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Morelia is a well-kept secret in the Mexican maquila landscape. The city is only three hours away from either Mexico City or Guadalajara, it has an abundant labor force, good educational facilities and ample water resources. It is a good spot for apparel manufacturing companies. Its main drawbacks are distance from the border and lack of support and service companies.
KEY INDUSTRIES
MAIN COMPANIES
ADVANTAGES
DISADVANTAGES
The Overview Morelia is a well-kept secret in the Mexican maquila landscape. The city is only three hours away from either Mexico City or Guadalajara, it has an abundant labor force, good educational facilities and ample water resources. It is a good spot for apparel manufacturing companies. Its main drawbacks are distance from the border and lack of support and service companies. The City POPULATION
Morelia, capital of the state of Michoacan, has an estimated population of 658,700 people, which represents 15.4% of the state population. This population is growing at a 2.35% annual rate, higher than the 1.8% national rate for Mexico. LOCATION
Morelia is located in the center of the Mexican Republic. It shares borders with the states of Guanajuato, Jalisco and Queretaro to the north, the state of Mexico and Guerrero to the east, Colima and the Pacific Ocean to the west. Michoacan is a land of tall volcanic ranges, rivers, large lakes and forests. Morelia: Average Temperature by Season
PROXIMITY TO IMPORTANT U.S. AND MEXICAN DESTINATIONS
INDUSTRY SNAPSHOT The manufacturing industry in Michoacan is not as developed as in other locations. The lack of an adequate road infrastructure may have hampered the state’s economic development in the past, though new projects are currently underway to improve and expand this network. Agriculture plays an important role in Michoacan’s economy generating 17.5% of the state’s domestic product. Michoacan is Mexico’s largest producer of avocados, strawberries and peaches and the third largest producer of sorghum. Other significant crops include sugar cane, limes, bananas, mangos and guavas. Michoacan is also Mexico's second largest producer of pine and oak, and accounts for 15% of Mexico's timber production. Other important activities include paper production as well as the mining of copper, manganese, mercury, silica, kaolin, marble, onyx, and mica. The iron and steel industry produces high-quality steel, metal sheets and pipes. The commercial balance of the state is positive. Export activity, although limited, has been steadily increasing. During 2003, exports increased by 63% in relation to 2002. Exports are concentrated on very specific sectors such as steel, fertilizes, and the agricultural sector. The main destinies of exports are the United States with 54%, Europe 19.2%, South America 13.7% and Central America 8.1%. The maquiladora industry in Michoacan is limited, representing only 0.16% of total export activity. Refer to the following table for a snapshot of export activity.
(Source: Ministry of Economy, with data from Banco de Mexico) The Workforce DEMOGRAPHICS EMPLOYMENT CONSIDERATIONS UNEMPLOYMENT AND SUB-EMPLOYMENT SKILL LEVEL The workforce in Morelia has expertise in the agricultural and metal industries. In general, the skill level of the workforce is about average when compared to the national level. At the beginning of 2003, the private sector in Michoacan launched the Center for Competitiveness and Product Quality, which has the objective to provide with consulting services, courses, and training with the goal of improving product quality. EDUCATION and TRAINING PROGRAMS Morelia has been for many years a regional center for higher education. Founded in 1540, the "Colegio de San Nicolas" is the oldest operating college in the continent. There are 10 technical high schools in the city, including:
Ten universities offer degrees in Communications, Law, Business Administration, Accounting, International Business, Information Systems and Civil Engineering among others. The main institutions for higher learning in the city are the following: Main Institutions for Higher Learning
The State of Michoacan’s Institute for Job Training (ICATMI) was created in 1992 with the objective to provide high quality training programs. TURNOVER RATES Morelia benefits from relatively low turnover rates and a stable labor force, a consequence of the high sub employment rates and limited industrial activity, as well as its distance form the border. The economic development department of Michoacan does not have a published figure but we estimate the rate to be Click Here To Register lse} Click Here To Register {endif} The Operation WAGE RATES
Wages are the key driver of Mexico’s manufacturing industry. It is, therefore, one of the first and most important topics that any company moving into Mexico will consider. TeamNAFTA touches on the overall wage issues in our Info Center but we have also provided some sample wages for Morelia below. While we have access to more detailed wage information, we typically present that information in a tailored report addressing a company’s specific labor needs.
