Una Estrategia de Crecimiento Económico para Hermosillo

Hermosillo se está quedando atrás en materia de crecimiento económico y diversificación productiva. Históricamente la ciudad se ha beneficiado de una fuerte presencia manufacturera, liderada por Ford, y un capital humano de alta calidad; sin embargo, se quedó rezagada con respecto a ciudades comparativas en términos de creación de empleo y diversificación económica entre 2010-2020. Este bajo desempeño se deriva principalmente de un menor crecimiento y diversificación de la industria manufacturera en comparación con ciudades mexicanas más dinámicas. Es importante destacar que Hermosillo mantiene importantes ventajas competitivas, sobre todo en infraestructura logística, costos de y acceso a electricidad, y calidad del capital humano. Pero también enfrenta retos en materia de sustentabilidad del agua, de asequibilidad y de oferta de vivienda, así como de movilidad urbana. Hermosillo debe encontrar una combinación de políticas públicas que le permitan capitalizar en sus ventajas, así como solucionar las potenciales restricciones al crecimiento que va a enfrentar. 

Hermosillo tiene claras oportunidades para acelerar su crecimiento económico. Hay tres cambios importantes en el contexto global que Hermosillo puede aprovechar: la transición energética, la relocalización de las cadenas de suministro y el boom del comercio internacional de servicios digitales. Estas tres tendencias se alinean particularmente con algunas de las ventajas competitivas existentes de Hermosillo. La ubicación estratégica de la ciudad cerca del mercado estadounidense, la mano de obra calificada, sus instituciones educativas y los abundantes recursos solares la ponen en buena posición para capitalizar estos cambios a través de acciones de política pública.

Las oportunidades económicas de Hermosillo podrían desbloquearse si la ciudad resuelve estratégicamente sus principales limitaciones. La gestión sostenible del agua y la mejora de su planificación urbana, particularmente en vivienda y transporte público, son las restricciones más urgentes que, una vez atendidas, permitirían a la ciudad crecer a un ritmo más cercano a su potencial. El incremento de la oferta vivienda y el desarrollo de un sistema de transporte público eficiente reduciría los costos de vida y los costos laborales para las empresas, haciendo a Hermosillo más atractiva para trabajadores e inversionistas. A su vez, es necesario establecer un modelo sostenible de gestión del agua que permita garantizar el crecimiento futuro de la ciudad. La resolución de estas limitaciones es esencial para posicionar a Hermosillo como un centro importante para las cadenas de suministro de manufactura avanzada, de la industria verde y de servicios digitales en el norte de México. La ciudad tiene muchos elementos a su favor para prosperar, pero requiere abordar estas limitaciones de manera coordinada para desbloquear su próxima fase de crecimiento económico.

Growth Through Diversification in Hermosillo

In this report, we study Hermosillo’s economic performance and assess critical issues affecting the city’s ability to achieve stronger economic growth. Although Hermosillo is far from experiencing economic stagnation, it fell behind other cities that managed to become successful economic hubs between 2010 and 2020. The main reason behind this trailing growth is Hermosillo’s relatively low diversification and investment dynamics, especially in the manufacturing sector. We apply growth diagnostic testing on various potential constraints to economic growth: logistics, electricity, water, human capital, housing, and transportation. Although none of them have directly constrained economic growth in the past, some are explicit threats to increasing growth in the future, thus catching up with high-performing peers. Electricity, human capital, and logistics are comparative advantages, while water, housing, and transportation are threats. 

In 2025, Mexico is expected to start a new period in its economic history marked by the promise of nearshoring and a new presidential administration. In the past, Mexico has gone through milestones that heavily impacted its economic development path, like the establishment of NAFTA and the China Shock (Hanson, 2010). The rise of Northern Mexico and other regions like El Bajío as global manufacturing hubs has resulted from greater integration with the North American market. This has brought foreign direct investments (FDI) targeted at establishing manufacturing sites primarily to cater to US demand and exports to the rest of the world. Mexico holds high expectations that nearshoring will bring opportunities of the same or greater magnitude. In that context, Hermosillo stands out as a city with the potential to exploit those opportunities and enhance its economic transformation. It is crucial to analyze its binding constraints for economic growth, comparative advantages, and potential concerns to understand how well-positioned Hermosillo is to take advantage of this momentum. 

Following the introduction and a methodological overview, the report is divided into four main sections. Section 3 provides a growth perspective on Hermosillo; Section 4 presents an analysis of growth constraints; Section 5 explains the local diversification challenge in detail; and Section 6 describes strategic policy areas to accelerate growth that result from this growth diagnostic analysis. 

