Led by a newly revitalized economy in Tijuana, Baja California’s industrial sector is growing once again. The state’s four major cities – Tijuana, Mexicali, Ensenada and Tecate, each have seen major projects or developments during the past 12 months that make them more attractive to foreign investment.

            “You’ve got a market here that is improving everyday,” says Gary Swedback, president of NAI Mexico, a commercial real estate firm. “Tijuana went through the same consolidation the last two years as the rest of North America did, and some sectors were hit really hard, but the good news is that we’re finding new sectors that are moving in behind them.”

            Chief among the new sectors are medical device, furniture, metal fabrication and automotive.

            In Mexicali, new companies such as Excel Logistics, Kimball International and Berg opened operations within the past year. Tecate is expected to benefit from the Toyota project under development about 10 kilometers from town and Ensenada’s port is being improved.

            Tijuana and Baja California are riding the resurgent maquila industry. In Tijuana, the demand is such that an industry group estimates there are 15,000 jobs that need to be filled. City officials are projecting an additional $300 million in investment – just this year.

            According to Swedback’s research, more than 3.2 million square feet of industrial space were vacant in Tijuana just one year ago. Today, only 1.5 million square feet are vacant. With a total capacity of 42.3 million square feet, that equals a vacancy rate of 3.6 percent.

            While the electronics industry is still king in Baja California, a new automotive industry is starting to develop. Toyota is building an assembly plant near Tecate and the state’s four major cities all expect to see increased supplier activity as a result.

            “We haven’t seen the suppliers move in en masse yet, but they are starting to pop up,” Swedback says.

            Tijuana has more manufacturing facilities than any city in Mexico and the electronics sector represents about 30 percent of the manufacturing industry in Tijuana. Companies with maquiladora plants in Tijuana are mainly U.S. corporations, but also include firms from Southeast Asia and Europe. Among them are Sony, Samsung, Sanyo, Hitachi, Mattel, Sharp, Philips, and others. Labor and a readily available and mature workforce, including technical personnel, competitive labor cost and easy access to the United States together with the services and facilities available in San Diego make it an ideal manufacturing location.

            Mexicali hasn’t experienced the maquila recovery as much as has Tijuana, but there are promising signs here too.

            “Tijuana was always the largest market in the state, but starting in the mid 1990s Mexicali did a good job of promoting itself,” Swedback says. “They were able to entice a large number of computer companies.

            “They haven’t seen the new growth yet that Tijuana has, but Mexicali is still a very good market.”

            In fact, Mexicali’s infrastructure package is considered the best in Mexico. It has ample water, electricity, natural gas, modern highways, two international ports of entry and easy access to the U.S. Interstate Highway system. Other Mexicali advantages include:

            •Newly constructed, modern four-lane highway to Tijuana.

            •Cerro Prieto geothermal energy plant.

            •Natural gas in all industrial parks.

            •Fiber optic telephone lines for data transmission and satellite communications.

            •The first maquila landfill, which allows maquilas to save on disposal costs for non-hazardous waste.

Other industries

            In recent years, Baja California’s agricultural production and livestock have also reached world scale levels of quality. Vegetables, cotton, fruits and flowers grown in the valleys of Mexicali and in the coastal areas of the state are successfully exported throughout the world. It has also become an important center for the production of dairy and meat products.

            Fishing and aquaculture in Baja California is mainly dedicated to catching tuna, sardines, abalone and lobster; while hatcheries have been developed to cultivate species such as oysters, catfish and scallops.

            Mining is still a young activity in the state but with a great potential because of the presence of abundant mineral reserves that range from precious, industrial and iron and steel metals to stone material for construction purposes.

            In recently important investments related to mining have been attracted to the state as a result of favorable market conditions and new technologies that make commercial exploitation possible.

            With the implementation in 1994 of the North American Free Trade Agreement, companies that have a commercial nature as well as industries have the possibility of supplying themselves with foreign merchandise at the border region with preferential customs terms. This offers advantages that have spurred an increase in commerce and services available in the region.

            Baja California has had a traditional vocation towards foreign commerce and it is the leader among the northwestern states of Mexico in the number of commercial centers goes.

            Baja California has an important infrastructure that supports tourism activities. Investment in tourism has mainly been channeled toward the construction and renovation of facilities such as hotels, golf courses, movie studios, marinas, residential areas and shopping centers, among other.

Transportation infrastructure

            Work currently is underway to improve the Mexicali-San Felipe highway and there are highways such as Mexicali-Tecate-Tijuana; Tijuana-Ensenada; and Mexicali-San Luis Río Colorado highways that provide first class ground transportation.

            The airport system includes international airports in Tijuana, Mexicali and San Felipe. Tijuana is among the five airports that have the most passenger flow in the country. There is also a military and commercial airport in Ensenada that regularly receives private flights.

