Tijuana Is “Strong” For Japan

By Wendy Fry

The Japanese manufacturing industry sees a “strength” in Tijuana, especially in the aerospace and medical sectors, thanks to the border city’s proximity to the United States and the dynamic relationships that exist in the “CaliBaja,” region, said Takao Nakahata, the Executive Director of Jetro Mexico.

“In the case of the aerospace and medical devices sectors, Tijuana is strong, and we are investing in the business environment in border states,” said Nakahata, during a recent Economic and Industrial Development (Deitac) event in Tijuana.

The Japan External Trade Organization (JETRO), established in 1958, is a government-related organization that works to promote mutual trade and investment between Japan and the rest of the world. In recent years the organization’s focus has shifted toward helping small to medium-sized Japanese firms maximize their global export potential.

Deitac is a business organization that works to attract new industries to the Baja region, as well as strengthen Tijuana business leaders’ relationships with San Diego.

Nakahata toured the city of Tijuana and the rest of Baja California for three days, saying he was interested in bringing Japanese investment to the region, and in bringing Mexican investment to Japan.

“We already have 60 years of experience, and we have an office in Mexico City. We are promoting exports of Japanese products and investment in Mexico,” he explained. “Our mission is to offer detailed information to Japanese businessmen.”

Nakahata was invited to Tijuana by the new 2021 Board of Directors for Economic and Industrial Development (Deitac) chaired by Carlos Jaramillo Silva.

Currently, the commercial relationship between Mexico and Japan is going through one of its best moments in history.

In 2019, Japan was ranked as the fifth-largest commercial partner of Mexico globally and the second in Asia, after China. At the end of 2019, bilateral trade reached US$22 billion between the two countries.

Among the main products exported from Japan to Mexico are vehicles and parts, reactors, boilers, industrial and electric machinery, sound equipment, TV equipment, iron and steel, optical and photography equipment, as well as medical equipment and surgical instruments, according to Raúl González, the Director of Projects and Institutional Relations for JETRO.

The main products that Mexico exports to Japan are electric machinery, sound and TV equipment, mineral fuel, oil, vehicles, meat, fruit and nuts, citrus fruit, melon, salt, sulfur, earth stone, lime, cement plaster, as well as fish and marine products.

One of the most interesting products from Mexico that has appeal in the Japanese market is tequila, which in 2019 totaled an export volume of 2.5 million liters, according to González.

According to the most recent statistics from the Secretariat of Economy of Mexico, Japan occupies the fourth place for FDI with a cumulative investment of US$27.05 billion, representing 4.6% of total foreign direct investment in Mexico, just after the United States, Spain and Canada.

Some 85% of the investment of Japanese companies in Mexico is concentrated in the manufacturing industry. Of that, the automotive industry concentrates most of that investment, with a total US$14.60 billion, ranking second after the United States.

Japanese car giants like Toyota Motor Corp. – the world’s largest automaker – have done well in the region, for example, making the Tacoma pick-up truck.

Current Toyota production in Mexico is concentrated at its 844,000-square-foot plant in Baja California, which opened in 2003, and started making the Tacoma in 2004. More recently, the company invested US$700 million expanding an additional Tacoma assembly plant in Guanajuato, which just began rolling trucks off the production line at the beginning of 2020.

Combined Tacoma production at both the Tijuana and Guanajuato plants was expected to hit 266,000 vehicles in 2020, before the coronavirus pandemic hit, with 166,000 of those vehicles scheduled to be made in Tijuana. In 2019, the Tijuana plant made approximately 167,500 Tacomas, mainly for export to the U.S. and Canada.

According to Greg Laskey, vice president of purchasing for Toyota North America, the advantages of manufacturing in Mexico are obvious: the location provides simple entry across the North American market, combined with a “highly skilled labor and highly dedicated (Mexican) work force.” Laskey made his comments at the International Congress of the Automotive Industry in Mexico. The event was hosted by the National Auto Parts Industry (INA).

During his visit to Tijuana, Nakahata reported that currently in Mexico there are about 1,269 Japanese companies already working, mostly in the automotive sector. The majority of those companies are in the Bajío, or Central Mexico. Nissan has plants in Aguascalientes and Morelos; Honda in Jalisco and Guanajuato; and Mazda in Guanajuato. In the case of commercial vehicles, Hino is in Guanajuato and Isuzu is in the State of Mexico.

The number of Japanese companies is up dramatically from the 400 Japanese companies that were operating in Mexico in 2009. Officials estimate Japanese companies provide at least a third of the 900,000 direct auto manufacturing jobs in Mexico.

The same strengths that attract automakers to Baja could attract medical device manufacturing companies. Covering an area of over 35,000 square miles, the geographic location of CaliBaja, along with its skilled workforce, makes it a location worth studying, according to Nakahata.

According to Yasushi Takase, the ambassador of Japan to Mexico, several industries are primed to follow in the success of Japanese auto manufacturing in Mexico.

“The next opportunities are in the fields of aerospace, medical and pharmaceutical technology, renewable energy, tourism and agriculture. Mexico is constantly opening new free trade areas and this beneficial position can be utilized through these thriving sectors to achieve success,” said Takase.

Given the demand for medical products worldwide, Japanese investors are interested in the border area, possibly in the medical device manufacturing industry. The Cali-Baja Biotech Cluster represents over 800 companies and includes San Diego, Imperial Valley and Baja California.

Medical devices in Mexico as a whole received cumulative foreign investment totaling more than US$2 billion during the period 2007-2017. Most of the capital influx came from the United States, but significant investment in medical device manufacturing activities in Mexico was made by other nations such as Germany, Singapore, Japan, and Canada.

During the period 2013 to 2018, Baja California attracted almost US$300 million worth of investment in the production of electronic and nonelectronic medical equipment, as well as capital investment directed towards the manufacture of medical disposables.

Japan also stands as one of the world’s top contributors to the medical devices market with companies like Olympus that manufactures gastrointestinal endoscopy devices. The medical devices market in Japan is predicted to grow by US$6.65 billion between 2020-2024.

Terumo, a thermometer manufacturer company that also makes cardiovascular equipment such as catheters and stents. Based in Tokyo and operating globally, Terumo employs more than 25,000 worldwide to provide innovative medical solutions in more than 160 countries.

Nipro, a manufacturer serving the medical device, pharmaceutical, and pharma packaging industries, already has a presence in Mexico. Nipro’s Medical Device business develops, manufactures, and sells medical equipment for dialysis treatment, and products related to diabetes and cell cultures.

Other top companies from Japan involved in medical device manufacturing include Sysmex, Nihon Kohden, Fukuda, Omron and Menicon.