regional accessibility, valorises cultural and natural amenities, and gives communities the power to govern some key issues, such as land use, directly.

Shifting from an agrarian-based to a more diversified rural economy

The agrarian vision that still prevails in Hidalgo is characterised by a sectoral approach to rural areas based on agricultural policy. Such a vision will face challenges to diversify the rural economy. There is a need to both modernise the agricultural sector as described in the previous section along with the creation of a new vision for developing rural areas in Hidalgo. The new vision will focus on unexploited opportunities in the rural territory, thereby making the territorial development the main object of planning, rather than just the agricultural sector. A rural development strategy for the State of Hidalgo could better boost its growth potential by harnessing opportunities for job creation in areas where the growth of traditional agriculture is becoming limited.

A shift of paradigm in agricultural policy would involve addressing multiple challenges, including adapting to modern marketing channels that are dominated by large competitive food chains, taking into account evolving production technologies (i.e. genetic engineering and biotechnology, among others), and better connecting farming to local society in terms of environmental effects, tourism amenities and opportunities for local and traditional foods. Since rural areas are largely concentrated in agriculture activities, with a large share of small- and medium-size farms, it will be crucial for the state to improve off-farm employment opportunities as a way to increase farm household income.

Adopting a new multidimensional territorial approach for Hidalgo’s rural policy

Over past decades, there has been a shift in how OECD countries approach regional and rural development policies. In the past, these policies tended to focus on addressing disparities between regions through the provision of subsidies to compensate them for lower incomes. Policies were designed by central governments through departments of state that delivered narrowly defined programmes with support for individual firms, incentives for inward investment, and a focus on infrastructure investment. Over time this approach has been seen as increasingly ineffective and unsustainable from a fiscal point of view.

The OECD Rural Policy 3.0 is a new framework on rural policy development that considers well-being across multiple dimensions of the economy, society and the environment by taking into account the differences of rural areas. It focuses on mechanisms for the implementation of effective practices, emphasising a focus on competitiveness and working with regions to unlock growth potential based on their unique assets and local conditions.

Table 3.8. The New Rural Policy 3.0

Old Paradigm

New Rural Paradigm (2006)

Rural Policy 3.0 -

Implementing the New Rural Paradigm

Objectives

Equalisation

Competitiveness

Well-being considering multiple dimensions of (i) the economy (ii) society and (iii) the environment

Policy focus

Support for a single dominant resource sector

Support for multiple sectors based on their competitiveness

Low-density economies differentiated by type of rural area

Tools

Subsidies for firms

Investments in qualified firms and communities

Integrated rural development approach - spectrum of support to public sector, firms and third sector

Key actors and stakeholders

Farm organisations and national governments

All levels of government and all relevant departments plus local stakeholders

Involvement of (i) public sector - multi-level governance, (ii) private sector - for-profit firms and social enterprise, and (iii) third sector – non-governmental organisations and civil society

Policy approach

Uniformly applied top-down policy

Bottom-up policy, local strategies

Integrated approach with multiple policy domains

Rural definition

Not urban

Rural as a variety of distinct types of place

Three types of rural: i) embedded in metropolitan region, ii) adjacent to metropolitan region, and iii) far from metropolitan regions

Source: OECD (2018[46]), Rural Policy 3.0: A Framework for rural development. https://www.oecd.org/cfe/regional-policy/Rural-3.0-Policy-Note.pdf.

The Rural Policy 3.0 can help guide rural policy in Hidalgo. This integrated approach has significant implications for how government works. It advocates different levels of government working in a more integrated way at a regional and local level. Within this framework, the specific policy responses for urban and rural areas are different and aim to develop complementarities between them.

Benefiting from rural-urban linkages to close the south-north divide

Alongside better co-ordination in rural policies, rural-urban linkages can help rural areas in Hidalgo to realise their growth potential. Urban and rural territories are interconnected through different types of linkages that often cross traditional administrative boundaries. These interactions can involve demographic, labour market, public service and environmental considerations. By defining three types of '”rural”', the OECD has carried out work in this domain that may support Hidalgo in developing a more coherent and better-integrated framework for rural policy development. This work puts an emphasis on the importance of better defining rural areas as a means to better understand rural-urban linkages (Table 3.9).

Table 3.9. Definition of rural areas and characteristics

Type

Challenges

Opportunities

Rural inside metropolitan area

- Loss of control of future

- Activities concentrate on core

- Loss of rural identity

- More stable future

- Potential to capture benefits of urban, and avoid negatives

Rural outside, but in close proximity to metropolitan area

- Conflicts between new residents and locals

- May be too far away for some firms, but too close for others

- Potential to attract high-income households seeking a high quality of life

- Relatively easy access to advanced services and urban culture

- Good access to transport

Rural remote

- Highly specialised economies subject to booms and busts

- Limited connectivity and large distances between settlements

- High per capita costs of services

- Absolute advantage in production of natural resource-based outputs

- Attractive for firms that need access to an urban area, but not on a daily basis

- Can offer unique environments that can be attractive to firms and individuals

Source: OECD (2016[47]), OECD Regional Outlook 2016: Productive Regions for Inclusive Societies, https://doi.org/10.1787/9789264260245-en.

Applying a special policy to remote rural regions in Hidalgo is needed to address bottlenecks and unlock potential growth. Remote rural municipalities display strong urban and rural interactions. In many OECD countries, the majority of the rural territory, but not the majority of the rural population, is found on areas poorly connected to a large urban centre. Nevertheless, within these predominantly rural territories, it is possible to find urban territories. The urban places in remote rural regions often obtain their economic function from the surrounding rural territory and follow a more traditional urban role of being market points for the export or trade of rural production and the import of inputs needed for rural production. This can be the case of Huejutla de Reyes, the biggest town in the northern part of the state, which can be supported to create better co-ordination with other municipalities of the area and local producers.

Exploring co-ordination with neighbouring states, especially in northern areas, should also be a priority for the state. Since some northern municipalities are closer to Veracruz than to the southern municipalities, the state should generate a differentiated policy for these municipalities to harness this interaction. Overall, the northern municipalities are less than 15 km distance to the road network of Veracruz. Co-operation between both states can improve the public services delivery of utilities, education or health. The provision of adequate infrastructure can also spur trade interaction and employment opportunities in the region.

Hidalgo should also seek to connect the northern part of the state directly with the ports of the Gulf. For example, Huejutla is closer to the port of Tuxpan (152 km) or Tampico (167 km) than to Pachuca (221 km). This proximity has not been yet exploited due to the lack of roads and train connections (see Chapter 2). A project of this nature could take the form of a joint initiative with the state of Veracruz, supported by the federal government. This road connection will unlock the productivity potential of the north, open rapid access to international markets and strengthen commercial links with Veracruz and other northern states.

