Guanajuato's automotive industry creates jobs and spurs development in education

For decades the state government has prioritised the development of the automotive industry, and these efforts have led to it becoming a vital sector for Guanajuato. As such, it is now recognised as one of Mexico’s great economic success stories. “Until 1991, when General Motors arrived in Silao, the state’s economy was mainly based on agriculture,” Fabian Gamboa, the head of the Guanajuato office of ProMéxico, the national trade and investment promotion agency, told OBG. “Now, we have a diverse and thriving automotive cluster.”

The state produces over 850,000 cars per year, 75% of which are exported. Guanajuato is home to 170 tier-1 suppliers that produce tyres, bumpers, axles and other components for manufacturers. Auto-parts companies employ more than 80,000 people and another 20,000 people are employed at assembly plants. Automotive exports now total over $24bn a year. “It’s a sector that grew very rapidly and it continues to generate a lot of jobs,” Alfredo Arzola, director of the Automotive Cluster of Guanajuato, an industry association, told OBG.

Guanajuato is already the second-most important state for car manufacturing in Mexico, and a number of major manufacturers are expanding their operations in the state. For example, Toyota is opening a $700m factory in the town of Apaseo el Grande in 2020, which will employ around 2000 workers and is expected to create 10,000 jobs indirectly. Some have speculated that by 2020 Guanajuato will be the top car-producing state.

Long-term Development

The rapid consolidation of auto and auto-parts manufacturing in Guanajuato is a relatively recent phenomenon. Unlike northern Mexican states such as Baja California and Chihuahua, Guanajuato did not develop maquiladoras, low-value-added assembly plants that are generally in cross-border areas, in the 1970s and 1980s. Instead, the state has implemented long-term development strategies for the automotive industry across successive governments, beyond a single governor’s term in office. In the early 1990s, as Mexico transitioned into the era of the North American Free Trade Agreement and embraced a new development strategy based on globalisation and trade, politicians in Guanajuato crafted a forward-thinking plan to transform their state into a modern manufacturing hub.

This process began under the administration of Carlos Medina Plascencia, when the governor created the 21st Century Guanajuato programme in 1992, which sought to strengthen the state’s road infrastructure and logistics to make it an attractive destination for automotive manufacturers. The programme’s first sign of success came in 1995, when General Motors opened its first facility in the state in the city of Silao. The industry took off from there, with a number of other foreign manufacturers setting up operations in the state as well, and by 2008 Guanajuato’s auto cluster included over 80 companies. In the years since, Mazda, Honda, Pirelli and Volkswagen have opened facilities in the state.

Decades of investment in modern infrastructure have ensured the state remains attractive to manufacturers. Today, Guanajuato has a dry port and a network of motorways, serving as a connection point between the country’s two most important motorways. “Guanajuato has been very smart about combining public and private investment to build the infrastructure that the state’s auto cluster requires to stay competitive and compete with other parts of the globe,” Santiago Villanueva, CEO of Grupo Vise, a local construction firm, told OBG.

Trained Workforce

Guanajuato’s success in developing a robust automotive industry has been aided by the state’s investment in education, as human resources are a vital component of production. Public schools, technical schools and universities are all part of the matrix of institutions that are helping to train Guanajuato’s young job seekers for work in the auto industry.

“One thing that distinguishes Guanajuato from other states is its skilled workforce,” Raul Noriega, deputy minister of innovation of Guanajuato, told OBG. “In the 1990s the government started making a plan for the long term, creating institutions to train technicians and engineers.” In order to upskill a new generation of industrial assembly workers, the State Job Training Institute was established, an academy that prepares students for technical jobs.

Technical schools and on-the-job training programmes can elevate job prospects for locals looking to develop their careers in the auto industry. “In more recent times Guanajuato has continued to increase the skills of young people in line with the needs of businesses,” Noriega added. Because they are major employers, the state government has been receptive to input from auto companies regarding making education and training courses as applicable to the industry as possible.

While the overwhelming majority of students in Guanajuato complete middle school, many young people join the workforce prior to completing high school or enrolling in university. Overall, the majority of all young people in Guanajuato have finished at least basic education, where students are aged 3 to 14, over 60% of the state’s residents older than age 15 have completed elementary school, and 18.4% of residents have completed high school. In the 2017/18 academic year 60.9% of the state’s young people aged 15 to 17 were enrolled in high school. On average, residents in Guanajuato have 8.4 years of schooling, more or less on par with the national average. Guanajuato’s auto industry benefits from this large pool of workers, and young people taking on entry-level work can expect to gain new technical skills on the job. “Many technicians are now trained inside the plant,” Arzola explained.

Specialised Skills

The state is also training a smaller contingent of graduates who have attended university and completed advanced coursework, and are ready for more specialised jobs. The state has more than 139,000 university students who study at the University of Guanajuato, which has campuses in the León, Guanajuato City, Celaya and Irapuato-Salamanca; the National Polytechnic Institute, which has campuses in Silao and León; and the University of León, which has a campus in the north-east, south-east and a third campus in San Miguel de Allende; among other institutions.

The sector has also been benefitting from the shift towards higher rates of enrolment in university education, which should see locals fill higher positions over time. In the 2017/18 academic year 29.5% of all young people aged 18 to 22 in Guanajuato were enrolled in university, up from 21.1% in the 2015/16 academic year. However, the state is still behind national averages, as 38.4% of this age group in Mexico were enrolled in university in 2017/18.

Private companies have long worked with the Ministry of Innovation of Guanajuato and other educational leaders in the state to optimise training and job opportunities, especially for young people. “General Motors, Toyota, Mazda and other receive many of our students and bring them in for internships,” Noriega told OBG. “Most businesses have a relationship with our technical schools.”

Mazda, for instance, has forged connections with the University of Guanajuato and with state-run National College of Technical Professional Education schools. Mazda has also partnered with the state government to create an apprenticeship programme that offers on-the-job training at entry-level positions, and another programme that sends young employees to Japan for a year of specialised training.

Looking Ahead

There are more than 350 automotive companies with operations in Guanajuato, and as local factories continue to attract additional suppliers, the state is quickly developing a strong cluster and a specialised, automotive-oriented workforce. Due to the revenue it generates and the employment opportunities it provides, Guanajuato’s auto industry is one of the leading examples of Mexico’s 21st century economic transformation. The state has already achieved a great deal of success and is looking to continue to attract new investment, diversify, and move towards higher value-added production. “In 2004 we had $200m in exports. In 2017 we had exports worth $24bn. That’s a big difference,” Ricardo Alaniz, director of Concamin, the Bajío region’s confederation of business chambers told OBG. “Now Guanajuato is known all over the world because of its automotive industry.”

Guanajuato is moving forward with a plan called Guanajuato 2040, under which the automotive sector will continue to be the main motor for the state’s economy, and it continues to be the central focus of the government’s long-term development plans.

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The Report: Mexico 2018

Guanajuato chapter from The Report: Mexico 2018

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