In a trend called powershoring, energy-intensive industry will locate closer to renewable energy sources, driven by cheap renewable energy (which is difficult to transport), and the need to decarbonise. Regions’ renewable energy resources and industrial capabilities shape the types of energy-intensive industries they can attract: some regions are best placed to produce very energy-intensive commodities (like green steel and green ammonia), while other regions are best positioned to host more complex industries that still require good clean energy supplies (like battery manufacturing or datacentres). Similarly, some powershoring industries have many spillovers and open up new pathways for regional economic growth, while other energy-intensive industries have fewer spillovers or open up fewer development pathways. This contribution explores these trends to help policymakers develop contextually aware powershoring strategies that can catalyse their best opportunities for economic development.

This book explores the complex and rapidly evolving urbanization of Amazonia, a vast, diverse, and ecologically critical region undergoing a profound transformation. Amazonia is now home to nearly 41 million urban residents across 895 settlements — and yet its urbanization remains poorly understood, underestimated in scale, fragmented in form, and frequently overlooked in policy.

Through multidisciplinary perspectives and contributions from more than 50 experts, this book examines how urban growth intersects with environmental degradation, social inequality, and gaps in governance. Despite these challenges, cities in Amazonia are also places of promising innovations, from tailored healthcare services and environmental monitoring to community-led planning and cross-border cooperation.

Rooted in both local insight and regional coordination frameworks, including the Amazonia Forever program, this work offers a holistic and evidence-based understanding of urbanization in Amazonia. It argues for urgent, coordinated action to guide sustainable, inclusive development — before current urbanization trajectories lead to irreversible ecological and social consequences. The book invites researchers, policymakers and practitioners to recognize Amazonia’s cities not only as sites of vulnerability but as key agents in shaping the region’s — and the planet’s — future.

Chapter four highlights successful practices and innovative approaches that address this region’s urban challenges. Some focus on people, improving healthcare, and mapping needs for riverine communities. Others emphasize environmental care, with cities leading sustainability efforts, nature-based solutions, partnerships and ecosystem restoration to boost resilience. It also stresses the importance of increasing prosperity by finding opportunities even under difficult, cross-border conditions

Keywords: urbanization, cities, urban areas, sustainability, climate, productivity, well-being, infrastructure, Amazonia, urban development

JEL Codes: R11; R12; O18; R58; J24; R42; Q54; Z13

Green objectives have reshaped public policy worldwide since the signing in 2015 of the Paris Agreement to limit global warming. Climate policy has moved from being one policy among many to an objective embedded in public policies at every level, including energy, industrial, fiscal, trade, development and foreign policies. However, a clear outcome from this policy shift is yet to be seen, with emissions still rising and climate impacts intensifying. There is also backlash against greening in a charged geopolitical environment.

Nevertheless, the chapters in this volume, written by a range of experts worldwide, show that in many countries and policy areas, green objectives are still driving fundamental changes and many lessons have been learned. The goals of reducing emissions and enhancing economic and societal resilience to climate change will persist as climate impacts become more evident, and as the green transition produces successes at city, regional and national levels. In this context, this Bruegel Blueprint offers a fresh intellectual framework for understanding how the green transition is shaping cross-sectoral impacts across the globe.

As the world decarbonizes, demand for products which enable the green transition will increase rapidly. Solar panels and wind turbines will be needed to generate renewable energy, and critical minerals like copper and lithium will be required for wiring and batteries. Many other products and services within supply chains for such “green products” have a similar dynamic but are less widely known. While reducing carbon emissions often comes in conflict with economic development goals, producing the products that enable the world to decarbonize presents a significant opportunity for places to diversify their economies and generate income for their citizens.

This section analyzes Hermosillo’s opportunities to produce green products. We analyze the industries which produce these green products and Hermosillo’s capabilities in those industries in the most granular detail that data currently allows. We find not only that Hermosillo can produce products needed for the green transition and thus capture new sources of income for its people and businesses, but also that many of these products are good stepping stones for future economic activities. In the process of learning how to produce these products, Hermosillo can better enable further diversification opportunities. We classify these opportunities accordingly, along both the intensive margin –– industries in which Hermosillo already has a revealed comparative advantage –– and the extensive margin, in which it does not.

The most immediate green opportunity for Hermosillo lies in the mining of metals. Critical minerals required for the green transition, such as lithium and copper, are present in Sonora, but recent federal policy changes threaten expansion and productivity. The Government of Sonora needs to leverage its experience dealing with mining interests, environmental issues, and the demands of local communities to help co-produce mining policies which are both sustainable and productive. These can have positive spillovers in Hermosillo in the form of mining services growth and the location of mining company headquarters in the city, as in the past.