The south of the state should also benefit from greater interaction with Mexico City. The important position of Tizayuca within the metropolitan area of Valle de Mexico can be used as an opportunity to spread the impact of economic and infrastructure projects into the surrounding areas. Improving infrastructure projects or other large-scale projects can be beneficial from this partnership with Valle de Mexico.

In terms of rural municipalities close to Hidalgo’s metropolitan areas in the south, they can benefit from the positive effects of the rapid urbanisation (Box 3.7). For these municipalities, issues like connectivity are less of a problem and they can attract new people and firms by finding their distinctive attributes. Attention to landscape and rural amenities can help them differentiate the quality of life offered in nearby cities while retaining many of the benefits of proximity to urban services agglomeration economies. Municipalities around Pachuca and Tula already present high rates of population growth, which can be seized to enter new markets and attracts new business.

Box 3.7. Proximity to cities and economic growth

Large metropolitan areas are important drivers of economic activity within countries and typically have the highest per capita GDP of all regions within a country. However, the economic effects of large metropolitan areas are not confined to their borders. They also play important roles in economic activity in surrounding regions. Their size and economic strength imply that they are key markets for many firms in rural areas. Even firms that do not directly sell to metropolitan areas rely on them due to their function as hubs for long-distance travel or because providers of highly specialised business-to-business services can predominantly be found within them. Therefore, large metropolitan areas form the geographical focal point of economic activity, even for regions that are a considerable distance away

Ahrend and Schumann (2014[48]) analysed the relationship between distance to metropolitan areas and economic growth in TL3 regions from 18 OECD countries over the 1995-2010 period. The study concluded that the GDP per capita of regions within 45 minutes of a metropolitan area with more than 2 million inhabitants grow on average by 1.8% per year. This growth rate is almost half a percentage point higher than the growth rate of regions within 45 to 90 minutes of metropolitan areas of the same size.

Source: Ahrend, R. and A. Schumann (2014[48]), “Does Regional Economic Growth Depend on Proximity to Urban Centres?”, http://dx.doi.org/10.1787/5jz0t7fxh7wc-en.

Hidalgo can further unlock its tourism potential

Tourism has a long tradition in Hidalgo. It has supported the economy in many municipalities and has experienced stable economic growth over the last years. Nevertheless, there is a need to add more value to the sector and foster policy commentaries. Incentivising more bottom-up led approaches, creating a common brand-name and investing in backbone infrastructure can create new economic opportunities in the sector.

Tourism contributes to 1.5% of Hidalgo’s GDP and employs 12% of its labour force. In 2016, the average hotel occupancy of the state (57%) was above the national level (52%). The state receives around 2.5 million tourists per year, equivalent to the entire population of the state. Most of the tourists are coming from other Mexican states (95%), mainly from Valle de Mexico. Domestic tourists have shown a more stable pattern, increasing constantly since 2009, than international ones which have overall decreased since 2001 and shown a more volatile pattern during the last years.

Hidalgo has four archaeological zones (mostly in the southeast of the state) and six museums administered by the National Institute of Anthropology and History (INAH). The archaeological zone in the municipality in Tula de Alledene, declared world heritage site, is the site that receives the largest number of tourists in the state (60% of the visitors to the state). The state also counts with five municipalities within the national brand magic towns (Pueblo Mágico) which recognise a limited number of towns based on their cultural and historical heritage. These include Huasca de Ocampo, Huichapan, Mineral del Chico, Mineral del Monte and Tecozautla, all located in the southern side of the mountain range of Hidalgo.

The tourism policy of Hidalgo

Tourism is high on the policy agenda of the country. Mexico’s National Development Plan (PND 2013-18) explicitly recognises tourism as a strategic sector in the economy, with high capacity to create jobs, stimulate regional development, compete in global markets, contribute to growth in other economic sectors, and generate value through the integration in domestic production chains (Box 3.8). Competitive projects related to tourism are promoted across states and are supported by the federal government. Co-ordination between different levels of government mainly occurs within the context of specific programmes and initiatives, notably the Programme for Sustainable Regional Tourism Development and Magic Towns (PRODERMAGICO) (OECD, 2017[49]).

In Hidalgo, the Secretary of Tourism elaborates the tourism policy following the federal guidelines closely. The Sectoral National Programme for Tourism 2013-18 provides the policy framework for the state and for the municipal tourism plans and programmes.

Box 3.8. Tourism strategies in the National Development Plan 2013-18

Boosting planning and transformation of the tourism sector. Strategic actions: update the regulatory and institutional framework, better align tourism policy and actions of federal and state governments, improve budgetary and programmatic co-ordination and mainstream government actions, in line with national tourism policy.

Encouraging supply-side innovation and enhancing tourism competitiveness. Strategic actions: strengthen the infrastructure and quality of tourism services and products, diversify and innovate the product and destination offer, complement sun-sea-sand destinations with alternative offers (cultural tourism, ecotourism, adventure tourism etc.), develop a National Quality Assurance Certification System, develop competitiveness agendas for destinations, foster greater collaboration and co-ordination with the private sector, local governments and service providers.

Fostering greater investment and financing flows, and effectively promoting destinations. Strategic actions: foster and promote financing schemes with the development banks; develop a comprehensive international tourism promotion strategy and develop new tourism products to stimulate and consolidate the domestic market, supporting the efforts of the private sector.

Promoting sustainability and social benefit from tourism. Strategic actions: create instruments to help tourism be a clean industry, strengthen the tourism model based on economic, social and environmental sustainability, and promote the conservation and preservation of cultural-historical and natural heritage (e.g. responsible wastewater management, sewage and wastewater treatment, drinking water quality).

Source: OECD (2017[50])Tourism Policy Review of Mexicohttp://dx.doi.org/10.1787/9789264266575-en.

The State of Hidalgo aims to benefit from cross activities in tourism including ecotourism and social tourism. In that sense, the state has stressed the protection of the environment as one of the strategic priorities to keep the growth in this sector. The state strategy for tourism is divided into three main objectives indicated in Table 3.10. It seeks to achieve objectives by focusing on marketing and promotion campaigns, training and certifications and identification of new segments of tourism. The three objectives include:

  • Position Hidalgo as a state with diversified and sustainable tourism.

  • Consolidate existing tourism and increase the productivity of tourism providers.

  • Encourage the provision of services with sustainability schemes.

