The Economic Axis: Synergy for an Effective Reacti...

The Economic Axis: Synergy for an Effective Reactivation

The health and economic crises brought about by the Covid-19 outbreak caught us all off guard, there is no doubt about it. Increased agility and resilience against unforeseen change were widespread among all productive sectors of Aguascalientes. To mitigate some of the effects of the pandemic on companies, like shortage of customers or liquidity issues, the State Government launched the $1.8 billion Todos por Aguascalientes economic support emergency program to help senior citizens and self-employed people through direct benefits, and business owners and entrepreneurs through tax discounts.

This strategy ranked Aguascalientes second in the business-owner support per capita domain. The joint efforts of state departments have been reflected in the low-job loss rates as reported by the Mexican Institute of Social Service (IMSS); Aguascalientes was the lowest affected state in the west-central region.

“Aguascalientes was one of the first states to seek an economic reactivation. The first objective is maintaining present jobs, because one of the State’s main responsibilities is to look after local busines owners and promote the right conditions so that the private sector can create more jobs. This will, consequently, continue to attract foreign investment,” said State Governor Martin Orozco Sandoval.

To face this times of uncertainty, Orozco Sandoval requested the Department for Economic Development (SEDEC), the Department of Tourism (SECTUR), and the Department of Rural Development and Agribusiness (SEDRAE) to join efforts to create the Economic Reactivation Plan, whose main objective is to make Aguascalientes the least affected states in the economic field.

The plan is made up of 8 axes, 22 strategic objectives, and 34 specific actions. It has an investment of over $5.8 billion to boost the productive sectors, to protect and stimulate local businesses, draw foreign investment, and help regional tourism, public works, and public-private investment projects.

“We are doing everything in our hands to face this economic crisis, in the understanding that we must be prepared for other health emergency effects like the ones we are experiencing in the fields of education, psycho-emotional development, and most likely, security,” said Orozco Sandoval.

Economic Diversification and Detailed Strategies from SEDEC

The Department for Economic Development has planned a health and economic strategy to trigger a prompt reactivation of the industry that consists in the standardization of sanitary protocols for businesses and a staggered reopening of small and large manufacturing companies.

The department, in alliance with big companies, will unify the images of grocery and hardware stores to promote local consumption. Local businesses and artisans will be publicized in billboards and radio announcements to promote products made in Aguascalientes and raise awareness that every producer represents the support of one or more families.

In view of the accelerated digitalization in services caused by the pandemic, the Business Development program included agreements with Rappi, Encalientes, Mercado Libre and Amazon to help a larger number of companies place their products on digital platforms. The use of point of sale terminals is also being encouraged so that more traditional businesses can receive electronic payments.

According to the latest state economic census conducted by the National Institute of Statistics and Geography (INEGI), 93.1 percent of businesses are classified as microbusinesses (between 1 and 10 employees), followed by small and medium-sized businesses (between 11 and 250 employees) with a 6.6 percent. Only a 0.3 percent of businesses belong in the category of large businesses, with more than 251 employees. 

The first two categories will receive government support through the Program of Subsidies and Loans for Business Development, a $131.4 million aid package. The Business Coordinating Board (CCE), the Employers Confederation of the Mexican Republic (COPARMEX), and the Industrialists Group of Aguascalientes (GIA) joined the state government in this effort to strengthen the different productive sectors of Aguascalientes.

Moreover, an emergency capitalization fund will be created through the sale of immovable assets that belong to the Investment and Administration Trusteeship for Economic Development (FIADE). This fund is expected to collect over $1 billion to help the Financial System of Aguascalientes (SIFIA). This will benefit both the business and entrepreneurial community in the state.

Promoting, developing, and driving exports in small and medium-sized businesses that offer highly competitive, world-class products or services is another of this promotional strategy’s specific actions.

The program is divided into two categories. The first one totals $20 million in subsidies of up to $300 thousand for small and medium-sized businesses in these sectors: textile, aerospace, clean energies, furniture, logistics, health, electronics, electric, agribusiness, commerce, services, industrial, and automotive.

Aguascalientes has always stood up as a state that draws foreign investment, especially from Japan, the United States, Spain, and Germany, which is why a series of visits—both physical and digital—to open new markets is being planned. 

“The State Development Plan helps directs our efforts toward economic diversification, strengthening the automotive supply chain and boosting local talent in the aerospace, agribusiness, electronics, research, logistics, health, and information technologies sectors. We believe that in 10 or 15 years’ time Aguascalientes’ economy will be better balanced,” said Manuel Alejandro González Martínez, secretary of economic development.

Agriculture, the mainstay of local economy.