Green Growth Opportunities for Hermosillo: “Powershoring”

The process of global decarbonization offers significant growth opportunities for Hermosillo, given its outstanding solar power potential. As fossil fuels are relatively cheap to transport, they created an “energy flat world,” allowing industries to thrive in locations that are far away from energy sources. Renewable energy, however, is much more costly to transport. Because of this, energy-intensive industries are naturally incentivized to relocate to areas with competitive green energy in a decarbonizing world ––something known as “powershoring.” Powershoring is a green growth opportunity for Hermosillo; that is, a pathway for Hermosillo to accelerate its own economic growththrough helping the global economy to decarbonize. Powershoring is becoming an increasingly important opportunity as businesses face carbon taxes and other costs inconsuming fossil fuel energy, which come from both regulators and consumers.

Hermosillo’s powershoring strategy should involve both attracting new industries and exploring new growth opportunities for existing industries. On the intensive margin of existing industries, companies may expand by integrating renewable energy into their own consumption of renewable sources. Hermosillo can build on its strengths in the food and agricultural sectors. On the extensive margin of new industries, attractive opportunities arise in the chemicals manufacturing cluster, the glass and ceramics cluster, and the semiconductors and electronics cluster. The industries identified in these clusters can be targeted for potential investment promotion efforts, given their large energy demands. In this report, we provide initial observations on several of these industries from an investment promotion perspective. 

To establish Hermosillo as a prime destination for industries seeking lower emissions, government and industry must work together on long- and short-term strategies. A significant obstacle is the intermittency of solar energy, which is subject to weather variability and the unavoidable reality that the sun does not shine at night. A current approach by companies is to use energy from the grid in combination with green energy certificates to offset resulting carbon emissions, but this practice is untenable for some end consumers. Over the longer-term, intermittency could be resolved through advances in battery storage and connections to neighboring regions, where wind power and other complementary renewable energy can be sourced. Since decarbonizing the grid is a long-term scenario, early movers can capitalize on opportunities through green industrial parks that provide a dedicated supply of renewable energy. The region’s energy infrastructure will need to evolve to ensure stability, but the short-term focus should be on industries that align with Hermosillo’s existing capabilities and renewable potential. Prioritizing sectors where processes are more easily electrified, and water needs are manageable appears to be the most logical place to begin a dynamic process of attracting and growing powershoring opportunities in Hermosillo.

Diagnosing Wyoming’s Workforce Challenges

Wyoming is facing two distinct labor market challenges: in the short-term low workforce availability is a constraint while in the long-term job and wage growth have stagnated. Currently, Wyoming’s labor market is characterized by tightness and employers are struggling to fill positions. However, the current tightness of the labor market is not a phenomenon that is specific to Wyoming but instead is prevalent across the country. What sets Wyoming apart is the lack of growth in employment and wages over the long-term. Understanding these differing dynamics is important because policy responses may attempt to address the short-term issue without considering the underlying structural causes of the long-term dynamics. This will likely be ineffective and not lead to lasting change. For lasting change, the structural issues of the long-term dynamic need to be addressed.

An often-discussed solution is to increase the supply of training and education – this has merits in its own right but will not solve the long-term labor market challenge facing Wyoming. Only 38% of all jobs in Wyoming require tertiary education, the second lowest of any US state. Additionally, our analysis shows that the returns to a tertiary degree in Wyoming are significantly below those of its peers. Unsurprisingly, the lack of demand for tertiary-educated workers leads many young Wyomingites with a tertiary degree to leave the state. Overall, however, Wyoming has become an exporter of well-trained young people. Increasing the supply of tertiary education will not address the underlying structural issues facing the labor market.

A main driver of Wyoming’s lagging performance has been the comparatively low labor productivity in the state. Most of Wyoming’s industries have a lower output per worker than the respective national industry and pay lower wages on average. Industries that fall into this category cover 82.8% of all employment in Wyoming. The few industries in which Wyoming is more productive than the rest of the US are mostly related to natural resource extraction. Wage dynamics of occupations in the state exert a similar pattern where STEM-related occupations have not seen much growth, indicating low demand in the state.

To address the long-term issue, Wyoming needs to create the conditions for a more complex economy that can use the potential of its human capital instead of excessively relying on its natural resources. The challenge is to attract and grow competitive companies in industries with strong demand. A critical factor in doing so is scale. Many more knowledge-intensive industries tend to develop in places that are larger urban agglomerations. Wyoming should focus on the positive forces of agglomeration to develop these industries and make use of the productive potential it has. Creating the conditions for this includes place-based investments and an enabling regulatory framework. In Wyoming, housing regulations have been an important barrier preventing further agglomerations, but efforts are underway to address this barrier.

In the short-term, solutions that are focused on increasing the available labor pool within the state appear most promising in easing the current constraint. This is especially true when they address structural barriers that could persist after the labor market cools off. Our work documents specific recommendations within the areas of childcare, justice-involved individuals, higher education, and out-of-state workers (Section 3.2) that aim to increase the participation from these labor pools in Wyoming’s workforce. These are labor pools that are significant in size and have underutilized potential in terms of labor force participation within the state.