Table 3.10. Hidalgo’s strategy on the tourism sector

General objective

Strategies

Actions (selected)

Position Hidalgo as a state with diversified and sustainable tourism

Promote the tourist offer in the national and international local scope

- Marketing campaign by using the National Council of Touristic Promotion

- Showcase travel programme with tourism agents

Consolidate the existing tourism services and increase the productivity of service providers

Strengthen the capacities of tourism service providers

- Certify the tourist services’ providers

- Promote the artisanal sector as a complement to tourism development

Encourage the provision of tourism services with sustainability schemes

Consolidate the existing tourism services offer

- Promote social tourism and contribute to the preservation of the historical heritage

- Improve the infrastructure and adequate services of tourism activity.

Promote the development of new tourism products

- Promote the necessary conditions to investors in the tourism sector

Promote actions to identify and develop tourism on culture, gastronomy, environment and medicine

- Generate an inventory of resources and natural and cultural attractions

Source: Government of Hidalgo (2016[29]), State Development Plan 2016-22

The sectorial plan of tourism recognises the main bottlenecks and opportunities for the sector. It aims to improve the infrastructure for tourism, the professionalisation of tourism services and the marketing of local products. Furthermore, it acknowledges the importance of promoting local assets to develop the sector. Ecotourism, cultural tourism (e.g. indigenous communities and traditions) and medical activities are some of the markets the state wants to enhance.

Nevertheless, Hidalgo can improve its strategy by following concrete actions and developing an integrated approach for the tourism sector:

  • Integrate food experiences into sustainable tourism development in rural areas can help ease poverty. There is a growing shift in the economy from easily reproduced goods and services to more unique experiences, especially those based on local food. The programme of magic towns, in which Hidalgo has five municipalities, has the goal to promote typical dishes among tourists. The uniqueness gastronomy of Hidalgo based on recipes and experiences with non-traditional ingredients such as El Nopal, worms and ant eggs can create a new source of income for local communities.

  • Strengthen and better showcase the cultural and natural resource-based attractions such as nature and water parks. Most of these attractions are located in rural areas and managed by local communities (ejidos). The community-based tourism in Mexico not only empowers communities and helps preserve natural resources but also offers a unique experience to tourists (Toscana, 2017[51]). In Hidalgo, there are positive experiences of community-based tourism, such as the Tephe and the Geiser water parks that are boosting the quality of life for their communities (Box 3.9). Supporting the sustainability of the existing community-based tourism’s initiatives and building upon successful cases to spur others can share the economic outcomes of the sector with a wider range of rural communities.

  • Clarify the strategy to enter into new niche tourism markets, such as medical and cultural tourism (e.g. indigenous communities and traditions). The Secretary of Tourism has developed a programme (Casate Conmigo, Get Married With Me initiative) to promote weddings in the state’s country houses. However, this programme could benefit from a clearer strategy to spread positive outcomes across the territory. A better strategy to exploit the state’s natural assets while involving local communities and business in the organisation and provision of local products and services to weddings is needed. The state also intends to promote medical tourism, but currently, there is no clear strategy in place. The state should take into account the experience and examples of best practices by other Mexican states in niche tourism markets (Box 3.10). These strategies can be implemented through the creation of a touristic territorial plan in municipalities with touristic vocation, which currently does not exist.

  • Another way to strengthen niche tourism in Hidalgo can be through the development of tourism in Hidalgo’s former mining areas around a strong brand and by investing in infrastructure. The Louvre-Lens case in France is a good example of this. In 2012 the Louvre opened a branch of its museum in Lens (a former mining area). The French State granted the use of the renowned Louvre brand to pave the way for Lens to become a new cultural destination. The establishment of the museum has been a concerted effort of public authorities across different government levels. The strategy consisted of accompanying local small- and medium-sized enterprises (SMEs) in the transition, and building capacity in terms of knowledge and skills. The creation of a strong value proposition with a long-term view was accompanied by a strategy to assist local SMEs in the transition.

Box 3.9. Water parks: Examples of community-based tourism business

The Tephe water park is located 1 hour by car north of Pachuca. It is located in an ejido’s land owned by 500 families whose members work on different activities in the park. The park has a modern hotel, pools with natural waterfalls and artificial waves, and a conference centre.

During the day the park can have up to 500 workers, all members from the owner families, conducting diverse activities from maintenance, security, cooking to recreation. This park benefits in total around 2 000 people.

As a payment, families receive a monthly income, health security and a monthly basket of basic goods such as food and cleaning products. The company has also a programme of scholarship for children of their families. The children’s school performance is monitored by the company who can decide then who will receive further support for high-level education.

Families are divided by neighbourhoods which choose one member to represent them within the management council of the company. The council is composed of 44 members who look after the day-to-day business of the water park and take financial and administrative decisions. They have also implemented a stabilisation fund system that allows the families to receive a monthly income in low tourist season. All the expansion of the aquatic complex has been done with own cash flow or private loans for big investments such as the hotel.

The Geiser water park is another example of a community-based tourism project in Hidalgo. It is located in the ejido of Uxdejhe, a rural community of 800 people in the municipality of Tecozautla. This land was originally used for agricultural purposes for own subsistence, but the presence of the geiser triggered its recreational use. The community started to develop tourism around the water from the end of the 1990s and currently the park has a hotel with more than 650 rooms. During weekdays, an average of 150 people visit the park and this number can reach 2 500 people at weekends, most of them coming from Hidalgo and surrounding states like Queretaro and Mexico.

Source: Government of Hidalgo (2017[1]), Answers to OECD Questionaire for the Hidalgo Territorial Review; Toscana, A. (2017[51]), El Géiser Water Park: A Community-based Tourism Experience in Mexico, http://dx.doi.org/10.15446/rcdg.v26n1.59189.

Box 3.10. Medical Tourism in Baja California and clusters in Mexico

The Medical, Dental and Hospital Cluster of Baja California was established in 2011. Prior to the global economic crisis, Baja California welcomed around 1 million patients each year, but this had dropped to 350 000 by 2010. Two factors had supported the development of medical tourism in Baja California up to this point: the proximity of a large market of consumers in Canada and the United States attracted by the availability of high-quality and cost-competitive healthcare; and the region’s reputation from manufacturing high-quality medical devices and medical technologies. This facilitated the emergence of a medical services industry for visitors, which in turn facilitated the emergence of an allied cluster of services in the hospitality and tourism sectors. However, to get ahead in the medical tourism sector, providers have had to pool efforts, consolidate their operations, get certified, promote themselves as a group and earn the trust of their prospective customers. The Baja California Cluster enables the hospital services in the region to provide a comprehensive and diversified offer to meet the needs of medical tourists. It also optimises the ecosystem of complementary services such as lodging, food and entertainment among others.