Despite the situation caused by the Covid-19 pandemic, the primary sector was the least affected. It was, in fact, one of the few sectors that reported an increase in the first quarter thanks to the constant effort and commitment of local producers to provide quality products to the people of Aguascalientes during the health crisis.  The sector was also favored thanks to the state’s diversification strategy since 251 thousand hectares (of a total of 562 thousand) is being used for agricultural purposes.

“The primary is the only sector that experienced an increase in the first quarter and is currently supporting our economy. This is why we must keep strengthening and diversifying both agriculture and technology, two of the industries the present administration is determined to propel,” said Orozco Sandoval.

To fight against the pandemic, the Department of Rural Development and Agribusiness distributed a record $170 million budget among 28 programs released during the first months—these are generally released throughout one year. SEDRAE is seeking to increase these programs’ aid percentage by 10 percent.

These programs will help the over 25,581 agricultural producers of the state whose main activity is cattle raising (milk and beef), pig farming, poultry farming, and vegetable, grain, fruit, and fodder production. Producers will be able to improve the quality of cattle, increase their liquidity, modernize their processes, save water, and take care of the environment.

“Local producers have been migrating from a basic type of production to one with better opportunities for profitability, productivity, and access to more specialized markets. I believe that is the key: migrating to other commercial sectors and professionalizing the agricultural industry,” said Miguel Muñoz de la Torre, secretary of Rural Development and Agribusiness.

To promote and strengthen the growth of the agricultural sector, SEDRAE has put a heavy emphasis on process innovation and modernization. The department has officially announced a productive re-conversion program to increase the sector’s reach to national and international markets. Aguascalientes ranks second in production of guava and coriander; third in fodder corn and chicken; fourth in grape, cauliflower, lettuce, and strawberry; seventh in peach, broccoli, and garlic; ninth in prickly pear and walnut; and tenth in milk.

In 2018, the primary and agribusiness sectors contributed with 8.89 percent to Aguascalientes’ gross domestic product. This percentage is expected to increase thanks to the state’s enormous potential and geographical position. The state’s proximity to the most important cities and to ports in the Pacific and Gulf of Mexico improves its chances to expand its markets.

Furthermore, to confront the post-pandemic scenario, SEDRAE’s objective is both to launch local products on to national markets and to promote them within the state through a series of strategies, like the Primero lo Nuestro and the Once Tierras programs that aim at creating connections between local producers and restaurants.

Finally, and in view of a growing possibility to make the wine sector contribute both to the tourism and agricultural industries, the Economic Axis program will open the Wine Trail next September to promote the resurgence of the state’s wine-producing tradition.

Adapting and Strengthening the Tourism Sector

Our lifestyle has been unquestionably changed by the pandemic. Aguascalientes’ tourism was not an exception, it was clearly one of the most affected economic activities. The economic loss caused by the  gradual closure of hotels and restaurants in April is estimated to be around $10.3 billion. Aguascalientes’ most important touristic event, the San Marcos National fair—which represents the largest source of revenue for the state—was cancelled this year and many sports and academic events were postponed.

Almost three months after the beginning of the lockdown and with the upcoming reopening of businesses and a staggered adaptation to the ‘new normal,’ SECTUR received the necessary protocols from the Department of Health to establish safe spaces for the return to operations of the food and transport activities, classified as essential. 

Humberto Montero de Alba, Secretary of Tourism, points out that 89 percent of hotels are ready to receive visitors and over 350 food establishments are already open, which is why he exhorted the eight thousand members of the tourism sector to take a virtual training course that will teach them how to help offer quality services that do not pose a threat to tourists’ health.

An integral alliance between the different departments that constitute the Economic Axis is urgent. We need to generate synergies to carry out precise actions that help us get better results for the economic sector of Aguascalientes.

Furthermore, strategic coalitions among the states in the region are key to an effective reopening. Our state has plenty tourist attractions and products to offer, beginning with the Wine Trail program in September which, in a joint effort with SEDRAE, will offer aid in infrastructure and equipment to the first ten participating wineries.

Moreover, the annual Festival de Calaveras will be celebrated early in November, and the Technology & Entrepreneurship Meta Fest will be held late that same month. Both festivals are supported by the Institute of Culture and the Institute of Youth of Aguascalientes.

“Everything adds up to the diversification mechanism we want to strengthen. We want to bring more visitors to Aguascalientes and, consequently, help increase the state’s current 4.2 gross domestic product. We need to improve this number […] Tourism is Aguascalientes’ friendly area. We want all the people to be proud of what we have, and we want to show it off,” said Montero de Alba.