How to Harness Mexico’s Emergent Innovation Potential
Index-based assessment data and analysis from the Portulans Institute suggests that if Mexico adopts a holistic, all-of-country approach to the digital future, the country can enhance its regional competitiveness and tackle deep-rooted barriers to economic development. These barriers have only been bolstered by the Covid-19 pandemic crisis. By using index-based assessments as tools to diagnose its areas of improvement, leveraging its existing strengths and combating long-standing barriers to network readiness, innovation, talent Mexico can continue to improve its competitiveness at both the regional and global level.
Although Mexico remains a leader in high-impact innovation, its status as one of the most attractive regional hubs has been threatened in recent years by both internal and external factors. Beyond the known effects of the current COVID-19 pandemic, Latin America and the Caribbean has suffered from more than a decade of weak economic growth, eroding its collective confidence. More recently, the rise of populist governments threatening local democracy has also taken a toll on the region. Together, both ailments have negatively affected Mexico’s economic growth in general and its innovation prowess in particular.
Further, as suggested our expert panel on digital transformation in Latin America, deep societal issues – such as entrenched inequalities, economic exclusion and connectivity gaps – persist, further preventing the creation of a future-ready, digital and inclusive society. For Mexico to overcome these economic, political, and societal issues and enhance its regional competitiveness, the country would benefit from adopting a holistic, all-of-country approach to the digital future.
However, there is cause for optimism. Mexico still displays an emerging track record of firm ICT regulation and significant investments into R&D from both the government and the private sector. If Mexico returns to and maintains macroeconomic stability – while promoting rather than curtailing structural reforms to open up its economy to global innovation, trade and investment – its rising innovation ecosystem will continue to distinguish itself from that of its regional and global peers. By harnessing its human capital, pioneering strategic investments into ICTs and combating the digital divide, Mexico can further improve its innovation and network readiness trajectory.
A key metric to gauge Mexico’s progress towards a future-ready, digital and inclusive society is the Network Readiness Index (NRI), an index-based assessment that not only measures economies’ readiness for the digital future, but also roots this approach in the recognition that developments in technology must be complemented by network-ready individuals, businesses and governments and good governance (high levels of trust, inclusion and regulation) in order to have an impact (measured by economic performance, the quality of life, and contribution to the UN Sustainable Development Goals).
Accordingly, among Latin American countries surveyed by the NRI, Mexico trails behind Uruguay, Chile, Costa Rica, Brazil and Argentina, ranking 63rd out of the 134 economies included. And among middle-income countries, Mexico is ranked 14th. With strong performance in the Governance pillar (48th place) and weaker performance in Technology (73rd place), it is clear that Mexico’s network readiness is uneven across key indicators.
One of Mexico’s key strengths is its government’s commitment to future readiness (37th place), a sub-pillar which gauges the availability of government online services (38th place) and the publication and use of open data (11th place). Mexico has been a leader in this field for nearly a decade, with the launch of the country’s Digital Strategy in 2012, including measures like the creation of a single government portal (Gob.mx), the ‘Prospera Digital’ digital inclusion program, and shared digital infrastructure (such as digital IDs) across the public sector. Further, Mexico ranks 11th worldwide on the Global Open Data Index, which includes indicators regarding the openness of its budget, election results, legislation and ownership, among others.
Another area that Mexico has a strong track record in is Regulation, a Governance sub-pillar. In fact, Mexico is a global leader for e-commerce legislation (1st place) and ranks highly for privacy protections and the ICT regulatory environment (15th and 31st place), bringing Mexico’s Regulation pillar’s ranking to 40th place globally. Recent analysis suggests that while Mexico has the regulatory competency and implementing institutions to support its emerging innovation system, coordination between institutions undermines this progress. This imbalance is reflected by Mexico’s performance on the Global Innovation Index (GII), which ranks its ICTs infrastructure higher than its regulatory environment (50th and 92nd place, respectively), bringing Mexico’s total ranking to 55th place globally.
Mexico is also an emerging leader in talent and human capital. A joint conference between the Mexican Council on Foreign Relations and the Center for Strategic and International Studies concluded that Mexico’s human capital potential will pave the way for it to become a more innovative economy, particularly in export-led sectors. This potential is captured by the Global Talent Competitiveness Index, which suggests strong performance in formal education, lifelong learning and access to growth opportunities (45th place worldwide) and the impact of its talent (48th place). Programs like CONOCER – a government agency dedicated to reskilling Mexico’s workforce – lay strong groundwork for workforce development and brain retention in the future.
However, these promising areas – in addition to Mexico’s infrastructural development, another key aspect of network readiness – are consistently undermined by the country’s sub-par performance in investing into future technologies, combating entrenched and increasingly digitized inequalities, and closing digital skills gaps. Likewise, many of these areas are currently facing unprecedented stress stemming from the pandemic, stretching their capacities beyond unprecedented resistance points.
For Future Technologies (a sub-pillar which gauges the adoption of, investment in and density of future technologies), Mexico lags behind its progress in other areas, ranking 75th globally. While Mexico’s high-technology exports, a strength for that economy as signaled by the GII, have reached over 15% of its total trade in recent years, tangible progress is yet to be determined in emerging technology R&D, which is still low-intensity, at around 0.3% of GDP in 2018.
Another red flag in Mexico’s network readiness track record is its poor performance in the Inclusion sub-pillar (90th place), which includes particularly worrying indicators relating to gaps in the use of digital payments (100th and 120th place) and income inequality (104th place). Recent literature by the Mexican Law Review has dubbed Mexico’s digital divide its “mirror of poverty”. While recent policy initiatives for digital inclusion have won global plaudits (such as ‘Conozco Mi Consumo’, enabling Mexican consumers to learn about telecom services available to them in rural areas), there is much progress yet to be achieved.
Related to this are Mexico’s gaps in digital and ICT skills, which undermine the development of its talent ecosystem. NRI analysis suggests that while the government ranks highly on being future-ready (37th place), individuals and businesses (64th and 80th place, respectively) demonstrate gaps in network readiness. Particularly concerning is Mexico’s ranking for ICT skills (94th place). The OECD’s Skills Outlook suggests that Mexico’s digital skills competencies trail behind OECD levels in terms of teachers needing ICT training.
Nonetheless, available data indicates that Mexico’s network readiness track record has had a substantial impact so far. Mexico is a regional leader (second only to Costa Rica) in the NRI’s Impact pillar (48th place), suggesting its levels of network readiness have a strong, positive impact on its economic development (44th place) and the wellbeing of its citizens (51st place). By tackling its deficiencies in digital skills, the digital divide and future technologies, Mexico can build a stronger, future-ready and digitally-integrated country, and enhance its performance in network readiness.
It is imperative for Mexico to continue developing the means for the production of new ideas and the adoption of growth-boosting technologies that – right before the beginning of the pandemic – assisted improving economic growth. By using index-based assessments as tools to diagnose its areas of improvement, leveraging its existing strengths and combating long-standing barriers to network readiness, innovation, talent Mexico can continue to improve its competitiveness at both the regional and global level.
This blog is part of the ‘NRI Regional Spotlight’ series: a series in which Portulans staff use the Network Readiness Index data and findings to produce targeted analysis and commentary (in addition to insights from the Global Innovation Index and the Global Talent Competitiveness Index). Interested in a deep-dive into your country’s tech competitiveness, innovation readiness and global talent? Email firstname.lastname@example.org.