By 2015, the number of medical tourists travelling to Baja California to receive medical treatment had risen to an estimated 800 000. Most medical tourists attend for minor procedures, so there is a greater chance they will extend their stay as a mini-vacation and visit local tourist attractions. Mexico is seeking to position itself as a leading provider of quality, safe and competitively priced medical services to visitors. Ten medical tourism clusters have now been identified for development in Mexico: Baja California, Sonora, Chihuahua, Nuevo León, Tamaulipas, Jalisco, Guanajuato, Puebla, Quintana Roo and Mexico City. Actions include strengthening the medical tourism service chain, holding regional meetings to raise awareness of the importance and potential, encouraging certification and accreditation of services and products, and implementation of Distintivo H and Punto Limpo hygiene certifications, and attracting investment and encouraging financing through the development banks, as well as actively promoting Mexico as a medical tourism destination. Medical tourism revenues in Mexico were estimated in excess of USD 3.1 billion in 2014.

Source: OECD (2017[50]), Tourism Policy Review of Mexico, http://dx.doi.org/10.1787/9789264266575-en.

  • Enhance the professionalisation of the sector. To date, despite a large number of hotels in Hidalgo, only a handful have staff who speak fluent English. Because SMEs represent the largest number of companies active in the service sector, such as tourism, and generate most of the employment (Chapter 2), specific attention should be put on the training of workers in those businesses as a means to strengthen the value chain of this sector.

  • Strengthen the tourism observatory. Elaboration and use of tourism-related data are at the core of modernising tourism. Hidalgo has set the goal of creating a tourism observatory that can monitor tourism-related activities in the state and define strategic projects based on existing demand niche markets. This is an important initiative that, if well implemented, can systematise the available information on the characteristics of visitors, their travel and consumption patterns, their expectations and their degree of satisfaction with different aspects of their travels. As recommended in a former OECD study on tourism in Mexico, this information type of initiative can be enhanced by the elaboration of a visitor survey and in-depth market research to analyse Hidalgo’s competitive position in tourism (OECD, 2017[50]).

  • Advertise the security environment as one of the comparative advantages of the state within Mexico. Security concerns are important for tourists around the world. Hidalgo benefits from low levels of crime relative to other states in the country (Chapter 1). The state should benefit from this particular position to attract tourists. Positioning as security and environmentally friendly state for tourism within national and international information platforms could represent a trigger for added value in the state.

In terms of financing, the state can foster the expansion of credit for tourism investment projects through the development banks. Hidalgo is the 3rd state that receives the most funding for tourism-related projects from Bancomext (7%), just behind Quintana Roo (22%) and Sonora (14%). This bank has supported different states with working capital and acquisition of fixed assets for enterprises linked to tourism; hotel acquisition, expansion, remodelling, sustainable hotel improvements (technological, environmental, energy saving, fuel and water); and medical tourism, including construction and equipment of hospitals and clinics (OECD, 2017[50]). Apart from financing traditional working capital needs, Bancomext can be used as the implementing partner for innovative pilot programmes. It has financed sustainable solar water heating in tourism hotels in Yucatan, Campeche and Quintana Roo. Hidalgo can then canalise the funding towards sustainable and strategic tourism projects with an integrated policy approach to leverage on other sectors.

Adopting a territorial approach to tourism policy development

Hidalgo’s policy on tourism lacks an integrated approach with other key sectors relevant to tourism such as environment, education and agriculture. Hidalgo would benefit from developing this integrated territorial framework and work agenda that would set a long-term vision for the sector ensuring the participation of different state agencies, both in programming and budgeting. A territorial development approach to tourism policy would help better exploit the diverse yet complementary wealth of existing tourist attractions.

The state government should develop a strategy whereby tourism is a key pillar of the economic development of the municipalities. This would result in:

  • Designing and implementing territorial development projects based on tourism potential and characteristics presented at the local level.

  • Developing local projects and strategies with the participation of other relevant state secretaries (Agriculture, Social Protection, Education, etc.) to create the necessary conditions for economic and social development as well as to ensure environmental conservation.

  • Bringing municipalities together to provide diversified yet complementary tourism attractions

  • Setting a clear vision for the sector. This can be done by developing a territorial brand of the state.

The case of ecotourism and agro-tourism is a good example to illustrate this approach. These niche markets can benefit from policy complementarities between policies and municipalities by boosting environmental conservation, sustainable agriculture and rural tourism. In that sense, tourism can also raise awareness of cultural and environmental values and help finance the protection and management of protected areas and biological diversity (OECD, 2017[52]). For example, Hidalgo can take further advantage of national programmes (SEMARNAT’s support on certifications of ecotourism centres and tourism-related businesses) and state programmes of environmental conservation to expand ecotourism in the state. Since many low-density municipalities in the north of the state are rich in natural resources and agricultural land, and enjoy low levels of insecurity, Hidalgo can develop this strategy for the northern part of the state. It can create, for example, a package of ecological routes through different municipalities, following the example of European Cultural Routes or Sierra Mágica Routes Programme in the state of Puebla (OECD, 2017[50]).

Another field for complementarities is the innovation and promotion of new tourism products. Given the increasing competition to attract tourists among Mexican states, the development of new ideas in non-mainstream tourism products should attract new income for the state. Promoting new ideas in the sector should involve support to entrepreneurs and SMEs. This can mean placing the tourism sector as a platform to foster new entrepreneurial ideas that can enhance other economic activities. It implies for Hidalgo to expand entrepreneurship programmes to tourism business, by aligning the innovation policy with this sector (Box 3.11).

Box 3.11. Fostering entrepreneurship and innovation in Portugal

Destinations are facing an increasingly competitive environment. There are three key ingredients for remaining successful in this industry: creativity, a wise use of technology and resilience. In this context, Turismo de Portugal has defined a framework to support travel start-ups, fostering entrepreneurship and innovation in the tourism sector and creating a dynamic entrepreneurship ecosystem in the country. This framework includes targets to develop a more innovative and entrepreneurial culture in the travel sector; create and actively support initiatives accelerating and nurturing start-ups that can impact tourism; support travel start-ups in the critical phase of market development by mobilising marketing resources specifically for their needs; provide adequate public funding and attract private investment to the new travel businesses emerging from this movement; attract knowledge to Portugal, fostering the travel ecosystem and making the country a reference Travel Start-up Hub. Within this framework, the Portuguese Tourism Board established several partnerships and initiatives focused on entrepreneurship and innovation, which have been able to enhance a very active entrepreneurial tourism ecosystem. This includes:

  • Encouraging tourism entrepreneurs to participate in horizontal accelerator programmes, notably the Lisbon Challenge (www.lisbon-challenge.com), in partnership with i-Beta. From nearly 100 start-ups accelerated the past 2 years, about 30 are from the tourism sector.