Overall, Hermosillo has opportunities to leverage the green transition to help diversify its economy, but is not as well positioned as peers. Hermosillo will need to coordinate investment efforts in order to compete with peer cities, who are better positioned to take advantage of these opportunities today. Industries such as manufacturing of electronic components and semiconductors and manufacturing of plastics products are among the more feasible and attractive industries for Hermosillo to target for promotion. Coordinating the manufacturing of green inputs with efforts to take advantage of solar energy resources is a strong strategy for the city. Large solar parks will need to be constructed to harness the cities’ solar energy resources. By using the planned build-out of these industries as a source of final demand, Hermosillo may be able to out-compete peer cities in attracting a solar panel OEM, which would help diversify the city into electronic components and semiconductors, as well as into the manufacturing of electric generation equipment.

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.

Alarming rates of forest loss in the Colombian Amazon have created a perceived trade-off that the only means of achieving economic prosperity is by sacrificing the forest. This study finds little evidence of this trade-off; rather, we find that economic development and forest protection are not an either-or choice. Forest clearing is driven by extensive cattle-ranching as a means to secure land titles. In essence, the loss of some of the world’s richest biodiversity is the result of some of the least economically complex activities that fail to achieve economic prosperity in the region. If anything, the acceleration in deforestation has accompanied a period of economic stagnation.

The existing economic model in the Amazon – centered on agrarian colonization and mineral extraction – has not generated prosperity for the people, all while failing the forest. The exceptional diversity of the Amazon’s biome is not reflected in the region’s economy. The Amazonian economy is best characterized by its low diversity and low complexity. A significant proportion of employment is linked to public administration – more than in other departments of the country. Very little of the production in the departments is destined to be consumed outside the departments (“exported”).

This study seeks to define an alternative economic model for the Colombian Amazon from the perspective of economic complexity with environmental sustainability. Economic complexity research finds that the productive potential of places depends not only on the soil or natural resources, but on the productive capabilities—or knowhow—held by its people. This research finds that the Colombian Amazon will not become rich by adding value to its raw materials or by specializing in one economic activity. Rather, economic development is best described as a process of expanding the set of capabilities present to be able to produce a more diverse set of goods, of increasingly greater complexity. This model starts from the base of understanding the existing productive capabilities in Caquetá, Guaviare, and Putumayo, to identify high-potential economic sectors that build off those capabilities to achieve new, sustainable pathways to shared prosperity.

Achieving shared prosperity in the Amazon depends on the connectivity and opportunity in its urban areas. The primary drivers of greater economic complexity – and prosperity – are the cities in the Amazon. Even in the remote areas of the Amazon, the majority of people in Caquetá, Guaviare, and Putumayo live in urban areas. The low prosperity in the Colombian Amazon is driven by the lack of prosperous cities. The report finds that Amazonian cities are affected by the lack of connectivity to major Colombian cities that limit their ability to ‘export’ things outside the department to then expand the capacity to ‘import’ the things that are not produced locally as a means to improve well-being.

The world is rapidly shifting towards a lower-carbon economy, drawing a new map of comparative advantage in the process. As the global economy decarbonizes, it will bring about profound changes in the landscape of production, giving rise to new industries, markets, and pathways for economic development. This transformation will manifest through changes in global demand and prices for existing products but also through the emergence of novel technologies and industries, many of which will replace older, carbon-intensive practices and production methods. These trends will have a significant impact on the fundamental competitiveness of every economy. Therefore, it is crucial for national economic policies, including in the United Arab Emirates, to include a well-designed green growth strategy to harness the global drive towards a decarbonized world economy.

This report aims to identify green growth opportunities for the UAE through a structured approach and suggest concrete policy ideas to seize them. We analyze green growth opportunities along the following four pillars: (1) make the enablers of decarbonization; (2) make green versions of energy-intensive products; (3) capitalize on carbon capture, utilization, and storage (CCUS); and (4) export decarbonization-related know-how.

One of the most promising opportunities identified lies in the development of green industrial parks. The UAE should consider establishing such green industrial parks to attract energy-intensive industries aiming to switch to low-carbon production processes. These parks provide the necessary inputs to low-carbon industrial production in a concentrated geographical area. These include dedicated low-cost renewable energy, but also clean, high-temperature heat, low-carbon hydrogen, as well as carbon capture technology and other services necessary to certify the green nature of the production. A net-zero world will need to make things like steel, cement, chemicals, aluminum, and glass without emitting carbon. It will also need to develop fuels for ships, planes, and heavy-duty transport that have near-zero life cycle emissions, a large proportion of which are expected to come from renewable energy that is used to make hydrogen and liquid fuels. Low solar energy costs make the UAE one of the best places to develop low-carbon energy-intensive industries. Additionally, the UAE has a low cost of capital, which is an important comparative advantage since many of these industrial activities are highly capital-intensive. As the world transitions towards a decarbonized global economy, green industrial parks will drive high-value green economic activities to locate in the UAE, resulting in stronger exports, more value-added, and a future-proof economic model for the country.

