OECD Territorial Reviews: Chihuahua, Mexico 2012

image of OECD Territorial Reviews: Chihuahua, Mexico 2012

Located at the border with the US, Chihuahua has benefited from FDI and NAFTA. Chihuahua has been one of the richest regions in Mexico and one of the most dynamic in the OECD. However, the region’s FDI-trade link with the USA has also led to some vulnerability to external shocks. The two crises affecting the USA in the past decade affected Chihuahua more than any other state. Despite recent progress in the quality of education, other structural challenges such as lower productivity growth, high inactivity rates and dwindling employment rates have been factors in Chihuahua’s sluggish growth. Chihuahua not only displays large intra-regional and gender inequalities, but also the largest inter-ethnic inequality levels in the country. Chihuahua can gain from a territorial approach to policymaking that integrates sectoral policies, fostering value-added in rural activities, better linking SME-development and FDI-attraction policies, as well as between innovation capacities and applications. The region could also strengthen their recent inclusive governance arrangement with civil society and the private sector.  Growth and development can only be possible if the current challenges in insecurity, water shortage and public finance are addressed.


Chihuahua's Economic Model and Challenges

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


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