  • Creating a vertical acceleration programme dedicated to tourism, the Discoveries Travel and Tourism Start-up Accelerator (www.startupdiscoveries.com), in partnership with Fabrica de Startups.

  • Targeting projects that use or contribute to open data, notably Smart Open Lisboa (www.smartopenlisboa.com), a partnership with Lisbon City Hall, Portugal Telecom, Cisco and Beta-i.

  • Including dedicated entrepreneurship programmes in the syllabus of Turismo de Portugal’s Hotel Schools with a specific programme – Tourism Creative Factory.

  • Attracting national and international investors to support these initiatives, through the Lisbon Investment Summit and Tech Tour.

Source: OECD (2017[50]), Tourism Policy Review of Mexico, http://dx.doi.org/10.1787/9789264266575-en.

Developing a brand for the State of Hidalgo

Hidalgo should give special support to activities that can foster a local brand. It can help to better articulate the different efforts in the tourism sector with other policy areas and showcase local products. This brand should be based on the characteristics and the potential of the region. Currently, there is no brand name for the State of Hidalgo. The development of a brand name has been a successful initiative in other regions (Box 3.12).

Box 3.12. Territorial branding

Places have their own characteristics, products and people, i.e. economic, geographic and cultural attributes that can be identified as unique or special. Branding is a way to promote the uniqueness of places. A clearly identifiable brand is more beneficial than many different, segmented ones. Brand creation needs follow-up action to consolidate it. The literature has extensively noted that logos and slogans alone have little significance in fostering economic restructuring and social cohesion (Oliveira, 2015[53]). Places should follow up on actions that can transform the region, in order to realise the brand’s potential. A brand reflects the work behind it; it does not create great places on its own.

The case of the brand Produit en Bretagne (Made in Brittany) in France shows how shared values and collective efforts to expand and solidify the brand can yield positive results (Donner, 2016[54]). The oldest regional food brand in Europe, Produit en Bretagne was created in 1986 to strengthen the solidarity and employment of the region. Since then, an association of producers was created, which today includes members of the service sector such as hotel, restaurants and cultural and creative sectors. The association facilitates the engagement of an array of stakeholders, who exercise quality controls over products and agree on the marketing strategy. The association successfully created a business incubator to support innovative projects too (Donner, 2016[54]).

This example also signals the importance of participatory territorial branding, i.e. of involving local stakeholders in brand development and consolidation. Promoting synergies and consensus among regional stakeholders has been identified as one of the key elements in keeping a brand alive and well in the long run.

The territorial marketing strategy adopted in the Cinque Terre region of Italy, for instance, relied on participatory methods. Local Agenda 21 fora were used to foster the commitment of the local and entrepreneurial actors in agricultural and tourism activities related to the promotion of the brand (Lorenzini, 2011[55]). In the long run, a long-lasting and legitimate brand depends largely on the engagement of local stakeholders.

Sources: Donner, M. (2016[54]), Understanding Place Brands as Collective and Territorial Development Processes, http://dx.doi.org/10.18174/379598; Lorenzini, E. (2011[55]), Territory Branding as a Strategy for Rural Development: Experiences from Italy, http://hdl.handle.net/10419/120139 (accessed 6 November 2017); Oliveira, E. (2015[53]), “Place branding in strategic spatial planning: A content analysis of development plans, strategic initiatives and policy documents for Portugal 2014-2020”, https://doi.org/10.1108/JPMD-12-2014-0031.

The only strategy in the state that makes use of something similar as a brand is the certification label “Con sabor a Hidalgo” to promote gastronomic tourism. The label is issued to those municipalities considered to offer special typical dishes. The branding strategy can be a very powerful tool for the tourism sector but can also have important ramifications to attract economic activity and population to the region. This policy, coupled with the development of more professional and market-oriented traditional sectors (particularly in textile, tourism and agriculture) as well as the implementation of the ICT across the different municipalities of the state should allow gaining markets and increased margins. Hidalgo can also benefit from the example of the GREAT campaign in the UK. Launched in 2012, the country aimed to capitalise on the global attention from the London Olympics and created a national brand campaign “GREAT” with the strategic goal of inspiring the world to think differently about the country (OECD, 2017[50]).

Natural assets and environmental amenities

The sustainability of natural resources is important not only for well-being and economic activity (e.g. tourism or agriculture) but also for the whole attractiveness of the state. Natural resources are a central asset for the State of Hidalgo. Despite its relatively small land surface within Mexico, Hidalgo has a diversified endowment of environmental assets ranging from a jungle, a chain of mountains, forests and a large water endowment. Hidalgo is the fifth state with the biggest diversity of mammals and plants in Mexico. It has 3 national parks (out of 67 in Mexico), 2 located in the south close to Pachuca and Tula and 1 in the north, and 44 natural protected areas (7% of the state’s territory).

However, population growth and urban expansion in the south of the state are threatening this natural capital. While air pollution is not a major problem compared to other states in the central area of Mexico, its quality could be improved (see Chapter 1). Overall, four critical problems underline the environmental challenge in the state:

  • Low volume of treated wastewater and overexploitation of aquifers. More than 62% of the residual water in Hidalgo requires a new treatment infrastructure. In addition, the state has a deficit of water (22 hm3), which is expected to increase by more than 10 times in 2030 due to an expanding water demand against its supply (Government of Hidalgo, 2016[29]).

  • Lack of control and monitoring of protected natural areas. Hidalgo is the state with higher risks on forest fires in Mexico and ranks fifth in the loss of largest forests, due to agricultural and farming activities (Secretary of Environment and Natural Resources, 2017[40]).

  • Inadequate management of solid waste. The state recycles only 2.4% of daily waste. Overall, there are only 5 regional landfill sites and 14 municipal sites that provide this service to 32 municipalities out of the 84 meaning that only 50% of the solid waste is managed properly. The solid waste from the reaming 52 municipalities goes to the 48 open-air dump sites that normally do not comply with environmental regulations (Secretary of Environment and Natural Resources, 2017[40]).

  • Low quality and access to water. Households in Hidalgo have the fifth lowest level of access to tap water in the country (Figure 3.13). The state provides 61% of households with tap water, below the country average level (77%). Overall, 12% of the state population lacks access to drinkable water (90% of this proportion is located in rural areas). The federal government has already projected an increase in this share to 35% by 2030 if nothing is done.