As developing green industrial parks is complex, this is an opportunity to accumulate valuable know-how that, in turn, can be monetized. For instance, nobody yet knows how to build, manage, and operate a multi-gigawatt green hydrogen production facility. In the process of building green industrial parks in the UAE, the UAE will have to learn how to optimize a very complex renewable energy system, balance electricity, heat, and hydrogen across multiple energy users with different load profiles, and deploy multiple new technologies together that are still in the pilot phase.

The UAE should consider monetizing its domestic experience by developing and exporting green industrial parks in other countries and developing a business model around these activities. Such a strategy could involve (1) owning the Engineering, Procurement, and Construction Management (EPCM) contractors and other related businesses that develop and operate parks; (2) where possible, having as much of the high-income knowledge workers who provide these services live and work in the UAE; and (3) helping UAE industrial companies that wish to expand abroad (such as Emirates Global Aluminium, or Emirates Steel Arkan) make profitable foreign investments in green industrial parks in other countries.

There may be another opportunity in critical minerals processing. A mining boom is required to provide the world with enough critical minerals to build a clean energy system. Currently, China is dominating the critical minerals processing market, but many countries are looking to diversify their critical minerals supply chain. Given its low cost of capital, strategic location, and good trading infrastructure, the UAE is well-positioned to take advantage of this opportunity. The country already has nascent strengths in mineral refining to build off, in the aluminum and, soon, in the lithium value chains.

Other promising policy ideas are centered on accelerating the creation of green growth knowledge in the UAE and encouraging high-potential business applications. Given their potentially large implications for low-carbon industrial processes in the UAE, we recommend that the government consider establishing applied research hubs in the areas of electrochemistry and thermal energy management & storage. Our research has already identified leading actors in this area that may be attractive partners for collaboration. Additionally, to ensure the close monitoring of the innovation and technology developed abroad, we recommend discussing the establishment of a green technologies working group within the Emirates Scientist Council. This working group would continuously monitor advances in green technologies and their impact on the UAE, reporting findings to the higher levels of government to inform strategic decisions.

It is painfully clear that South Africa is performing poorly, exacerbating problems such as inequality and exclusion. The economy’s ability to create jobs is slowing, worsening South Africa’s extreme levels of unemployment and inequality. South Africans are deeply disappointed with social progress and dislike the direction where the country seems to be heading. Despite its enviable productive capabilities, the national economy is losing international competitiveness. As the economy staggers, South Africa faces deteriorating social indicators and declining levels of public satisfaction with the status quo. After 15 years, attempts to stimulate the economy through fiscal policy and to address exclusion through social grants have failed to achieve their goals. Instead, they have sacrificed the country’s investment grade, increasing the cost of capital to the whole economy, with little social progress to show for it. The underlying capabilities to achieve sustained growth by leveraging the full capability of its people, companies, assets, and knowhow remain underutilized. Three decades after the end of apartheid, the economy is defined by stagnation and exclusion, and current strategies are not achieving inclusion and empowerment in practice.

This report asks the question of why. Why is the economy growing far slower than any reasonable comparator countries? Why is exclusion so extraordinarily high, even after decades of various policies that have aimed to support socio-economic transformation? What would it take for South Africa to include more of its people, capabilities, assets, and ideas in the functioning of the economy, and why aren’t such actions being undertaken already? The Growth Lab has completed a deep diagnostic of potential causes of South Africa’s prolonged underperformance over a two-year research project. Building on the findings of nine papers and widespread collaboration with government, academics, business and NGOs, this report documents the project’s central findings. Bluntly speaking, the report finds that South Africa is not accomplishing its goals of inclusion, empowerment and transformation, and new strategies and instruments will be needed to do so. We found two broad classes of problems that undermine inclusive growth in the Rainbow Nation: collapsing state capacity and spatial exclusion.

Learn more about the Growth Lab’s research engagement, Growth Through Inclusion in South Africa.

The Colombian Amazon faces the dual challenge of low economic growth and high deforestation. High rates of deforestation in Colombia have led to a perceived trade-off between economic development and protecting the forest. However, we find little evidence of this trade-off: rising deforestation is not associated with higher economic growth. In fact, the forces of deforestation of some of the world’s most complex biodiversity are driven by some of the least complex economic activities, like cattle-ranching, whose subsistence-level incomes are unable to meet the economic ambitions for the region. All the while, the majority of the Amazonian departments’ population works in non-forested cities and towns, at a distance from the agriculture frontier that forms the “arc of deforestation.” The relative urbanization of the Amazonian departments, despite the vast land mass available, recognizes that prosperity is achieved through close social-economic interactions to expand the knowledge set available to be able to produce more, and more complex activities. Achieving economic goals therefore relies on creating new productive opportunities in non-forested, urban areas.

