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As trade screws tighten, Mexico recruits US tech

Governor of the State of Jalisco, Jorge Aristóteles Sandoval Díaz
Refugio Ruiz | Gobierno del Estado de Jalisco | AP
Governor of the State of Jalisco, Jorge Aristóteles Sandoval Díaz

The governor of Mexico's state of Jalisco is visiting more than 40 U.S. tech companies with the message that it's a great place for high tech, the latest cross-border recruitment effort to respond to U.S. immigration policy.

Jalisco Gov. Jorge Aristóteles Sandoval Díaz will meet with California Gov. Jerry Brown, 13 large tech companies including Facebook and Google, and 30 startups beginning this week in California. It's an annual trip for officials from Jalisco, birthplace of tequila, synonymous with hot sauce, and sometimes called Mexico's Silicon Valley for its already thriving tech scene.

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This year, the trip has an added purpose: to talk to Brown about a bi-lateral agenda to support Mexican citizens to remain in the U.S. And, Sandoval will promote capital city Guadalajara and the rest of Jalisco as a friendly environment for skilled workers that may have trouble getting hired by U.S. tech firms if the Trump administration passes more restrictions on H-1B visas, as a draft order indicated.

"We want tech companies to know there is a huge opportunity in Jalisco for them to grow," Sandoval, who has created a cabinet-level Innovation Department, told USA TODAY in a phone interview Tuesday.

"Jalisco has many advantages" — a close time zone to Silicon Valley, talent, strong university system, government support and infrastructure, Sandoval said. The Trump administration's policies, in particular the possibility of an executive order that could curtail H-1B work visas, also work in Jalisco's favor, he said.

The pitch is hardly a slam-dunk. Some tech companies remain reluctant to expand in Mexico, with a threatened 35 percent tariff from Trump on goods made there looming as large as his much-heralded wall. (Trump floated the idea of a 20 percent tax on Mexican imports to pay for the wall, though White House spokesman Sean Spicer said it was one of several proposals.) There are also lingering questions about Jalisco's overall tech talent, poor broadband access in some areas and costs related to opening operations offshore.

Nonetheless, Sandoval's push to raise awareness about Jalisco comes at a time when the U.S.'s northern neighbor, Canada, is also attempting to recruit tech workers as the U.S. halts entries of immigrants from seven predominantly Muslim nations and threatens to further limit H-1Bs, which offer a pipeline of talent from abroad. Canadian venture firms and companies are enticing U.S. start-ups with funding, sparkling new work spaces, broadband access and a relatively affordable cost of living.

Jalisco's pitch is similar. The state on the western coast of central Mexico has blossomed into a thriving tech hub worth $21 billion. Guadalajara or coastal Puerto Vallarta are home to manufacturing, design and research-and-development operations for Intel, Hewlett Packard and Oracle, among others. Oracle and Intel house innovation centers in Guadalajara, and a 940-acre media-business center is under construction.

Technology goods represent about 55 percent of Jalisco's exports, and account for 25,000 jobs in the state. Nearly a third of Mexico's tech business comes from Jalisco, according to a spokesman for Sandoval.

"The Jalisco government is 100 percent focused on technology," says Bismarck Lepe, CEO of San Francisco-based tech services firm Wizeline. "It's an ideal region for intellectual property, and not cheap manufacturing."

Lepe has deep ties to Mexico. His parents are from there, but left for the U.S. for a better economic opportunity. Lepe, who studied at Stanford Universityand worked at Google, decided to return in 2010 after a third-party analysis determined Guadalajara was fertile ground for tech talent. Half of Wizeline's 270 employees are in Guadalajara, most of them engineers.



"We want to make Guadalajara a tech hub for the world — from multinational companies to mid-tiers and start-ups," says Cindy Blanco, general director of StartupGDL, a nonprofit organization that champions the region. Guadalajara has lured entrepreneurs with a pool of tech talent fed by the university system, a comparable time zone (Central) to Silicon Valley and direct flights, Blanco says.

The close proximity of Mexico and Canada could offer concerned American companies — and workers — an option should Trump issue executive orders on a revised travel ban, curtail H-1Bs and revise the NAFTA trade accord. Job seekers are likely to choose Canada as a backup. It was the most popular second destination, at 43%, followed by Australia (12%) and the United Kingdom (5%), based on 1,200 people tracked last week by Indeed, a job-search engine. Mexico was No. 12 on the list.

'Not an ideal solution'

Mexico is at a disadvantage when it comes to talent, say tech executives. Its engineering pool isn't as bountiful in Mexico as it is in India and China, and salaries for Mexican engineers are significantly higher because competition for them is so fierce, says Stephen Stokols, CEO of FreedomPop, a wireless Internet and mobile virtual network operator.

"Mexico is a primary market for us, but it's not an ideal solution," Stokols says. His Los Angeles-based company has 20 people — about 10% of its worldwide workforce — in Mexico City, mostly engineers. "We would have more people there, if the engineering talent were available."


It can also be expensive to open operations south of the border and establish a payment system, says Jesus Hoyos, managing director at Solvis Consulting, which resells tech products in Mexico.

Still, Mexico might offer as compelling a case for job seekers turned away by the U.S. It is a huge trade partner with the U.S. — trade between the two companies totaled $583.6 billion in 2015, according to the U.S. Trade Representative — and the home to more than 1million Americans, the largest community for expatriates. (Nearly 40,000 American and Canadian expats are among Jalisco's population of seven million.)