Alongside this, the state has shown a low capacity and allocation of resources to address the environmental challenges. Hidalgo is among the top 10 states with the lowest index in environmental management and conservation in Mexico (Secretary of Environment and Natural Resources, 2017[40]) and ranks among the fifth states with the lowest allocation of public resources for environmental issues.

Figure 3.13. Households with access to tap water per state, 2015
Figure 3.13. Households with access to tap water per state, 2015

Source: INEGI (2015[32])Inter - census Survey 2015 http://www.beta.inegi.org.mx/proyectos/enchogares/especiales/intercensal/?init=1.

The current government has developed a strategy to tackle the risks for its natural resources. Hidalgo’s environmental strategy focuses on seven objectives (Table 3.11). Overall, they aim to develop ecological territorial planning across the entire state, foster environmental education, improve and preserve water sources and monitor urban waste and air quality. The Secretary of Environment and Natural Resources (SEMARNATH) is responsible for developing and enforcing the environmental policy in the state.

The sectorial programme of SEMRNATH is aligned with the state objectives and with the main environmental laws for the state:

  • The Law of Ecological Balance and Environmental Protection of the State of Hidalgo (LEEPAEH) and regulations (see section on land use).

  • Four specific laws: The Law of Sustainable Forestry Development, the Law of Management and Prevention of Waste), the Law for Environmental Protection and the Law for Mitigation and Adaptation for Climate Change.

Table 3.11. Hidalgo’s environmental conservation strategy (selected strategies)

Objectives

Strategies

Comprehensive and sustainable territorial planning

- Diagnosis of natural assets at municipal level

- Map municipal environmental management, with a large focus on waste

- Plan and forecast environmental challenges

- Develop the up-to-date Plan on Environmental Territorial Planning

Equity in services and infrastructure

- Update the number of business units in the state and verify their environmental procedures

- Deliver technical assistance on environmental management

Education and environmental culture

- Conference and workshops on environmental management in schools and universities.

Sustainable infrastructure

- Improve urban waste management

- Identify priority municipalities to develop waste management infrastructure

- Technical assistance to municipalities to develop the infrastructure on waste management.

Sustainable development

- Improve and expand infrastructure on renewable energy

- Focus on municipalities without access to electric energy

Air quality

- Monitor air pollution, issue alerts and determine actions to be taken by private sector and communities

- Modernise the tools to monitor air pollution

Natural capital preservation

- Ensure environmental balance in forests through conservation and restitution

- Ensure conservation of flora and fauna

- Preserve and expand natural protected areas

Source: Secretary on Environment and Natural Resources (2017[40]), Sectoral Plan of Environment and Natural Resources 2017-22.

Among the different strategies to attain the state’s environmental objectives, the sectorial programme of SEMARNATH focuses and follows up on nine strategic policies:

  • Create and implement Ecological Land Management Plans for the state and municipal level. The main goal in this matter is to finish the update of the Ecological Land Management Plan for the state (expected for 2019) and ensure the whole territory is covered with updated plans.

  • Increase the number of economic units subject to regulation and authorisation in terms of environmental standards. In 2016, 28.92% economic units have complied with the mandatory environmental regulations and the target for 2019 is to increase compliance with 35.7% of economic units.

  • Preservation of natural heritage areas. It is expected that 10.89% of protected natural areas are considered within a conservation scheme. For example, establish six new units for the preservation of wildlife; reduce response time for forest fires, among others.

  • Create and implement a state strategy for biodiversity. By 2019 the government expects to have completed the research on state biodiversity and published the strategy for preservation.

  • Increase the percentage of the population with access to environmental education and culture. The indicator measures the number of educational institutions with environmental programmes, the target for 2019 being 15%.

  • Increase the percentage of solid waste subject to sustainable management. The strategy is part of the State Program for the Prevention and Integral Management of Solid Waste that seeks to implement policies for its sustainable management. The indicator measures how much solid waste has been harnessed for recycling, as compost materials or into clean energies. The goal for 2019 is to implement projects for solid waste re-utilisation for alternative sources of energy.

  • Increase units of sustainable technology for the generation of renewable energy in the municipalities.

  • Track the percentage of vehicles that have conducted ecological control. In 2016, 27.8% of vehicles conducted the ecological control and the target for 2019 is that 35% of them completes it.

  • Increase environmental tax collection. For instance, by establishing a Green Fund, simplifying collection mechanisms, aligning regulations and laws to increase collection. The indicator measures the progress on tax collection, which in 2016 was negative (-15%) and has a target of 45% increase for 2019.

Renewable energy policy stands out from the list of key policy areas. There are two types of projects being implemented:

  • Renewable energy for rural municipalities: the government has installed 533 autonomous photovoltaic systems to bring electricity to rural areas that do not receive it directly from the Federal Commission of Electricity (CFE). There were further plans for expansion of this policy in 2017. In addition, 130 biodigestors have been installed with the purpose of generating energy for cooking in rural municipalities.

  • Public-private partnerships for energy supply: Intermunicipal project for the generation of electric energy from solid waste in Tizayuca. There is a plan to reproduce this pioneer project in two more locations.

In terms of climate change, SEMARNATH’s research has determined that Hidalgo’s territory is located in a zone of significant vulnerability to climate change with a potential increase of 2°C in temperature and 5% decrease in rainfall water by 2020.

To face this challenge, Hidalgo has a State Program for Action on Climate Change 2013 (PEACCH) aligned with the General Law for Climate Change and the National Strategy for Climate Change. The objective of PEACCH is to design and integrate the technical tools to measure climate variability; identify the main greenhouse gases emission sources; predict future climate scenarios and vulnerabilities and propose mitigation policies. According to the PEACCH findings, most of the emissions in the state come from energy generation; however, wastewater and solid waste contribute significantly to greenhouse gas emissions. Wastewater comes from three sources, municipal sewage water, industrial sewage water and sewage water from Mexico City Metropolitan Area that flows into the Endhó and Requena dams. Hidalgo has a lower rate of treated sewage water than the national average in 2014.

As for international co-operation, one of the few co-operation programmes on environmental conservation in Hidalgo is the “ProTierras” programme. Hidalgo together with Oaxaca and Zacatecas is currently participating in a programme with FAO called “ProTierras”. The objective is to promote the sustainable use of land, reduce land degradation and to strengthen local institutions and producers.

