Mexico

Digital
Economy
Focus Report
In collaboration with

oxfordbusinessgroup.com August 2022

Foreword

Jorge Castilla,
Country Managing
Director

2 OBG Mexico Digital Economy Focus Report August 2022

Content Guide

I 2 3
PART PART PART
INFRASTRUCTURE INTELLIGENCE INNOVATION
5 Data Centres 13 Intelligent Technologies 19 Financial Technology

6 5G Rollout 14 Artificial Intelligence and 20 Open Banking

Machine Learning
7 Smart Cities 21 Payments and Transfers
15 Telehealth
8 Cybersecurity 22 Government Participation and Regulation
16 Education
9 E-Commerce Trends 23 Citizen- and Business-Focused Services
17 Open-Source Software
10 Last-Mile Challenges 24 Internal Process Optimisation

11 Digital Solutions 25 National Digital Strategy

28 Outlook

29 Key Takeaways

3 OBG Mexico Digital Economy Focus Report August 2022

I 2 3
PART PART PART
INFRASTRUCTURE INTELLIGENCE INNOVATION
5 Data Centres 13 Intelligent Technologies 19 Financial Technology

6 5G Rollout 14 Artificial Intelligence and 20 Open Banking

Machine Learning
7 Smart Cities 21 Payments and Transfers
15 Telehealth
8 Cybersecurity 22 Government Participation and Regulation
16 Education
9 E-Commerce Trends 23 Citizen- and Business-Focused Services
17 Open-Source Software
10 Last-Mile Challenges 24 Internal Process Optimisation

11 Digital Solutions 25 National Digital Strategy

28 Outlook

29 Key Takeaways

4 OBG Mexico Digital Economy Focus Report Source: source August 2022
Part 1: Infrastructure

Data Centres
Data centres (DCs) are at the core of the global predominantly Mexico City; the availability of fibre- Global data centre colocation market projections, 2026
digital economy. The pandemic accelerated the optic connectivity; an abundant supply of electricity;
widespread use of cloud services, such as cloud state-level support; and low risk of natural disasters
computing and on-demand modular services, like the earthquakes and hurricanes common in
including software and infrastructure as a service. other cities. AWS, Microsoft and Oracle are planning Market size (2020) $25.8bn
Mexico City, as the largest metropolitan area in Latin to open cloud clusters in Querétaro.
America, is increasingly embracing the kind of digital
transformation taking place in the US and Canada, The 2010 Data Protection Law aimed to shield Market size (2026) $33.4bn
the country’s most important economic partners. personal data from damage and unauthorised
The growth of DCs is projected spur economic access. Further homogenisation of privacy and data-
activity in related sectors. They require not only protection laws with the EU and the US is likely to
IT, but also electrical, mechanical and cooling spur investment and innovation. Environmental and CAGR (2021-26) 4.40%
infrastructure, as well as support and maintenance energy consumption concerns should be integrated
services. In 2021 the DC market in Mexico was into business models to foster the use of renewable
worth $632m, and it is expected to reach a value energy to operate these facilities. Area 24.9m sq feet
of $1.08bn by 2027 with a 9.4% compound annual
growth rate (CAGR). Major companies operating Investment in the aggregate Latin American DC
in Mexico include Alibaba, Amazon Web Services market is expected to grow by a 7.6% CAGR in 2021-
(AWS), Huawei, Oracle, and Microsoft. Mexico has 26. The market in the region is moving towards Power capacity 4815 MW
around 28 operational DCs, including 11 edge DCs. investing in modular or Performance Optimized DCs,
as opposed to the mostly greenfield construction
The state of Querétaro has become the primary site currently in use. Energy efficient and designed to Revenue $59.6bn
for DCs in Mexico, including hyperscale facilities. This sustain high rack density, modular infrastructure
is due to its proximity to major economic centres, costs 30% less compared to traditional facilities.

