Mexican economic development officials are hoping that special economic zones in the South of Mexico are effective in reducing regional disparities.

The North-South Divide

Early in December of 2014, Mexico’s president, Enrique Pena Nieto, announced that “special economic zones’ would be established in the South of Mexico, in its economically most underdeveloped states. In terms of the country’s overall economic development performance over the past thirty years, the difference between the progress that has been made in Mexico’s North-Central region stands in stark contrast to what has been the experience of the nation’s South. According to the Wall Street Journal, “While per capita gross domestic product has grown 47% in the industrialized
northern and north-central regions of Mexico in the past three decades, in southern states per capita output has increased just 7%.” This is according to numbers provided by the Mexican government that suggest that special economic zones in the South of Mexico should be established in order to address the country’s marked regional economic disparities.

During the recent G20 Summit which took place in Antalya, Turkey, Mexican leader Enrique Nieto Pena, met one-on-one with Chinese head of state, Xi Jinping. Among the topics that were touched upon over the course of the discussion, was the special economic zones in the South of Mexico and an interest on the part of the Chinese and their businessmen in exploring opportunities for investment in these areas.

In late September of the present year, Pena Nieto laid out specific details related to the establishment of special economic zones in the South of Mexico. According the Mexican plans, the zones will be established at three locations in the South of the nation. The three sites at which special economic zones in the South of Mexico will be set up are:

  • on the Isthmus of Tehuantepec, which is bordered by the Gulf of Mexico in the north and the Pacific Ocean in the south in the State of Oaxaca;
  • at the Puerto Chiapas in one of Mexico’s most economically challenged states, Chiapas;
  • at the Port of Lazaro Cardenas in the State of Michoacan.

Special economic zones will offer specific incentives

According to Mexico’s chief executive incentives to be offered to investors within special economic zones in the South of Mexico are: select tax incentives, a simplified regulatory framework and upgraded infrastructure and trade facilities, as well as preferential duty and tariff treatment for goods entering the zones. Pena Nieto and other Mexican economic development officials are of the belief that these considerations, as well as the logistic advantages that accompany the geography of these zones will result in their ability to attract Chinese and other foreign direct investors.

The plan for special economic zones in the South of Mexico was written by the Mexican government in conjunction with the world bank. Although three such zones will be established, it is anticipated that five Mexican states will feel their effects. They are

  • Chiapas
  • Guerrero
  • Michoacan
  • Oaxaca
  • Veracruz

According the Wall Street Journal, if all goes according to plan and Mexican government projections, legislation will be passed next year and the special economic zones in the South of Mexico will see “the first companies setting up in the areas in 2018.”