Mexican SEZs: Poles of Development

The Sheinbaum Administration is saying the right things about nearshoring and international trade… but the core of the Mexican approach to economic development is equal parts infrastructure development and social program with a strong community focus. ?

Mexico’s approach to economic development has a much stronger social component than the ones you encountered in China.? AMLO and the new Sheinbaum administration are focusing on the poorer regions in the South – especially the Isthmus of Tehuantepec in the states of Oaxaca and Veracruz.? Under the AMLO administration, Mexico’s key mechanism for economic development has been “Poles of Development” – or "Polos de Desarrolla para Bienstar" – or PODEBIS.? While these projects are vaguely analogous to ?SEZs in China, there are key differences.?

End of the Story:?

Mexico’s “Poles of Development” are not yet ready for prime time, but the 12 designated development sites along the CIIT (Corridor of the Isthmus of Tehuantepec) demonstrate how the Sheinbaum administration plans on carrying out its economic development programs.? These zones address many of the problems facing traditional Maquiladora centers (the Border and the Bajio) – like expensive land, electricity shortages, and drought.? Unfortunately, they also feature many typically Mexican hurdles like excessive governmental interference, ?a large & vaguely defined set of stakeholders with conflicting interests, labor challenges, ?and insufficient information flows.? ?

MNCs taking a strategic view of Mexico’s role in a North American supply chain will see a lot of potential value in this PODEBIS approach.? For those using Mexican sites as a quick outsourcing fix, these development zones are probably not worth the trouble.?

Part 1:? Defining Key Terms & Assets

CIIT – (Corredor de Interoceánico de Istmo de Tehuantepec).? ??Sometimes referred to as the “new Panama Canal”, the Corridor of the Isthmus of Tehuantepec (CIIT) is the thin strip of land in the south of Mexico separating the Gulf of Mexico (in Vera Cruz) and the Pacific Ocean (in Oaxaca).? The AMLO administration started a large-scale project to develop the region into an integrated industrial zone, and President-Elect Sheinbaum seems likely to expand the program. ?This is an impoverished region, and the new initiative contains a strong social component that prospective investors need to approach carefully.? Negotiations with Indigenous community stakeholders continue to be problematic for both local and international investors.? ???

PODEBIS, or Poles of Development (Polos de Desarrollo para Bienstar) are public-privately administered industrial parks that are broadly analogous to SEZs in places like Shenzhen or Suzhou.? Mexico has designated 14 PODEBIS in total, with 12 of them in the CIIT (at various levels of completion).? It appears that the PODEBIS will be the main mechanism for official development projects in Mexico under the Sheinbaum administration, but the effectiveness of this approach remains to be seen.? Think of the PODEBIS as industrial parks under the jurisdiction of the Navy with a strong social activism component.? The stated goal of the PODEBIS is to attract businesses with economic incentives, streamlined regulations, and improved infrastructure.? Investors will benefit from lower VAT (8% vs. 16% without incentive) and income tax (20% vs. 30% non-incentivized).?? T-MEC/USMCA and IMMEX rules should apply for qualifying companies & transactions.

Tren Linea Z – the Transistmico Tren.? The refurbished train line crosses the Isthmus of Tehuantepec and connects the Port of Salina Cruz and the Port of Coatzacoalcos – a length of roughly 191 miles (300 kilometers).? The railway will move both cargo and passengers.? When improvements are complete, the high-speed train will cover the distance in under 3 hours.? Reportedly.?

This is the rail bridge that some people feel will compete with the Panama Canal.? Line Z is going to integrate with the Tren Maya project – apparently.? I’ll share details as they emerge.?

Port of Salina Cruz.? Located in Oaxaca on the Pacific Ocean, the Salina Cruz Port focuses on energy, logistics, and trade.? A petroleum refinery already exists in Salina Cruz.? Improvements to the port include the construction of a breakwater, a new container terminal, and an LNG (liquefied natural gas) export terminal.

Port of Coatzacoalcos.? Located in Veracruz, the Port of Coatzacoalcos focuses on petrochemicals, energy, and infrastructure.? This port is being dredged and expanded, and a new container terminal and upgraded dock facilities are being built.?

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Part 2:? The PODEBIS Projects (that we know about)

Mexico has slated 14 zones for PODEBIS developments – 12 of them in the CIIT, and two new ones in the Yucatan.?

Here is a brief description of a cross-section of relevant PODEBIS projects, drawing on the available information.? (NOTE:? I relied heavily on AI tools for this list. ?Care should be taken.)

The CIIT PODEBIS projects:

• Coatzacoalcos I: Located in Coatzacoalcos, this PODEBI is a 257.70-hectare area strategically located along the Coatzacoalcos-Villahermosa highway. The project aims to attract private and public investment, focusing on petrochemicals, energy, and logistics due to Coatzacoalcos’s strategic port location.
• Coatzacoalcos II: Also located in Coatzacoalcos, but in a different area than Coatzacoalcos I, this PODEBI focuses on attracting investment for economic growth in petrochemicals, energy, and related infrastructure.
• Texistepec: Located in Texistepec, this PODEBI focuses on boosting the local economy through investments in agriculture, agro-industry, and sustainable practices. PROISTMO was awarded the concession to construct, operate, and maintain this project through an international public bid. This is the second largest of the 12 projects.
• San Juan Evangelista: Located in San Juan Evangelista, this PODEBI focuses on improving infrastructure and attracting investors to agriculture, fisheries, and tourism.
• Salina Cruz: Located in Salina Cruz, this PODEBI has received significant investment due to its role in the Corredor Interoceánico del Istmo de Tehuantepec. It focuses on energy (including the Salina Cruz refinery), logistics, and trade. The existing refinery will become a pivotal point for this project.
• Ciudad Ixtepec: Located in Ciudad Ixtepec, this PODEBI was attracting investment for local development in renewable energy (wind power), agriculture, and handicrafts. However, the bidding process was canceled on November 11, 2022, for unknown reasons.
• Santa María Mixtequilla: Located in Santa María Mixtequilla, this PODEBI focuses on attracting investment for sustainable development in agriculture, ecotourism, and cultural preservation.
• Matias Romero Avenda?o: Located in Matias Romero Avenda?o, this PODEBI focuses on enhancing local capacities and infrastructure for agriculture, transportation, and logistics.
• Asunción Ixtaltepec: Located in Asunción Ixtaltepec, this PODEBI focuses on attracting investment for economic growth and job creation in agriculture, handicrafts, and renewable energy.

The Yucatan projects:

• Mérida 1: Located at kilometer 24.5 on the Mérida-Progreso highway in Yucatán, this project spans 223 hectares and focuses on 11 sectors: electronics, semiconductors, automotive, medical devices, pharmaceuticals, agroindustry, clean energy, machinery, information technology, metals, and petrochemicals. It is a collaborative effort between the Yucatán state government and the federal administration.
• Progreso 1: Also located at kilometer 24.5 on the Mérida-Progreso highway in Yucatán, this project spans 110 hectares and will serve as a multimodal park for the Tren Maya project.

Part 3: What PODEBIS and CIIT Mean to FDI Decision-makers.

The CIIT initiative, supported by the network of PODEBIS industrial parks and enhanced infrastructure projects has the potential to make Mexico a more sophisticated, balanced, and competitive economy – if the Sheinbaum administration can pull it off.? It’s a massive project with a very broad range of stakeholders whose interests do not always align.? The Isthmus of Tehuantepec is presently occupied by Indigenous groups who depend on traditional farming – and there is a bad history of exploitation and violence at the hands of developers and the military.? ?If Mexico can develop the Isthmus in a sustainable, socially responsible manner while integrating the zone with the larger economy of Mexico and North America, it could address many of the problems plaguing the busy Maquiladora centers in the North.?

The Sheinbaum Administration will have to raise its game in terms of organization, management, and communication to make this project viable for the long term, ?but the new president has a well-earned reputation for efficiency and pragmatism. ??

Why does this matter to international managers?

Opportunities:? A successful CIIT and efficient network of PODEBIS industrial parks will open up Mexico’s vast, underserved southern region.? Prices are lower, land is available, and labor, electricity, and water will be plentiful.?

While the “Panama-Killing Land-bridge” idea is a non-starter, the ability to access the US, Europe, Asia, and South America from a single logistics hub could be a game changer for international companies.? ??The drive from Salina Cruz, Oaxaca to Laredo Tx is a little under 1,100 miles (1,700 kilometers), which is still viable for surface transport.? There will also be rail and air freight available, though we are still waiting for details.

Challenges:? This is a poor, underdeveloped area, and you will almost certainly have to train potential workers and import management teams for at least 5 years.? Sourcing from within Mexico will also be a little more complicated.

Foreign enterprises in Mexico have built the Maquiladora model into a well-oiled machine, and this new zone will definitely have some kinks that need to be worked out.? There will be much more direct government involvement than is visible in the Northern production zones, and the Navy will have broad authority over the entire area.? Negotiating with local populations and Indigenous groups will be delicate and time-consuming.?

The Trump Factor:? If Trump wins in November, the risk factor for certain types of cross-border trade will shoot up.? Will borders stay open?? Will the USMCA be renewed in 2026? Will customs procedures stay efficient?? Will there be all kinds of new regulations, inspections, and bureaucracy?? International investors on the border are paying top dollar for close access to specific border crossings, and the risk of those Ports of Entry becoming less reliable goes up if Trump and his team have jurisdiction.? In the event of nullification of USMCA in 2026 (review process) or other adverse developments on the border, the CIIT’s multi-modal logistics capability will be a powerful advantage.?

Final Word - ??Successful nearshoring in Mexico has been characterized by consistent adherence to established methods.? Set up in an established manufacturing center on the border or in The Bajio in accordance with Mexican regulations, import duty-free under IMMEX, and export 100% of your output to the US under USMCA.? Stick to the established methods and do not go off the normal path, and you’ll be fine.? ?Mexican business has been lukewarm to the PODEBIS program – and most international investors are still unaware of it.?

Mexican economic development, however, is about to fall victim to its own success.? Every headline you see about a major MNC breaking ground on a big project in Nuevo Leone or Ciudad Juarez means more hiring of scarce workers, using more scarce electricity, and pumping more scarce water.? While GM and Toyota will do fine, newcomers and smaller operations will face delays, backlogs, and shortages.? The Southern PODEBIS strategy makes sense on paper, but Sheinbaum will have to make developing profitable industrial development a top priority in an already crowded agenda.

<< Note on sources:? I made use of Google’s new NotebookLM to help compile the research for this paper. I collected a wide range of sources from the Mexican government and international journals (English and Spanish) and then used the NotebookLM platform to distill data into a useful format.? I THINK this should reduce the risk of hallucination, but it’s still AI, so you should confirm all pertinent data on your own.>>

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