The risk of deforestation reduces incentives to improve the connectivity of Amazonian departments with major cities and export markets. The remoteness of these departments increases the cost of ‘exporting’ goods to markets outside the departments. Poor connectivity contributes to the low economic complexity of the departments. In turn, the low complexity reduces incentives to coordinate new investments that would generate returns to greater connectivity. Coordination failures, which occur when a group of economic actors (e.g., firms, workers) could achieve a better outcome but fail to do so because they do not coordinate their actions, are widespread in all three of the Amazonian departments studied. This limits the creation of new capabilities and productive diversification to generate new jobs and higher incomes.

We posit that economic growth in the Colombian Amazonian is limited by a “connectivity trap” whereby the lack of external market connectivity restricts economic complexity, and, in turn, the low complexity fosters the coordination failures that limit returns to new diversification. Ultimately, low returns to diversification further reduce incentives to improve connectivity. Underpinning the connectivity trap is the belief that limiting the connectivity of Amazonian departments with large Colombian cities and the broader global economy will limit incentives for deforestation. Yet, deforestation has accelerated in recent years, despite the continued poor connectivity. We argue that Colombia must create a new national law to curb deforestation by eliminating the financial incentives for land speculation. Reclassifying forested lands under the control of national protection systems with severe restrictions on economic activities and strengthened enforcement, as detailed in an accompanying report, provides the needed legal clarity regarding land formalization. Within the law to eliminate incentives for deforestation, the national government should create a new development approach for the Colombian Amazon. This approach must move beyond a natural resource-based approach to the region, to center on the productive potential of its urban areas, and the carbon markets and tourism potential of its forested areas. One pillar of this approach is to build new public sector capabilities to coordinate investments into new, targeted productive sectors to create new national-local mechanisms of investment promotion. A second pillar is to improve connectivity to external markets through road and air investments between Caquetá, Guaviare, and Putumayo and major cities and ports.

La Amazonía colombiana enfrenta un desafío doble: bajo crecimiento económico y alta deforestación. Las altas tasas de deforestación en Colombia han llevado a que se crea que el desarrollo económico no puede tener lugar si se protege la selva. Nosotros no encontramos evidencia que sustente esa dicotomía: el aumento de la deforestación no está asociado a un mayor crecimiento económico. Las fuerzas detrás de la deforestación de una de las áreas con mayor biodiversidad en el planeta se sustentan en algunas de las actividades económicas menos complejas, como la ganadería extensiva, cuyos ingresos son incapaces de cumplir con las ambiciones económicas de la región. Al mismo tiempo, la mayoría de la población de los departamentos amazónicos trabaja en ciudades y pueblos desprovistos de selva, lejos de la frontera agropecuaria que forma el “arco de deforestación”. La relativa urbanización de los departamentos amazónicos, pese a la gran masa de tierra disponible, constituye un reconocimiento de que la prosperidad solo se logra mediante interacciones socioeconómicas que expanden el conjunto de conocimientos disponible para que se pueda producir más, y mediante actividades más complejas. Por lo tanto, para alcanzar las metas económicas hay que crear nuevas oportunidades productivas en las áreas urbanas sin selva.

El riesgo de deforestación reduce los incentivos para mejorar la conectividad de los departamentos amazónicos con las grandes ciudades y los mercados de exportación. El carácter remoto de estos departamentos aumenta el costo de “exportar” bienes a mercados que están fuera de estos departamentos. La conectividad precaria de la región contribuye a su baja complejidad económica, que a su vez reduce los incentivos para coordinar nuevas inversiones que podrían generar retornos a partir de una mayor conectividad. Las fallas de coordinación – que ocurren cuando un grupo de actores económicos (como empresas y trabajadores) podrían lograr un mejor resultado, pero no logran hacerlo pues no coordinan sus acciones respectivas – son extendidas en los tres departamentos amazónicos bajo estudio. Esto limita la creación de nuevas capacidades y la diversificación productiva que podrían generar nuevos empleos y mayores ingresos.