Although the environmental strategy acknowledges most of the critical bottlenecks, the effective implementation of laws and environmental guidelines remains low (e.g. there is no clear mechanism on the construction of the green fund and green investment). Furthermore, part of the outcome of the strategies relies on the update of the Ecological Land Management Plans. Such an update can expose new environmental situations for the state, with different areas in risk or new environmental needs. Clear long-term goals should also be included such as reduction of air pollution level. The State of Hidalgo should hence ensure that SEMARNATH has the institutional capacity to finish the update in time and process the results.

The State of Hidalgo can also benefit from further attention to some specific challenges:

Increase complementarities with other state secretaries and sectorial programmes. Strategic programmes such as environmental control on vehicles, increase technology for renewable energy or increase environmental tax collection should be aligned with policies from other state Secretaries (SEMOT, SOPOT or SEDECO). For example, the SEMOT’s strategy on encouraging sustainable motorised mobility should be aligned with the SEMARNATH’s goal of improving air quality. Hidalgo should establish co-ordination mechanism for co-operation among secretaries.

In terms of waste management, the State of Hidalgo should ensure that governance arrangements that help mobilise waste infrastructure funds and allocate financial resources in an efficient, transparent and timely manner. The state has low recycling rates and weak waste management. The SEMARNAT has acknowledged this issue and is conducting a process to determine the priority areas and the municipalities in order to start supporting the adequate infrastructure for processing waste. However, the process is still in its initial stage and the limited economic resources jeopardise a rapid implementation of such an infrastructure.

Hidalgo should promote better co-ordination with other states and among municipalities with regards to water resources. The pressure of water resources in the State of Hidalgo originates from different sectors and states. Most of the water extracted from the aquifers in Hidalgo is destined for agriculture (87%) and public use (7%). The operative region of Tula has particularly high pressure on water resources with already higher water demand than resource availability. This demand comes not only from Hidalgo but also from the metropolitan area of Valle de Mexico (ZMVM). Overall, out all the aquifers providing water to the ZMVM, the Cuautitlán-Pachuca aquifer is the one under the highest pressure (Fondo Metropolitano del Valle de México, 2011[13]).

Water contamination is another important environmental challenge in the state. To solve this issue, the federal government has supported the construction in Atotonilco Hidalgo, the largest treatment plant of residual water in Mexico, which will also treat the residual water produced in Mexico City. While this project will help reduce water contamination, it needs to be accompanied by education campaigns and monitoring of private companies. Strengthening the Secretary of Environment to accomplish such tasks is essential to make the most of this project.

OECD has developed the principles of water governance, which can guide Hidalgo in the aim to preserve and improve the quality of water resources (Box 3.13). Specific actions for the state should be:

  • Enhance the co-ordination with surrounding states. Since, the metropolitan area of Valle de Mexico creates an important pressure on Hidalgo’s groundwater recharge (especially on the Cuautitlán-Pachuca aquifer), a co-operation between both states is crucial to avoid overexploitation.

  • Increase quality information on the level of resources and water-related infrastructure. The hydrologic infrastructure on agriculture lacks information on the length of water canals and irrigation networks.

  • Involvement of local communities and citizens. Many environmental problems come from a lack of consultation with citizens and local business. Given the weak enforcement of environmental guidelines by other state secretaries, civil society engagement is crucial to oversee natural capital conservation. They are direct witnesses of environmental deterioration and can be effective for Hidalgo to strengthen the ties between civil society and government representatives in natural resources’ conservation.

  • Forest conservation does not rank very high in the priorities of the SEMARNAT, despite being a support for the local economy and the environment, especially in the northern part of the state. Hidalgo is the state with the highest risks on forest fires among Mexican states and ranks fifth with the largest forest loss due to agricultural and farming activities (Secretary of Environment and Natural Resources, 2017[40]). Northern municipalities have stressed the high level of illegal appropriation of wood in forests. To solve this, Hidalgo should further control illegal logging and improve its plans for fires. In particular, it needs a comprehensive development of an inventory of forests and promotes the involvement of local communities in its conservation. It can be complemented with a strategy to link the forest preservation with other sectors, such as tourism.

  • On climate change, Hidalgo should consider international partnerships in a strategic manner, in alignment with the federal government. This can entail in the first stage, for instance, the comprehensive diagnostic of the main challenges regarding climate change mitigation across the territory. Studies on the forestry potential to reduce CO2 emission and create environmental bonds or risk environmental assessment for human settlements can be conducted in partnership with international experts and with the support of state level or other secretaries involved. The example of Baja California’s co-operation with USAID (on a systematic methodology for cost-effective and renewable energy) could guide Hidalgo’s efforts in environmental co-operation with other organisations.

  • To conclude, Hidalgo’s capacity to protect and better manage its natural assets relies on an efficient co-ordination among states, secretaries and municipal governments and complementarities with strategic programs of other sectors (i.e. ecotourism or renewable energy). Investment on environmental infrastructure (solid and water waste management) and international and federal partnerships to evaluate and mitigate the risk of climate change and other environmental risks are needed in the state.

Box 3.13. Principles on water governance

The OECD Water Governance Principles provide the 12 must-do elements for governments to design and implement effective, efficient, and inclusive water policies:

Principle 1. Clearly allocate and distinguish roles and responsibilities for water policymaking, policy implementation, operational management and regulation, and foster co-ordination across these responsible authorities.

Principle 2. Manage water at the appropriate scale(s) within integrated basin governance systems to reflect local conditions, and foster co-ordination between the different scales.

Principle 3. Encourage policy coherence through effective cross-sectoral co-ordination, especially between policies for water and the environment, health, energy, agriculture, industry, spatial planning and land use.

Principle 4. Adapt the level of capacity of responsible authorities to the complexity of water challenges to be met, and to the set of competencies required to carry out their duties.

Principle 5. Produce, update and share timely, consistent, comparable and policy-relevant water and water-related data and information, and use it to guide, assess and improve water policy.

Principle 6. Ensure that governance arrangements help mobilise water finance and allocate financial resources in an efficient, transparent and timely manner.

Principle 7. Ensure that sound water management regulatory frameworks are effectively implemented and enforced in pursuit of the public interest.

Principle 8. Promote the adoption and implementation of innovative water governance practices across responsible authorities, levels of government and relevant stakeholders.

Principle 9. Mainstream integrity and transparency practices across water policies, water institutions and water governance frameworks for greater accountability and trust in decision-making.

Principle 10. Promote stakeholder engagement for informed and outcome-oriented contributions to water policy design and implementation.

Principle 11. Encourage water governance frameworks that help manage trade-offs across water users, rural and urban areas, and generations.