(Source: Area industry wage studies and interviews with local managers, $11.00 pesos/USD) INDUSTRIAL COSTS dollar @ 11 pesos/USD
*CFE.-June 2004,** CRE.-June 2004, *** Pemex June 2004 INDUSTRIAL REAL ESTATE Michoacan has an adequate infrastructure to support maquila operations. It is one of the states that generate more electrical energy in the country, due to its 13 hydroelectric plants and distributors that produce 15% of national production. Michoacan is also one of the few regions in central Mexico with abundant water supply. There is only one industrial park in Morelia, the Ciudad Industrial Morelia, and 7 industrial parks in Michoacan:
AVAILABLE SPACE These parks offer all services necessary for manufacturing including water, electricity, natural gas and fiber optic telephone services. Here are current industrial real estate costs of Class “A” plants in the parks: Industrial Real Estate US dollars/sq. ft.
TRANSPORTATION Highways There are 8,684 miles of highways in the State of Michoacan. One of the main highways, the 4-lane Federal Highway 54 connects the city of Morelia with both Mexico City and Guadalajara, the two biggest cities in the country, both of which are located at a 3.5 hour distance. Recently inaugurated, the “Siglo XXI” highway connects the city with the deep sea-port of Lazaro Cardenas, which is located 250 miles away. The highway network in Mexico reaches virtually any location, connecting Morelia with the rest of the nation and with the U.S. Given its central western location, Morelia provides quick access to both the pacific and the central western NAFTA corridors:
Roads in Morelia are adequate. The main road in the city, “the Perfiferico”, encircles the city. In fact, most of the population lives within this circle though the city has grown beyond that. Railroads Michoacan has 799 miles of railroads. Ferrocariles Nacionales de Mexico offers passenger and freight rail services to the cities of Apatzingan, Uruapan and Morelia, connecting these cities to Mexico City. The network reaches Laredo, TX, and connects with several other cities in the Southeast U.S. Air Transport There are three airports in the State of Michoacan, an international airport in Morelia and two national airports located in Uruapan and Lazaro Cardenas. The Morelia international airport, located 15 miles from Morelia offers connecting domestic and international flights to Mexico City, Guadalajara, Zacatecas, Tijuana and U.S. cities such as Los Angeles, San Francisco, Chicago, and San Antonio. CUSTOMS Mexican Customs staffs offices in Morelia. Some of the services offered at the customs offices include:
INCENTIVES The government offers incentives in relation to payroll taxes, training programs, and assistance in the procedures for meeting requirements at three levels of government (federal, state, and municipal). Additional incentives can be negotiated, depending on the location of the new project, type of manufacturing activity, and the creation of jobs. The incentives subject to negotiation include: infrastructure works, fees with the State Public Registry, and construction permits. STATE OF MICHOACAN INCENTIVES FOR INVESTMENT The state government, municipal governments and the Trust Fund for Industrial Parks in Michoacan are authorized to promote incentives for attracting productive investment capital. Incentives offered are related to:
(Source: Bancomext, and State of Michoacan, 2004)
The Support SUPPORT SERVICE COMPANIES There are few support and service companies for the maquiladora industry in Morelia since there is not a large industrial market. Support for specialized operations will likely come from Guadalajara and Mexico City. The Politics UNIONS All major national labor unions have representation in Morelia, including the Mexican Confederation of Workers, or CTM, the Revolutionary Confederation of Workers and Farmers (CROC), as well as the Revolutionary Confederation of Mexican Workers (CROM). Nevertheless, unionized labor in Morelia does not represent a major impediment to new starts or expansion, and there have been no labor strikes since 1997. POLITICAL INFLUENCES The Governor of Michoacan, Lazaro Cardenas Batel (from the PRD party), has made very clear that it is a priority for his government to attract Foreign Direct Investment (FDI) to the State, in particular investments that contribute to forge productive chains or industry clusters. The incentive program for investments of Michoacan is one of the most aggressive ones in Mexico. The government of the State of Michoacan jointly with the Federal government and the private sector created a specialized organization to promote exports, the Michoacan Business Centre for Exports (Centro Empresarial para las Exportaciones de Michoacan). OTHER COMPANIES
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