Planteamos que el crecimiento económico en la Amazonía colombiana está siendo limitado por una “trampa de conectividad” donde la falta de conectividad con los mercados externos restringe la complejidad económica, y a su vez la baja complejidad alienta las fallas de coordinación que limitan los retornos de una nueva diversificación. A fin de cuentas, los bajos retornos de la diversificación reducen aún más los incentivos para mejorar la conectividad. Como trasfondo de la trampa de conectividad está la creencia de que limitar la conectividad de los departamentos amazónicos con las grandes ciudades colombianas y el resto de la economía global limitará también los incentivos para la deforestación. Pero la deforestación se ha acelerado en los últimos años, mientras que la conectividad sigue siendo muy mala. Nosotros argumentamos que Colombia debe crear una nueva ley nacional para frenar la deforestación que elimine los incentivos financieros de la especulación con tierras, al reclasificar las áreas selváticas bajo control de los sistemas nacionales de protección para que tengan severas restricciones sobre las actividades que se puedan emprender en ellas, y se refuercen las labores de cumplimiento de la ley, como se comenta en detalle en el reporte siguiente. Con una ley que elimine los incentivos para la deforestación, el gobierno nacional debe crear un nuevo enfoque del desarrollo para la Amazonía colombiana. Este enfoque debe trascender el basado en los recursos naturales y centrarse en el potencial productivo de las áreas urbanas, así como en los mercados de carbono y el potencial turístico de las áreas selváticas. Un pilar de este enfoque es la construcción de nuevas capacidades en el sector público, que le permitan coordinar inversiones en nuevos sectores productivos específicos, para crear nuevos mecanismos locales y nacionales de promoción de inversiones. Un segundo pilar es la mejora de la conectividad con los mercados externos, mediante inversiones en carreteras y transporte aéreo entre Caquetá, Guaviare y Putumayo, y las grandes ciudades y los puertos.

Technological advances have increased the general tradability of services, leading international trade in services to outpace trade in goods, especially after the global financial crisis and the COVID-19 pandemic. Services once considered less tradable due to the necessity of physical proximity between consumer and provider are now increasingly digitized and delivered remotely. Cross-border services now represent 79% of all internationally traded services, and digitally deliverable activities like engineering, accounting, database and other information services are experiencing yearly U.S. imports growth rates over 15%. This report analyzes how Mexico has been capitalizing on some of these trends over the past five years using the most granular data available. Then, we analyze opportunities from the perspective of Hermosillo. 

Hermosillo is poised to benefit from this global expansion due to its comparative advantages and existing productive capabilities in potentially tradeable services. We estimate the revealed comparative advantage of Hermosillo in each tradeable service category and find that the city is better positioned than similarly rich and complex cities in Mexico to take advantage of several of these opportunities. This is because Hermosillo is currently intensive in these opportunities, and also because Hermosillo has other industries that are similar to the opportunities in terms of their occupational structure (which could potentially supply additional labor in case tradeable service industries were to expand rapidly). Moreover, Hermosillo’s wage differentials compared to the U.S. are significant for most industries and occupations, including all tradable service industries and teleworkable occupations. This provides a cost advantage for foreign firms seeking to outsource part of their operations. Hermosillo also boasts a well-educated workforce with high levels of schooling and a strong emphasis on STEM fields, positioning it well to meet a potential expansion in educated labor demand. 

Some tradable services represent bigger opportunities for Hermosillo, but the city will need to develop new capabilities in cross-border service provision in order to take advantage of them. In particular, engineering services, database and other information services, business and management consulting, research and development, education, and accounting services require attention and further research to inform effective strategies. To realize these opportunities, local firms may need to overcome sector-specific challenges related to internationalization. Policymakers can play a pivotal role by fostering strategic partnerships, attracting multinational service providers to bring in knowhow, and creating supportive enabling environments for teleworking and digital service provision.

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.

This is one of four Growth Lab reports that aim to identify promising growth opportunities for Hermosillo. The focus of this report is nearshoring. Nearshoring is not a new phenomenon in Mexico, but recent changes in U.S. policy aimed to incentivize nearshoring of critical industries. This report first explores current realities of nearshoring and friendshoring in recent years, based on global trade and the distance which U.S. imports are traveling, and Mexico’s dynamics in global trade and investment in comparison to other countries. The report then evaluates the economic growth opportunities that nearshoring could incentivize in Hermosillo. We analyze the nearshoring opportunity set for Hermosillo across products and industries and if they are based on the city’s productive capabilities.

This report confirms that nearshoring and friendshoring have been taking place in global trade and investment in response to U.S. policy between 2017 and 2023. Mexico has made gains in its exports to the U.S. market in recent years as exports from China have lost ground, but it is not the only country doing so. A few countries like Vietnam benefited even more, despite being geographically far from the U.S. market. Mexico is seeing growth in products it has traditionally exported, but it is not seeing much diversification into products that the U.S. has deemed critical. Nor is Mexico seeing promising investment trends that would signal an acceleration of growth in these opportunities. Given Hermosillo’s position as a large city that is near the U.S. market, and to a growing market in Arizona in particular, the process of nearshoring represents a potentially transformational chance to jumpstart growth in attractive industries to better position the local economy for the future.