Principle 12. Promote regular monitoring and evaluation of water policy and governance where appropriate, share the results with the public and make adjustments when needed.

Source: ESEC (2011[56]), About the ESEC, (Accessed July 2018), www.lecese.fr/en.

Box 3.14. Co-operation with international organisations on climate change

Water/Wastewater Utility Greenhouse Gas Reduction and Energy Management Program, USAID-Baja California

This is an initiative with the state of Baja California, through the Global Development Alliance, USAID and the Border Environment Cooperation Commission (BECC) fund, to provide comprehensive and systematic methodology for identifying and implementing cost-effective energy conservation and renewable energy projects at municipal utility sites, focusing particularly on water and wastewater municipal sites.

The programme started in 2013 and is ongoing. It had a total investment of USD 3.7 million, of which 40% came from the United States government and the rest from four other resource partners (BECC, Baja California’s government, Greenhub Advisors and MDB Consulting Engineers).

The Mexico Border States Climate Change Program, The Center for Climate Strategies

The Center for Climate Strategies (CCS) has provided assistance to each of the six US-Mexico Border States with comprehensive climate change action planning. Since 2008, CCS has operated in partnership with the Border Environment Cooperation Commission (BECC) – also a partner for the USAID-Baja California project – and each of the states (Baja California, Chihuahua, Coahuila, Nuevo León, Sonora and Tamaulipas) in co-operation with the Mexico Institute for National Ecology and Climate Change (INECC) and the US Environmental Protection Agency (EPA).

The programme includes the development by CCS of greenhouse gas emissions inventories and forecasts (all sources and sinks) in each of the states, through a regionally consistent methodology that is applied on a custom basis to each jurisdiction. In addition, CCS and BECC have supported climate mitigation planning with each of the states. The research and mapping for the greenhouse gas emissions in the State Plan for Climate Change Action were funded by this initiative.

Sources: USAID (2017[56])Water/Wastewater Utility Greenhouse gas reduction and Energy Management programhttps://partnerships.usaid.gov/partnership/municipal-waterwastewater-utility-greenhouse-gas-reduction-and-energy-management-program; CCS (2018[57])Mexico Border States Climate Change Program, The Center for Climate Strategies, Washington DC, http://www.climatestrategies.us/international_actions/international_actions/view/1.

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Annex 3.A. The 17 operative regions in Hidalgo
Annex Table 3.A.1. The 17 operative regions in Hidalgo

Regin I - Pachuca

Regin X Huejutla

Epazoyucan

Mineral del Monte

Pachuca de Soto

Mineral de la Reforma

San Agustn Tlaxiaca

Atlapexco

Huautla

Huejutla de Reyes

Jaltocn

San Felipe Orizatln

Xochiatipn

Yahualica

Regin II Tulancingo

Regin XI Apan

Cuautepec de Hinojosa

Santiago Tulantepec

Singuilucan

Tulancingo de Bravo

Almoloya

Apan

Emiliano Zapata

Tepeapulco

Tlanalapa

Regin III Tula

Regin XII Tizayuca

Tepetitln

Tezontepec de Aldama

Tlahuelilpan

Tula de Allende

Villa de Tezontepec

Tizayuca

Tolcayuca

Zapotln de Jurez

Zempoala

Regin IV Huichapan

Regin XIII Otom Tepehua

Chapantongo

Huichapan

Nopala de Villagrn

Tecozautla

Acaxochitln

Agua Blanca de Iturbide

Huehuetla

Metepec

San Bartolo Tutotepec

Tenango de Doria

Regin V Zimapn

Regin XIV Tepeji

Nicols Flores

Pacula

Tasquillo

Zimapn

Ajacuba

Atitalaquia

Atotonilco de Tula

Tepeji del Ro de Ocampo

Tetepango

Tlaxcoapan

Regin VI Ixmiquilpan

Regin XV Atotonilco

Alfajayucan

Cardonal

Chilcuautla

Ixmiquilpan

Acatln

Atotonilco el Grande

Huasca de Ocampo

Mineral del Chico

Omitln de Jurez

Regin VII Actopan

Regin XVI Jacala

Actopan

El Arenal

Francisco I. Madero

Mixquiahuala de Jurez

Progreso de Obregn

San Salvador

Santiago de Anaya

Chapulhuacn

Jacala de Ledezma

La misin

Pisaflores

Regin VIII Metztitln

Regin XVII Zacualtipn

Eloxochitln

Jurez Hidalgo

San Agustn Metzquititln

Metztitln

Tlahuiltepa

Tianguistengo

Xochicoatln

Zacualtipn de ngeles

Regin IX Molango

Calnali

Huazalingo

Lolotla

Molango de Escamilla

Tepehuacn de Guerrero

Tlanchinol

Source: Government of Hidalgo (2017[1]), Answers to OECD Questionnaire for the Hidalgo Territorial Review.

Notes

← 1. The states selected as a comparison are those sharing a border with the state of Mexico and Mexico city, both also included: Morelos, Tlaxcala, Queretaro, Puebla, Guerrero, Michoacan.

← 2. Urban population in Mexico is classified as the population living in urban areas. The National Institute of Statistics and Geography (INEGI) classifies urban areas as the localities with more than 2 500 inhabitants, while rural areas are the ones with less than 2 500 inhabitants.

← 3. With the definition of Mexican metropolitan zones in 2010, Tizayuca was included in the Valle de Mexico metropolitan zone because of the functional integration of the functional urban core (for more details see SEDESOL-CONAPO-INEGI (SEDESOL-CONAPO-INEGI, 2015[12]).

← 4. Pachuca is the only metropolitan area of Hidalgo (it meets the minimum 500 000 inhabitants threshold), while Tulancingo and Tula are classified as medium and small urban areas.

← 5. Ozone at ground level is one of the major constituents of photochemical smog. It is formed by the reaction with sunlight (photochemical reaction) of pollutants such as nitrogen oxides (NOx) from vehicle and industry emissions and volatile organic compounds (VOCs) emitted by vehicles, solvents and industry.

← 6. According to CONEVAL, a person in extreme poverty does not meet three or more indicators, of six possible, within the Social Deprivation Index and, moreover, is below the minimum welfare line. People in this situation have such a low income that, even if they dedicate it completely to the acquisition of food, they could not acquire the necessary nutrients to live a healthy life.

← 7. CONEVAL has different variables of income and social depravation. For income deprivation, this chapter uses the variable of share of population with an income below the line of welfare (minimum income to access the basic food basket and cover basic goods and services). For social deprivation, it uses the variable share of population with three or more social depravations (among the pool of six indicators of social deprivation).

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