Related project: Pathways to Prosperity in Wyoming

How would dollarisation affect Argentina’s competitiveness?

Argentina is in the middle of substantial economic reforms, both on the fiscal and monetary side. The country’s monetary policy programme aims to introduce a free competition of currencies, which would mean allowing multiple currencies to be used and to compete freely. Although official dollarisation (replacing the local currency with the US dollar) is unlikely to happen, according to recent government announcements, it might emerge as a potential outcome considering that it was a central part of the president’s economic agenda during the election campaign.

Research on optimum currency areas (which explores the extent to which geographical regions should share a common currency) does not show conclusively that dollarisation decreases exports or undermines external competitiveness. Yet insights from both economic theory and Argentina’s history indicate that dollarisation is likely to have a negative impact on the country’s ability to achieve export-led economic growth.

In this article, the authors examine:

The Economics Observatory (ECO) is a new project that bridges the gap between academic research, government policy and the general public. It’s led by Richard Davies, Professor in Practice at the London School of Economics’ School of Public Policy and director of the Growth Lab’s research collaboration at LSE.

Housing in Wyoming: Constraints and Solutions

Quantitative evidence supports the contention that Wyoming’s housing market is constrained, to a greater degree than many other parts of the US. Prices are persistently above expectations given economic fundamentals in most parts of the state, and the supply of new housing in Wyoming is on average less responsive to price increases than in other US counties. This has undermined natural population growth and contributed to a low amount of population density close to city centers in Wyoming, as compared to other US cities with comparable population levels. Importantly, this phenomenon is not simply the result of pandemic-era economic frictions. The evidence shows that these constraints have durably persisted in Wyoming. 

This housing constraint weighs heavily on the broader Wyoming economy, and chokes off growth in new industries that could add to the Wyoming economy beyond its natural resource base. Businesses consistently report a lack of access to workforce as a leading problem that ultimately results from a lack of housing. Some businesses have even tried to create their own housing for employees, and news reports abound of teachers and nurses who secure jobs in Wyoming communities but then have to leave because they cannot find housing.

Key problems behind Wyoming’s housing constraints include excessive regulations concerning housing density and insufficient investment in arterial infrastructure. For example, there is evidence that over-regulated minimum lot sizes in Wyoming are blocking the creation of supply to match free-market demand for houses with smaller amounts of land. Other areas of over-regulation include those concerning allowable housing types, building height, parking spaces per dwelling, and the housing approval process itself. This may be seen as surprising given Wyoming’s reputation as a low-regulation state, but Wyoming maintains restrictions that other states and countries have discarded as outdated and highly counterproductive. Besides outright restrictions on housing development, we find that the most common cost driver undermining the housing development has to do with low public investment in needed arterial infrastructure, especially water systems. Land supply as well as material and construction costs are not primary constraints to housing development across the state, but may matter for select communities.

We suggest a portfolio of policy changes for the state of Wyoming to explore in order to solve its housing constraints. One category of changes is regulatory, and focuses on deregulation, reducing bureaucratic overhead, and shifting from veto-cratic to democratic housing approval procedures. Another category is focused on investment on infrastructure to support housing, and exploration of state-local funding structures to facilitate continuous infrastructure improvement. If implemented, these changes will not only help to solve Wyoming’s housing constraints but also facilitate housing development in a way that combats urban sprawl, and in doing so protects open spaces outside of cities that Wyomingites value.

Related project: Pathways to Prosperity in Wyoming

A Growth Perspective on Wyoming

This report sets out to understand if the economy of the State of Wyoming is positioned to grow into the future. To do this, the report begins by investigating the past. To know where the state economy could be headed, and how that direction may be improved, it is critical to understand how the state developed the economic structure and drivers that it has today. Thus, Wyoming’s economic trajectory is explored over the long, medium, and short term. From this investigation, we find that Wyoming faces an overall growth problem, but we also find a high degree of variation in economic engines and growth prospects across the state. The problem that this report identifies is that the composition of economic activities is not positioned to sustain a high quality of life across all parts of the state.

“Across all parts of the state” is an essential part of the problem statement for Wyoming. While some local and regional economies in the state are growing and bumping up against identifiable constraints, other local and regional economies are experiencing sustained contractions and will require new sources of growth in order to retain (or expand) population and high quality of life. Since economic dynamics vary significantly across the state, analysis is conducted in as much geographic detail as possible. By combining historical and geographic dimensions of growth, this report aims to inform pathways for sustained and inclusive prosperity across Wyoming.

Related project: Pathways to Prosperity in Wyoming