This report provides analysis to begin to identify the most promising nearshoring opportunities for Hermosillo, but local action is needed to build on these initial observations. We identify products and industries that are attractive opportunities for nearshoring in Hermosillo and we evaluate which industries are most consistent with Hermosillo’s existing industry structure and underlying productive capabilities. Promising opportunities stand out in industries related to medical equipment, electronics, machinery, and plastics and the latter sections of this report explore these opportunities in some detail, both quantitatively and more qualitatively. Local strategies to capitalize on these opportunities will vary in design and local actors should weigh the criteria provided and other considerations when deciding which industries are the highest priority for targeted investment promotion and other action steps. One exception, however, is in the value chain for semiconductors, where the emerging opportunity to supply and complement the value chain that is forming in Arizona is too large to pass up. Semiconductors represent an essential area that policymakers and the business community in Hermosillo should embrace, along with a set of additional promising nearshoring opportunities.

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. 

Since 2003, the GDP per capita of Tabasco has consistently figured among the 4 largest in the country. However, this level of economic activity has not translated into an equally favorable performance in other social welfare metrics. According to CONEVAL, the Tabasco poverty rate in 2016 was 50.9%, seven percentage points higher than the national rate (43.6%). On the other hand, the average monthly income of the workers of the state is in the 40th percentile of all the states.

This discrepancy can be explained because the mining activity, despite accumulating only 3% of jobs, represents more than 50% of the state’s GDP. If we only consider non-oil GDP, we have that the GDP per capita of the state has tended to be located around the country’s median, and for 2016 it was in the 30th percentile nationwide.

Este estudio busca identificar las capacidades productivas de Tabasco a partir de un análisis de la composición de sus exportaciones y su empleo basándose en la perspectiva de la complejidad económica. Asimismo, busca identificar productos potenciales que requieran una base de conocimientos productivos similar a la que ya tiene Tabasco y que le permita mejorar su complejidad económica actual y prospectiva.

Para tales efectos, primero se explora la evolución en el tiempo del valor de las exportaciones de Tabasco y la composición de las mismas, así como de los principales productos de exportación. En sentido, se tiene que las exportaciones de Tabasco están determinadas por el sector petrolero. Los envíos de petróleo representan alrededor del 97% de las exportaciones estatales y explican más del 90% del aumento de las exportaciones de la última década.

En este estudio se consideraron los productos priorizados en el Reporte de Complejidad Económica de Tabasco y se procedió a evaluar su potencial a partir de un conjunto de consideraciones de mercado. Luego, se agregó el potencial de cada producto en distintas colecciones de producto, y se seleccionó una industria cuya estimulación y desarrollo constituya una apuesta de desarrollo prometedora el estado. Respecto de éste se detallaron algunas estadísticas generales como una forma de evaluar su potencial de crecimiento e impacto para la economía local, estatal y nacional.

Para el objeto de este estudio, el sector industrial escogido para el análisis de cuellos de botella fue el de “Químicos” y, más puntualmente, los productos: “Agentes de limpieza orgánicos (ex. Jabón)”, “Aprestos y aceleradores de tintura”, “Mezclas de sustancias odoríferas”, “Placas fotográficas” y “Tinta”. El desarrollo de esta colección de productos representa una importante oportunidad, la que, a la fecha, los productores mexicanos no han podido aprovechar del todo. Sin embargo, estos productos han presentado un gran dinamismo dentro de México en los años recientes. Entre 2004 y 2014, las exportaciones de México en estos productos se han duplicado, el empleo en los sectores asociados a estos productos ha aumentado un 20%, y el salario promedio en estos sectores ha aumentado entre 40% y 50%.

Campeche cuenta con el PIB per cápita más alto de todo México. Si bien buena parte de este desempeño se debe a la actividad petrolera (la cual representa 80% de la actividad económica del estado), incluso si se considera únicamente el PIB no petrolero per cápita el estado se ubicaba por encima del 80% de las entidades federativas del país. En 2016 el PIB per cápita de la entidad –a pesar de ser el más alto de todo México – era 45% de su valor en 2003, lo que equivale a una caída anual promedio de aproximadamente 6%. Si bien esta caída ha sido sostenida, las razones que la subyacen parecen haber variado en el tiempo.

En el período 2003-2009 se evidenció una divergencia entre el comportamiento de la actividad petrolera y la no petrolera. Por un lado, todos los sectores de la economía no petrolera, con la excepción de servicios de apoyo a los negocios, reflejaron tasas de crecimiento positivas. Por el contrario, la actividad petrolera cayó abruptamente, debido a que a pesar de que hubo aumentos en la cantidad de pozos de desarrollo perforados y en la cantidad de equipos de perforación activos, la producción petrolera cayó 26%, alcanzado con ello niveles que no se habían observado desde 1997.

