Mexico a Rising Global Hub for Innovation as Tech Start-ups Triple in Last 10 Years

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Through greater investment in R&D and education, and by encouraging a tech-enabled society, Mexico’s economy has the potential to gain more than $245 billion in cumulative gross domestic product (GDP) growth through 2025. Demographic advantages peaking in the next decade and improved start-up support will lay the foundation for a robust culture of innovation. Even though R&D spending has been higher in countries like the US, Korea, the UK, and Singapore, in the last six years, growth of new start-ups led by 18- to 64-year-olds has been highest in Mexico. Indeed, since 2010, the number of Mexico’s tech start-ups has tripled.

"Mexico's performance in innovation has strengthened over the past few years due to steady reforms and government policies,” said Richard Sear, Partner and Senior Vice President at Frost & Sullivan. "This has led to pro-private investment schemes, encouraging multinationals and local players to view Mexico as a viable hub for emerging technologies, such as Artificial Intelligence (AI), the Industrial Internet of Things (IIoT), and cybersecurity. With continued support from the new administration, Mexico can become a pioneer of innovation across Latin America (LATAM) and the globe."

Frost & Sullivan’s recent analysis, supported by Cisco, The Future of Mexico—A Global Hub for Innovation, analyzes the social, technological, and economic factors influencing a culture of innovation in the country.

"With the largest fintech ecosystem in LATAM, Mexico is capable of building multiple start-up hubs in cities such as Mexico City, Guadalajara, Monterrey, and Tijuana," noted Sear. "In 2018, the number of fintechs crossed 300, strengthening the country's position as the second-most vital fintech ecosystem in the region."

Due to a surge in emerging technologies, traditional industries are reinventing themselves. Mexico is well positioned to be LATAM’s innovation leader in emerging areas such as electric vehicles (EVs), 4G/5G telecommunications rollout, and affordable, smart, and green housing, as well as in established industries such as tourism and medical devices. Other important trends that are driving Mexico's growth as an innovation hub include:

• The rise in Mexico’s venture capital (VC) activity—Nearly 1.900 VC deals were finalized between 2010 and 2018, involving a total investment of $22 billion.
• Mexico’s large youth population—By 2025, more than 45 percent of the population will comprise millennials and Gen Z. Therefore, the government is focused on raising the standards of education and encouraging youth training programs and entrepreneurship.
• The working-age population, which is expected to touch 68 percent in 2033—It will enhance LATAM's economic prosperity, driving infrastructure development and advancing innovation and technological adoption.
• Continued infrastructure development—Infrastructure investment increased to 8 percent of GDP from 2014 to 2018 to develop rail, road, and aviation infrastructure. Ongoing support for these efforts will boost multiple GDP contributors, from agriculture and tourism to advanced manufacturing.
• Growth of the Mexican middle class—By 2030, the Mexican middle class will rank in the top 10 contributors to global middle-class consumption. This surge in economic activity is already driving innovation in retail.

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