Regulatory revamp: Efforts to improve the business climate attract investment

With an eye on diversification and increased value-added production and services, the state of Hidalgo has been working in recent years to revitalise its business climate to entice both domestic and international investment in a way that trickles down throughout the local economy, boosting salaries and improving livelihoods. To that end, the government has implemented what in May 2019 ratings agency Standard & Poor’s called an “ambitious plan” to make entering and operating in the state as smooth a process as possible, which could put economic growth above the national average.

Doing Business

The World Bank ranked Pachuca, Hidalgo’s capital, 19th out of Mexico’s 32 capitals in 2016. That same year, the current governor, Omar Fayad Meneses, took office, and his administration has taken a proactive approach to attracting investment. His administration implemented a single window and an improved regulatory system that reduced the wait times for permits and approvals. These efforts have already seen results, with the National Observatory of Regulatory Improvement ranking Hidalgo as the fifth-best state in terms of regulatory improvement.

Much of this has been under the umbrella of the Secretariat of Economic Development (Secretaría de Desarrollo Económico, SEDECO) of Hidalgo, which has been at the forefront of efforts to improve the business climate. “Our relationship with SEDECO has been highly collaborative during the development of the Guajiro Solar Plant,” Camilo Serrano, general manager for Mexico at Atlas Renewable Energy, told OBG, referring to the first solar energy park in the state. “Their direction was fundamental in enabling us to complete construction on time.”

Legal Framework

The overhaul of regulations has been central in the bid to build a business-friendly community. In early 2017 the state’s Congress approved regulatory improvement legislation that jump-started reform. “We believe the next frontier in improving regulations in Mexico is at the state and local levels, where businesses sometimes find opacity, corruption or difficulty getting permits,” César Emiliano Hernández Ochoa, national commissioner of the National Commission for Regulatory Improvement, told OBG. “It is encouraging to see states take the lead. And it’s not just politicians: in March 2018 Hidalgo’s judicial authority created a commission for regulatory improvement.”

These initiatives have led to greater security for investors, as well as faster times for opening businesses and receiving permits. In September 2018 the State Council for Regulatory Improvement approved the government’s proposal to simplify 730 procedures, with officials estimating this could save MXN700m ($36.2m). Additionally, municipalities in Hidalgo have agreed to grant construction licences within seven days maximum and allow the opening of new businesses within three days. Other legislative reforms have also improved the business environment, including two energy laws (see Energy chapter), a law facilitating telecommunications infrastructure (see ICT chapter) and a public-private partnership law passed in March 2018 that will speed up the tendering of infrastructure projects and introduce new financing models.

Secure Investment 

Hidalgo has also worked to enhance its reputation as an oasis of security, offering both citizens and investors a high level of stability. According to the 2019 Mexico Peace Index published by the Institute for Economics and Peace, Hidalgo was the fifth-most-peaceful state in Mexico. To improve safety further, in May 2019 Hidalgo opened a command centre that links 10,000 cameras and 20 drones to security and emergency services. These actions should improve the business environment, enhance investor confidence in the short to medium term and solidify momentum.