En este estudio se consideraron los productos priorizados en el Reporte de Complejidad Económica de Campeche y se procedió a evaluar su potencial a partir de un conjunto de consideraciones de mercado. Luego, se agregó el potencial de cada producto en distintas colecciones de producto, y se seleccionó una industria cuya estimulación y desarrollo constituya una apuesta de desarrollo prometedora el estado. Respecto de éste se detallaron algunas estadísticas generales como una forma de evaluar su potencial de crecimiento e impacto para la economía local, estatal y nacional.

Para el objeto de este estudio, el sector industrial escogido para el análisis de cuellos de botella fue el de “Textiles” y, más puntualmente, los productos: “Abrigos para mujeres, de punto”, “Calzoncillos para hombres, de punto”, “Camisas para hombres, de punto”, “Camisas para mujeres”, “Camisas para mujeres, de punto” , “Las demás prendas de vestir, de punto”, “Suéteres (jerseys) y artículos similares, de punto”, “Sostenes y artículos similares”, “Trajes para hombres, de punto”, “Trajes para mujeres, de punto”, “Trajes y pantalones para hombres”, “Trajes y pantalones para mujeres” y “Trapos y cordajes textiles en desperdicios”. El desarrollo de esta colección de productos puede representar una oportunidad. Sin embargo, recientemente las exportaciones de estos productos por parte de México han venido perdiendo espacios en el mercado global, siendo el valor de las exportaciones mexicanas de estos productos en la actualidad menos de la mitad de lo que era en 2004.

Loreto is a place full of contrasts. Although it is the largest department in Peru, it is one of the least populated in the country. Its capital, Iquitos, is closer to Brazil and Colombia’s border states than it is to the capitals of its neighboring regions in Peru – San Martin and Ucayali. Iquitos can only be reached by air or river, making it one of the largest cities in the world without road access. Since its foundation, Loreto’s economy has depended on the exploitation of natural resources: from the Amazon rubber boom at the end of the 19th and the beginning of the 20th centuries, to the oil extraction and exploitation of forest resources that predominate today. This model has brought with it significant environmental damage and has produced a pattern of slow and volatile growth, which has opened an ever-widening gap between the economy of the region and that of the rest of the country. Between 1980 and 2018, Loreto grew at an average compound annual growth rate four times lower than the rest of Peru. Otherwise stated, while the rest of Peru has tripled the size of its economy, Loreto increased it by just under one-third.

Within the last decade (2008-2018), the region has distanced itself from its Amazonian peers in the country (Ucayali, San Martín, and Madre de Dios), which have grown at an average annual growth rate five times higher. Loreto’s average per capita income fell from three-quarters of the national average in 2008 to less than half of it by 2018. In addition to – or perhaps as a consequence of – its economic challenges, Loreto is also among the departments with the worst indicators of social development, including the highest levels of anemia and child malnutrition in Peru.

In this context, the Growth Lab at Harvard University partnered with the Gordon and Betty Moore Foundation to develop a research study that would provide inputs and policy recommendations to boost the development of the region and foster sustainable prosperity.

Is there a tradeoff between environmental sustainability and economic development? If there is a place where that question can be approximated, that is Loreto. Located on the western flank of the Amazon jungle, Loreto is Peru’s largest state and the one with the lowest population density. Its capital, Iquitos, is the largest city without road access in the world. For three decades, the region’s income and development has diverged from that of Peru and its other Amazonian peers by orders of magnitude. And yet, despite plummeting contributions from natural resources – that predominate in the policy discussion in and on the state – Loreto has developed a more complex productive ecosystem than one would expect, given its geographical isolation. As a result, it has a stock of productive capabilities that can be redeployed in economic activities with higher value-added, able to sustain higher wages and better living standards.

We deployed a thorough Growth Diagnostic of Loreto to identify the most binding constraints preventing private investment and development in sustainable economic activities. In the process, we relied on domestic databases available to the public in Peru and international datasets, combining and validating our analytical insights with extensive field visits to the Peruvian Amazonia and lengthy interviews with policymakers, private businesses, and academia. Improving fluvial connectivity, developing the capacity to sort out coordination failures associated with the process of self-discovery, and substituting oil for solar energy, are the three policy goals that would deliver the largest bang for the reform buck. The latter presents an opportunity for environmental organizations – subsidizing solar – to move away from their status quo of preventing bad things from happening, to a more constructive one that entails enabling good things and sustainable industries to happen.

Project page: Economic Growth and Structural Transformation in Loreto, Peru

This report has three main objectives. Firstly, to identify and assess the agglomeration of know-how that is currently present in Loreto’s existing economic activities. Secondly, to define technological proximity metrics based on available data in order to identify the economic activities that generate the most value-added and which require similar productive capacities to those that are already present in the region. Finally, this paper seeks to identify those economic activities that are relatively “adjacent” to Loreto’s stock of productive know-how and which, therefore, have high potential to lead the productive transformation of its economy.