5 OBG Mexico Digital Economy Focus Report Table source: Arizton August 2022
Part 1: Infrastructure

5G Rollout
No. of 5G networks in and Baja California, each with internet penetration Electricidad, CFE). The latter manages infrastructure country. Meanwhile, China’s Huawei will provide 30%
in excess of 84%. The three least connected states vital to 5G rollout in marginalised rural areas. of the technology to be used in the south of Mexico.
Latin America, May 2022
are Chiapas, with 46% connectivity; Oaxaca, with The main challenge for an expedited rollout of this
Argentina 55%; and Veracruz, with 59%. The contribution critical technology is building consensus among the Average internet & smartphone usage
of telecommunications and broadcasting to GDP leading players, the federal government and the 32
Columbia went from 1.6% in 2010 to 2.8% in December 2020. state governments. In August 2019 Telecomm and Mexico City North America
It is expected that 5G applications will contribute the SCT announced the cancellation of the public
Mexico 90
$90bn to the Latin American economy by 2034, bid for 5G-capable networks. In turn, the federal
Peru representing 5.4% of total growth in GDP. government announced plans for a state-led and
not-for-profit initiative to develop the backbone
Brazil Telcel and AT&T launched 5G technology in 18 cities network through the newly created state company
in 2022. The two telecommunications companies CFE Telecomunicaciones e Internet para Todos. 60
Chile cover over 75% of the country’s 132m active mobile
lines, with Telcel taking a 60.8% share and AT&T with Closing the gap in digital connectivity in Latin
Since the 2014 liberalisation of the 15.4%. Movistar, with a 18.7% share of the market, America could have significant economic impact,
telecommunications industry, foreign direct has not announced when it will begin 5G rollout. generating 15m jobs and increasing regional
investment in the sector has increased 12-fold, GDP by almost 8%. While Telcel’s 5G rollout has 30
from $138m in 2011 to $1.7bn in 2019. The number The main regulatory entity in Mexico is the reached an estimated 48m people, according to the
of internet users has grown by 35%, from 62m Federal Telecommunications Institute. It shares Competitive Intelligence Unit, in 2021 only 10% of
in 2015 to 84m in 2020, representing 72% of some regulatory and roll-out responsibilities with mobile phones in Mexico were 5G compatible, out
Mexico’s population aged six and older. Some 80% Telecomm, a decentralised body of the Ministry of of a total of 120m smartphones. Telcel expects to
of urban dwellers now have internet access, along Communications and Transportation (Secretaría increase its 5G reach to 120 cities before the end 0
Smartphone Internet
with 50% of the rural population. The three most de Comunicaciones y Transportes, SCT), and the of 2022. Sweden’s Ericsson is set to provide 70% of penetration penetration
connected regions are Nuevo León, Mexico City Federal Electricity Commission (Comisión Federal de the technology, predominantly in the north of the rate (2020) rate (2017)

6 OBG Mexico Digital Economy Focus Report Graph source: Statista August 2022
Part 1: Infrastructure

Smart Cities
Globalisation has increased the rate of Guadalajara in 2015, Chihuahua in 2016 and vital stakeholders, much of the investment the efficient management and sustainable use
urbanisation, which in turn fosters economic Mexico City in 2019 for their efforts to integrate and innovation needed requires public-private of resources, demand for efficient and adequate
and cultural interdependence. With about 56% technology-based solutions to promote creativity, collaboration. Other challenges include privacy transport, public safety concerns, and increased
of the world population living in cities today – a internet connectivity and data-informed public and security concerns over the internet of things awareness of health-related risks following the
figure expected to reach 70% by 2050 – cities are policy. In 2021 the Confederation of Industrial and the absence of appropriate infrastructure pandemic represent the foremost drivers for
set to play an essential role in implementing the Chambers of Mexico (Confederación de Cámaras in Mexico. Continuing urbanisation, the need for smart city growth in the coming years.
UN’s 2030 Agenda for Sustainable Development. Industriales, Concamin) launched an initiative to
Increasingly, digital technology has been promote smart cities in Mexico with a preliminary Mexico City statistics
integrated into urban design and management shortlist of 13 secondary and tertiary cities,
and used to support the coordination of urban including Aguascalientes, Mérida, Morelia and
systems that enable governments to offer citizen- Xalapa, with a view to promoting economic
centric services. The global market for smart and social development and sustainable use of 25.6m 2.9% 18.2
cities is expected to grow from $457bn in 2021 to resources. Multinational professional services population annual economy
$873.7bn by 2026, for a CAGR of 13.8%. network KPMG and Concamin identified the population score*
large urban areas of Mexico City, Puebla, growth
According to the 2021 IMD-SUTD Global Smart Guadalajara and Monterrey as the cities with the
City Index, Mexico ranks 108th out of 118, down most pressing need for an enhanced smart city
18 places from 2020. Although the current strategy due to demographic pressure and the 156th 77.3 years 109th
administration has been slow to implement need to distribute social services equitably. ranking for life expectancy ranking for life
change on the national scale compared to other economy** expectancy**
markets, the country’s city- and state-level With the priority being the creation of
governments have made substantial efforts collaborative environments for public and
*The economy subindex of the Statista report has a range of 0 to 35 and consists of the following weights: GDP per capita (0.3),
to expand their smart city approaches. The private entities, including local governments, unemployment (0.3), corruption control (0.2), rent in the city centre (0.1) and rent in the suburbs (0.1).
Inter-American Development Bank recognised academia, the financial sector, NGOs and other **Statista “Global Business Cities” 2021 report

