Latin America is betting on SEZ, while Mexico has other things in mind

There are about 500 Special Economic Zones (SEZ) in the Latin American region.

Thursday, August 8, 2019

There are about 500 Special Economic Zones (SEZ) in the Latin American region, according to the “World Investment Report 2019” (WIR 2019) from the United Nations Conference on Trade and Development. It also states that the SEZs are a great opportunity for sustainable development and a fundamental part of the “2030 Agenda”.

There are different examples around the world that show the success of SEZs, which become a key factor in transforming economies, providing greater participation in value chains, reducing poverty levels, accelerating industrial modernization, and attracting investment. In the most recent 5 years, the number of SEZs around the world has increased from 4,000 to 5,000 where 145 countries have some kind of SEZ. On the other hand, there are some examples where the SEZs have not reached the expected results.

China is top on the list with the most SEZ, 2,543; followed by: Philippines (528), India (373), and the United States (262). In Latin America, Nicaragua (52), Costa Rica (49), Colombia and Honduras (39) and Brazil (32) stand out. The UNCTAD highlighted that these zones generate 68 million jobs and that another 500 SEZ projects are planned for the next years.

During Enrique Peña Nieto’s six-year term, it was announced on the Official Site of the Presidency that the SEZs would be: Port of Chiapas in Tapachula, Chiapas; Port of Lazaro Cardenas in municipalities adjacent to Guerrero and Michoacan; and in the Interoceanic Corridor of the Isthmus of Tehuantepec, from Salina Cruz in Oaxaca to Coatzacoalcos in Veracruz, and from Tabasco and Campeche.  But President Andres Manuel Lopez Obrador has decided to cancel the seven SEZ project.

The President’s decision contrasts with the efforts of Latin American countries, since the region plans to create 20 to 30 Special Economic Zones over the next five years. Together with the 500 Zones that the region already has, these zones bring together more than 10,000 companies and a workforce of one million people.

One of the elements of why SEZs continue to be encouraged, not only in Latin America but in several parts of the world, is the ability to attract investment that drives development, generates jobs and increases economic activity and foreign trade, through systems that offer fiscal incentives, more flexible rules and regulations and operational advantages. Despite the SEZs have shown evolution over time, not only focusing on manufacturing, but now also including high-tech sectors, financial services, tourism, environmental performance, science commercialization or urban regeneration, the President of Mexico will not continue to implement them and will allocate resources to projects such as the Mayan Train, the Dos Bocas refinery and the Transisthmian Corridor.