The Growth Lab at Harvard University, with funding provided by the Gordon and Betty Moore Foundation, has undertaken this investigation with the aim of identifying the existing productive capacities in Loreto, as well as the economic activities with potential to drive the structural transformation of its economy. This paper is part of a broader investigation – Promoting Sustainable Economic Growth and Structural Transformation in the Amazon Region of Loreto, Peru – which seeks to contribute with context-specific inputs for the development of national and sub-national public policies that promote productive development and prosperity in this Peruvian state.

Loreto es un lugar de contrastes. Es el departamento más grande del Perú, pero se encuentra entre los de menor densidad poblacional. Su capital, Iquitos, está más cerca de los estados fronterizos de Brasil y Colombia que de las capitales de sus regiones vecinas en el Perú – San Martín y Ucayali. Sólo se puede llegar a Iquitos por vía aérea o fluvial, lo que la convierte en una de las mayores ciudades del mundo sin acceso por carretera. Desde la fundación del departamento, la economía de Loreto ha dependido de la explotación de recursos naturales, desde el boom del caucho a finales del siglo XIX y principios del XX hasta la extracción petrolera y explotación de recursos forestales que predomina en nuestros días. Este modelo ha traído consigo daños ambientales significativos y ha producido un patrón de crecimiento lento y volátil, que ha abierto una brecha cada vez más amplia entre la economía de la región y la del resto del país. Entre 1980 y 2018, Loreto creció a una tasa promedio compuesta anual cuatro veces menor a la del resto del Perú. Es decir, mientras el resto del Perú triplicó el tamaño de su economía, la de Loreto creció algo menos que un tercio.

En la última década (2008-2018), la región también se ha venido distanciando de sus pares amazónicos en el país (Ucayali, San Martín y Madre de Dios), que han crecido a una tasa promedio anual cinco veces mayor. En este período, el ingreso promedio por habitante en Loreto ha pasado de ser tres cuartas partes del promedio nacional en 2008 a menos de la mitad para 2018. Además del rezago económico – o quizás como consecuencia de él -, Loreto también se ubica entre los departamentos con peores indicadores de desarrollo social, anemia y desnutrición infantil del Perú.

En este contexto, el Laboratorio de Crecimiento de la Universidad de Harvard se asoció con la Fundación Gordon and Betty Moore para desarrollar una investigación que proporcionara insumos y recomendaciones de política para acelerar el desarrollo de la región y generar prosperidad de forma sostenible.

Sembrado en el flanco oeste de la selva amazónica, Loreto se encuentra entre los departamentos más pobres y con peores indicadores sociales del Perú. El desarrollo enfrenta allí un sinfín de barreras, pero no todas son igualmente limitantes y tampoco hay recursos para atender todos los problemas a la vez. El Laboratorio de Crecimiento de la Universidad de Harvard, bajo el auspicio de la Fundación Gordon and Betty Moore, ha desarrollado un Diagnóstico de Crecimiento que buscar identificar las restricciones más limitantes, y priorizar las intervenciones de políticas públicas alrededor de un número reducido de factores con el mayor impacto. La investigación, que se fundamenta en análisis de bases de datos nacionales e internacionales, e incluye factores cuantitativos y cualitativos derivados de las visitas de campo, identifica a la conectividad de transporte, los problemas de coordinación asociados al autodescubrimiento, y la energía eléctrica, como las restricciones más vinculantes para el desarrollo de Loreto. De acuerdo con nuestras conclusiones, mejoras en la provisión de estos tres factores tendrían un mayor impacto sobre el desarrollo sostenible de la región que mejores en la educación y los niveles de capital humano, el acceso a financiamiento, y otros sospechosos habituales. Este reporte es el segundo de una investigación más amplia – Transformación estructural y restricciones limitantes a la prosperidad en Loreto, Perú – que busca aportar insumos para el desarrollo de políticas públicas a escala nacional y regional que contribuyan a promover el desarrollo productivo y la prosperidad de la región.

El Laboratorio de Crecimiento de la Universidad de Harvard, bajo el auspicio de la Fundación Gordon and Betty Moore, ha desarrollado esta investigación para identificar las capacidades productivas existentes en Loreto y las actividades económicas con potencial para liderar la transformación estructural de su economía. Este reporte forma parte de una investigación más amplia – Transformación estructural y restricciones limitantes a la prosperidad en Loreto, Perú – que busca aportar insumos para el desarrollo de políticas públicas a escala nacional y regional que contribuyan a promover el desarrollo productivo y la prosperidad de la región, tomando en cuenta sus características particulares.