            The Port of Ensenada is ranked second in Mexico in  the number of tourists it receives and it is being transformed to host the growing volume of cruise liners and great draught ships that want to anchor on the coast of Baja California.

            In the state there are more than 40 loading and cargo companies that can provide service nationally and internationally. As a result of the North American Free Trade Agreement, it is expected that the number of cargo vehicles will increase with regard to the companies that are in the United States that have been authorized to provide an international cargo service in the border states of Mexico.

            Baja California has six ports of entry, by land, with California; and a maritime customs port in Ensenada. The customs offices for land vehicles are connected with the North American cities of San Diego, San Ysidro, Calexico and Algodones. All ports of entry have customs services and facilities.

            These facilities are among the most modern and large in the country; they were designed to provide service during the next 15 years. There are more than 70 registered customs agencies that provide service to businessmen engaging in commercial activities in foreign countries.

Utilities

            Electric power is provided through different generators that satisfy the needs of the population, commerce and industry. Currently they service nearly 600,000 customers, of whom 53,000 are commercial users and 3,000 are industrial. The electrical power industry has the productive capacity to supply the demand during the next seven years.

            Another important power alternative is the natural gas pipeline in Mexicali that provides natural gas to the productive plants.

            In Baja California access to tap water is guaranteed. The water source that supplies the Mexicali Valley comes mainly from the Colorado River, as well as from agricultural water holes that assure water supply all year long. The coastal and central areas depend greatly on water holes and, in a lower scale, on rain. With this modern irrigation systems have made the consumption of water more efficient.

California’s impact

            Baja California industry also benefits from its close proximity to California. The relationship between San Diego and Tijuana benefits both cities.

            San Diego’s leaders made a commitment in the 1980s to diversify the economy and encourage the growth of technology companies. They were motivated by the desire to move away from the boom or bust cycles that dependency on narrow core industries had created.

            No one could have predicted the success with which the region has developed key industries. Developing in parallel - and in today’s technology environment, finding more and more cross-fertilization opportunities - San Diego’s core industry sectors have become leading centers for biotechnology, communications and software development.

            Fueled by the research being done at San Diego’s world-class universities and institutes, and supported by a business-friendly public sector, the San Diego region’s economy is recognized as one of the best for starting a business or pursuing a career.

            What makes the region thrive? Clearly, one of the world’s best climates is conducive to innovation and entrepreneurship. Constant sunshine, the serenity of the Pacific Ocean, and the ability to move from beach to mountains to desert within a few hours provides ample inspiration for the thousands of scientists, engineers and researchers who call San Diego home.

Industry information

            In June 2004 San Diego was named the No. 1 biotech cluster in the United States  by the Milken Institute. The honor was bestowed for the region’s climate of innovation and its success in bringing products to market, establishing new companies and creating jobs. Recently, Biosite Inc.’s Triage Cardio ProfilER and Biogen IDEC’s Zevalin have joined Agouron (now Pfizer) Pharmaceuticals’ Viracept, Ligand Pharmaceuticals’ Targretin, and Biogen IDEC’s Rituxan as successful products developed in San Diego. Corporate giants Merck, Pfizer, Dow, Novartis and others have developed key partnerships with local biotech pioneers, fostering growth while providing companies with the financial freedom to develop innovative new products.

Communications

            San Diego’s communications industry cluster was one of the region’s first large emerging technology clusters and continues to experience growth. Communications technology powerhouses like QUALCOMM, Motorola, LG and Nokia have operations in San Diego that help solidify the region’s position as the wireless capital of the world. San Diego is home to approximately 600 communications firms that thrive on the region’s established network of support industries, professional trade organizations and dynamic educational community. Additionally, the San Diego region is extremely supportive of start-up companies, offering many resources that make it easy for an enterprise to find a niche.

Defense and transportation manufacturing

            San Diego’s defense and transportation manufacturing industry, long a workhorse of the San Diego regional economy, remains a major economic force today. The region holds the largest military concentration in the nation and is home to the Space and Naval Warfare Systems Center (SPAWAR), with an annual operating budget of $4.6 billion and $342 million flowing each year to more than 50 companies in the San Diego region.

Computer and electronics manufacturing

            This industry plays a vital role in San Diego’s regional economy through production of essential components for other industry clusters. San Diego’s computer and electronics manufacturing cluster firms produce and assemble electronic components, with an emphasis on high technology and computer-related products. Companies like Sanyo, Sony, Hewlett-Packard, AMCC and Cymer thrive in San Diego due to the depth of business and workforce talent, world-class university research programs, and a network of support entities committed to nurturing technology companies.

Software and computer services

            Software companies regard the San Diego region as an ideal location for technological innovation. Companies such as Fair Isaac and Company (formerly HNC Software), Maxim Systems, Lightspan, Oracle and SAIC thrive in San Diego due to the availability of skilled workers, the outstanding quality of life, access to capital and support organizations, and the presence of superior research institutions.