Innovation Policies for Inclusiveness Policy Cases

Special Economic Zones

Country: Mexico

1. Short Description

The Special Economic Zones project aims to foster economic development in three lagging
regions of the south of Mexico, so as to address the gap between the north and south of the country.
The project includes the deployment of important investments in infrastructure and the
establishment of special labour, fiscal and trade conditions to firms establishing in those Zones, with
the objective of attracting industrial investments in those regions.

This policy profile is part of a policy toolkit on innovation policies for inclusiveness. It is relevant
for territorial inclusiveness.

2. Policy Characteristics

Country and leading institution:
Mexico
Ministry of Finance and Public Credit,
Economic Productivity Unit
Basic Information
Timeline:
Design of tailored measures for each SEZs during
2016; infrastructure development and attraction
of firms during 2017; SEZs starting to operate in
2018.

Target group Size and budget:

Regions Budget: -
Three zones in the south of the country that Three recipient zones: the Inter-oceanic corridor
significantly lag behind regions in the north. on the Isthmus of Tehuantepec (in the states of
Veracruz and Oaxaca), Puerto Lzaro Crdenas
(Michoacn and Guerrero); and Puerto Chiapas
(Chiapas).
Type of policy instrument(s) Inclusiveness focus
Financial support (fiscal incentives) Territorial inclusiveness
Non-financial support (streamlined
regulations to doing business / foreign
trade incentives)
Investment in public infrastructure
(multimodal connectivity, energy and
telecommunications infrastructure)
 Policy objectives
The creation of three Special Economic Zones (SEZs) in southern states of Mexico aims to foster
economic development in those regions and ultimately bridge the gap with the north of the
country. The attraction of foreign investment is expected to lead to job creation and to an
increase in production and trade revenues, thus improving the quality of life of peoples in those
regions.
Rationale
There is an important gap between the north of the country (richer and more industrialized)
and the south (more dependent on agriculture and registering the highest poverty rates of the
country).
Policy target recipient and selection mechanism
There are three areas that will be designated as special economic zones in Mexico: the Inter-
oceanic corridor on the Isthmus of Tehuantepec, connecting the Pacific Ocean with the Gulf of
Mexico and including the municipalities of Coatzacoalcos (Veracruz) and Salina Cruz (Oaxaca);
Puerto Lzaro Crdenas, comprising the ports adjacent municipalities of the states of
Michoacn and Guerrero; and Puerto Chiapas (Chiapas).

The three areas that are expected to be designated as SEZs have been selected for three main
reasons:
The five states in which these Zones are located (Michoacn, Guerrero, Oaxaca, Chiapas
and Veracruz) lag behind and are among those with the highest levels of poverty in
Mexico.
The zones currently have potential in a variety of industries
The zones are strategically located and present important logistical advantages.

February 2016
 Type of policy instrument(s)
Tax incentives for companies investing and creating jobs in those areas.
Foreign trade facilities; production and transportation within the SEZs will also benefit
from the Free Trade Agreements that give access to more than 45 countries.

Streamlined regulations to doing business (one-stop shop), and special customs

regulations.

Increased investments in competitive infrastructure, including in energy,

telecommunications and multimodal connectivity with the rest of the country and
international markets.

Policy challenges
Tackling unfavourable contextual conditions:

Unlike other SEZs around the world, Mexicos Zones are located at places with higher
concentrations of poor and less educated/trained people compared to the national average, and
where current conditions are precarious. This situation represents a great challenge for
Mexican policy makers.
Attracting activities with value added for the region:

To ensure that economic growth is sustainable, policy makers have the challenge of designing
policies to attract firms that will promote innovation in the region and will build on existing
assets, while avoiding the attraction of footloose, low-value added activities.
Avoiding the potentially negative effects on the environment:
Southern Mexico shelters rich ecosystems that could be threatened by the development of
infrastructure and several economic activities as a result of the establishment of SEZs.
Actions undertaken to address challenges
Complementary policies should be designed and implemented in these Zones as well as their
surrounding areas, in order to attract high quality investments and talent, and achieve
sustainable growth. These include policies to improve the human capital endowment through
education; the improvement of health services; the expansion of financial services; and the
development of public infrastructure, including transport networks.
To reduce the unintended consequences on the environment, assessments of environmental
impacts of the development of infrastructure and new economic activities in the region will be
conducted.
Evaluation and outcomes of the scheme
The plan is yet to be implemented. Preliminary estimates, based on international experience,
indicate that the SEZs will attract around 500 enterprises to the region and create more than
150,000 jobs within 10 years of operation.

February 2016
 Sources
Harrup, A. (2015), Mexico to create economic zones to develop poor southern states, The Wall
Street Journal, September 29, 2015. Available online: http://www.wsj.com/articles/mexico-to-
create-special-economic-zones-to-develop-poor-southern-states-1443568912 (last accessed on
January 27, 2016)
Presidencia de Mxico (2016) Zonas Econmicas Especiales, Available online:
http://www.presidencia.gob.mx/zonaseconomicasespeciales/ (last accessed on January 27,
2016)
*Information transmitted to the OECD by Sandra Lizeth Cordova (Secretara de Hacienda y
Crdito Pblico, Mexico).

Background
This document is part of a repository of examples of innovation policies that have for explicit aim
to contribute to territorial, industrial and social inclusiveness. The repository is part of an
innovation policy toolkit developed for the Innovation for Inclusive Growth project and gathers
national innovation policy programmes that:
A. Explicitly target lagging and less innovative regions (outside of regions that are highly
innovative) or by design are more likely to support these lagging / less innovative regions.

B. Explicitly aim to include in innovation activities individuals and groups that are not usually
participating in those activities and in support of broadening the group of innovators.

C. Explicitly aim to foster innovation activities in non-innovative firms, in particular by targeting

non-innovative sectors and non-innovative Small and Medium-sized Enterprises
(SMEs).
Policies are searchable by themes and characteristics on <upcoming webpage>.

Contact:

Sandra Lizeth CORDOVA SOLIS

Unidad de Productividad Econmica
Secretara de Hacienda y Crdito Pblico

February 2016