Chihuahua: Unlocking opportunities and overcoming challenges

Aerial view of streets at night in Chihuahua, Mexico
Editor's note:

This viewpoint is part of USMCA Forward 2024.

Chihuahua stands as one of three Mexican states reaping significant benefits from the USMCA, showcasing a remarkable 5.1% economic growth in the first quarter of 2023. In the short span from 2021 to 2022, the state witnessed a staggering 28% increase in exports. This success story owes itself to a confluence of factors: a resolute government dedication to position the state as a prime investment destination; substantial investments in education programs to prepare citizens for complex tech and manufacturing roles; a robust security initiative in collaboration with businesses and civil society; and an unwavering commitment to democratic principles that underscore the rule of law, assuring citizens, companies, investors, and public officials that accountability reigns supreme.

Chihuahua, the largest state in Mexico by geographic size, has held the title of the country’s top exporter for 12 consecutive years, amassing over $75 billion in exports during 2010-2022. Its geostrategic location and an extensive border with the U.S., are a gateway for trade, cultural exchange, and shared development between the two countries. The Chihuahua government understands that global challenges have local impacts that require cross-border cooperation and the active involvement of citizens, through transparent and accountable mechanisms, that reinforces the vital role of democratic institutions. While democracies do not guarantee flawless governance, they act as a safeguard of accountability and balance of powers, providing the potential for elected officials’ better performance.

The main opportunities ahead

Chihuahua, enriched not only by its prime geographical location and abundant natural resources, but by its hard-working people, stands as one of Mexico’s key manufacturing hubs, a status enhanced by the USMCA. Since the agreement came into effect in 2020, it has attracted increased foreign direct investment (FDI), particularly from U.S. and Canadian companies expanding their operations into Mexico and Latin America.

The USMCA continues to usher in a plethora of opportunities for the state, Mexico, and the broader North American region. Going forward, the most promising opportunities for Chihuahua include: 1) the phenomenon of nearshoring; 2) a growing demand for Mexican products in the U.S. and Canadian markets; and 3) growth in FDI flowing into Chihuahua, generating employment, infrastructure, and a constant need for adaptive education programs to cultivate highly qualified labor. These opportunities, underpinned by the USMCA, have driven the Chihuahua region’s export growth, reaching over $35 billion in the second quarter of 2023. In terms of employment, in the third quarter of 2023, 453,000 jobs were created in Chihuahua’s manufacturing sector alone, marking a 3% increase from 2022. During the same period, Mexico attracted approximately $1.86 billion in FDI with a high percentage in manufacturing, with Chihuahua representing a substantial 23.8% of this amount, or $443 million. Complementing this increased trade and investment in manufacturing is infrastructure development. For example, the recent agreement with Mexico-Pacific to construct the Sierra Madre gas pipeline in the state involved a $15 billion investment. This pipeline will transport gas from Texas to the Pacific coast in Mexico for export to Asia, opening up new markets for North America.

The primary objective as elected public officials is to ensure that all these opportunities are firmly grounded in the rule of law, guaranteeing that citizens and everyone involved can witness tangible improvements in their daily lives.

Challenges to be surmounted

Challenges are inherent in every journey. Concerning the successful implementation of the USMCA in Chihuahua, Mexico, and the North American region, the primary challenges include: 1) ensuring that small and medium-sized enterprises (SMEs) are able to grow and take advantage of USMCA to boost their exports; 2) retraining workers in the state and reducing workforce migration; and 3) conducting seamless cross-border integration with new investments in infrastructure.

Labor migration and cross-border mobility in Chihuahua are significant challenges. The state has experienced substantial migratory flows for various reasons. A state offering good jobs, quality education, functional democratic institutions, and protection for civil and human rights is essential to retaining the local population. Smooth collaboration among countries and neighboring states will further contribute to the growth and development of Chihuahua. Complications, such as the 2023 border closures with Texas-resulting in approximately $30 million in daily export losses and disruptions in the supply chain-underscore the importance of proactive governance and deeper cross-border cooperation. Moreover, the potential influx of migrants into the U.S. from Mexico poses a significant risk to state institutions at a humanitarian, economic, and governance level.

The role of effective democracy in expanding USMCA attributes

Democracy is no longer confined to election cycles; it is a continuous approach to decision-making and policy formulation. Economic development must harmonize with democracy. According to the Latinobarómetro 2023 research, “The Recession of Democracy in Latin America,” Mexico is among the countries experiencing “a weak or regressing democracy,” with support of democracy dropping from 43% in 2020 to 35% in 2023. This decline underscores the urgency of strengthening individual, civil, social, and economic rights, and their protection. North America has been, for the past decades, a region of economic prosperity, a fertile ground for trade, and one based on democratic ideals, processes, and institutions. Our region demands continuous efforts from state governments to uphold liberal values and governance within the framework of the rule of law. This administration remains committed to pushing forward economic wellbeing as well as prioritizing the consolidation of democracy for the state of Chihuahua.