Mexico's 'Silicon Valley' Offers Different Image for Americans

You don't have to worry about the wall when you work in the cloud.

GUADALAJARA, Jalisco—Perhaps I shouldn't have referred to Mexico's second-largest city, Guadalajara, as a south-of-the-border version of Silicon Valley.

J.P. Lopez, who heads business development for a nonprofit called Ijalti that promotes the state of Jalisco's high-tech business "clusters," was shaking his head when the words spilled out of my mouth. "We're a unique hub" with its "own DNA," he objected. The city's technology boom has been decades in the making, after all, and has grown organically. It's certainly not a copy of anything.

I get the point, but still slapped "Mexico's Silicon Valley" in the headline for a decidedly north-of-the-border reason. In the age of Donald Trump—and what news isn't about Trump these days?—it's useful to discuss our southern neighbor without referring to drug cartels, crime and illegal immigration. Even Americans' positive views of Mexico are limited, and are epitomized by a T-shirt sold in a tourist shop in beachfront Puerto Vallarta that welcomes Americans to "the fun side of the wall."

Mexico beach resorts certainly are entertaining, but there's more to the country than these things. That's why I took the three-hour flight south, where I was the guest of an Austin-based software-development company called iTexico. The firm specializes in "nearshoring" for U.S. companies, which is an alternative to "offshoring" operations in places such as India or China.

A few years ago, I developed a start-up website but couldn't afford a local developer. I contracted with a company in India, but learned about the difficulties of that approach. It's 8:32 a.m. in Sacramento now, but 9:02 p.m. in Bangalore. You work on the site, come up with a question and email it to India, but the developer is asleep. When he wakes up, he answers the question and emails it back — but you're asleep. It can take weeks to resolve simple matters. And then there are language and cultural barriers that complicate the process.

During my stay in Mexico, I worked just as if I were at home. Jalisco is in central time. The software-development team spoke perfect English. It's easy to fly to Texas to meet with clients. One of my Mexican hosts attended college in Boise, Idaho. And Americans and Mexicans are far more similar culturally than our president would have us believe. It's not much different than working with a company in the Midwest or the South.

Aren't nearshoring firms stealing American jobs? That's an inevitable question given the fixations of the current administration.

"Right now in the U.S. there is a deficit of 1-million-plus technology jobs," said iTexico CEO Anurag Kumar. "We're not lifting and shifting anything from the United States to Guadalajara. We're helping companies in the U.S. by providing talent that they don't have here. … We're helping U.S. companies build jobs faster." There are cost savings, but those are secondary, he added.

Many Americans want to have it both ways. They complain when U.S. companies create jobs in other countries, then complain also when people from those other countries immigrate to the United States to get meaningful work. I'm not concerned about immigration, but those who are ought to see the value of developing solid industries in Mexico so that industrious people don't need to wait in immigration lines (or sneak across the border) to come here.

The free market is the best way to increase prosperity for everyone. Lower-cost alternatives reduce wages in certain industries because of the resulting competition. But it's not a zero-sum game. Because I was able to outsource that website mentioned above, I was able to cost-effectively start a project. Low-cost labor allows people with new ideas to start businesses, and such enterprises create more jobs in the long run. That's how free economies work.

You can't write about Mexico without addressing crime. There's no sugarcoating the problems the country has with drug-related murders. But as I asked a friend who expressed fear about traveling to Mexico, "Would you walk around south Chicago or north Philadelphia at midnight?" It's all about perspective. A recent study by United Healthcare Global evaluated security threats and crime rates on a one (lowest) to five (highest) basis. Guadalajara scored three on both, which is the same as San Francisco, worse than Las Vegas and better than Philadelphia and Atlanta.

Kumar said he isn't worried about the wall because he works in the cloud. Indeed, people in Jalisco are careful about what they say about U.S. policy, but there's no doubt Trump's actions are reason for concern. His incendiary rhetoric also is sparking a populist national political backlash in Mexico, which could lead to myriad problems on both sides of the border.

Despite short-term political uncertainties, there's no question Guadalajara is in the tech business for the long haul. For many years, companies such as Motorola, Dell, Hewlett-Packard and IBM have operated in the city. The Universidad de Guadalajara has been a magnet for engineering and technology students. Although I oppose such things, the state and city governments have offered subsidies. With its treasure trove of historical neighborhoods and hip nightlife, Guadalajara is a magnet for young IT types from across the country.

It's definitely one of a kind, so it's easy to understand those who bristle at news stories making the Silicon Valley comparison. But the comparison is an improvement from the usual American discussions of Mexico. It's a reminder that Americans need to develop a more thoughtful and nuanced understanding about the complexities of their friendly southern neighbor — and get beyond the ugly rhetoric and stories about cartels.

This column first appeared in the Orange County Register.

Steven Greenhut is Western region director for the R Street Institute. He was a Register editorial writer from 1998-2009. Write to him at [e-mail].