7 OBG Mexico Digital Economy Focus Report Infographic source: Statista, CBRE August 2022
Part 1: Infrastructure

Cybersecurity
$2trn and $10trn, a figure equal to the combined no comprehensive treatment of cybersecurity or North America by 2025. Chapter 19 of the US-
53% of internet users were value of the world’s top-five companies by market an effective governing body yet. The administration Mexico-Canada Agreement, the first deal of its
victims of cyberattacks in 2021 capitalisation, making 2022 a decisive year for of President Andrés Manuel López Obrador kind to regulate digital trade, addresses challenges
25 cybersecurity. Many companies do not report has not advanced a cybersecurity plan despite and opportunities regarding taxes on digital
cybercrime because of the unfavourable publicity Mexico being the country with the 10th-highest trade products, data localisation and internet
20 that comes with cyberattacks. cybercrime density globally, with the second-most sovereignty, and other key digital trade elements.
15 incidents in Latin America, after Brazil.
Cybersecurity has historically been an overlooked
10 part of Mexico’s digital ecosystem, with the private Progress is evident, however. Big DCs now offer 60% of internet users
5 sector taking the lead. In 2017 then-President enhanced cybersecurity systems, and small think that their computer is
Enrique Peña Nieto made an attempt to assemble and medium-sized enterprises (SMEs) market not protected from cyberattacks
0
a national cybersecurity strategy one year tailored services to the private and public sectors,
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2002 Science and Technology Law, the 2010 Data in the subsector, as many companies made the
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Protection Law and the 2014 Telecommunications shift to remote work in early 2020. cost of responding to cyberattacks at
Cybersecurity involves both network and and Broadcasting Law. Mexico became a regional £11.7m per company, an increase
transaction security, the latter being essential for leader in financial technology (fintech) regulation As the digital economy continues to evolve, of 27.4% from 2016
an advanced digital economy as it secures remote with the 2018 Fintech Law regulating financial the main challenge remains the creation of a
digital ID validation and transactions. Global services provided by fintech firms and the coordinated governing body. Between May 2020
investment in data protection and related risk- regulatory sandbox created in 2020 for start-ups and May 2021 at least five federal institutions Cybercrime is expected
management reached $172bn in 2022, up 11% from in the segment. These laws and Article 211 of the were hacked or had their files compromised. to cost global businesses
2021 and 25% from 2020. In 2021 cybersecurity federal criminal code are the closest the country The high rate of cybercrime in the country could $8trn over 2017-22
incidents had an economic impact of between has to a regulatory framework, although there is become a focal point of diplomatic tensions in

8 OBG Mexico Digital Economy Focus Report Infographics sources: Juniper Research, World Economic Forum August 2022
Part 1: Infrastructure

E-Commerce Trends Case Study

Online sales in Mexico reached MXN401bn in Connectivity, expedited 5G rollout, last-mile delivery The need to streamline decision-making and in order to deliver a broad portfolio of cloud
2021, experiencing 27% growth and representing and cybersecurity, as well as conflict, inflation, boost operational competitiveness has been services to businesses of all sizes.
11.3% of total retail sales. Mexico was among the health and climate risks are all factors impacting a primary driver for enterprises to move more
fastest-growing e-commerce markets for the third e-commerce. Improvements to e-commerce purposefully into the digital economy. Whether it Technology adoption has touched the entire value
consecutive year and exceeded the global sales infrastructure, increased access to funding, trust in was a business forced to develop an e-commerce chain of many sectors. Automotive manufacturing
average by over 10%. Its figure for e-commerce sales the digital ecosystem and changes in legislation will solution as the Covid-19 pandemic prevented – which is a key industry in Mexico – has adopted
as a percentage of total retail sales surpasses that define the pace of growth for the coming years. customers from visiting retail outlets, an internet-of-things technology to do predictive
of markets such as France, Germany and Italy. enterprise that needed to build communications maintenance and optimise costs. The industry
In 2020 more than 2bn people around the world solutions to interact with employees and clients uses data to build more efficient supply chain
In April 2019 the Mexican government published shopped at an e-commerce store, generating over across multiple locations, or a financial institution solutions and identify consumer trends, and it
a self-regulating norm protecting consumer $4.2trn in revenue. This figure is projected to reach that came to rely on mobile and online platforms has developed disruptive mobility solutions like
rights. It was drafted through collaboration $5trn-5.4trn in 2022. Companies have begun using to cater to its clients, all types of sectors have ride-hailing apps. Auto manufacturers are now
between government entities and experts in AI and real-time data to create a hyper-personalised acknowledged digital transformation as a means moving into self-driving cars and reducing carbon
e-commerce, such as the Mexican Electronics e-commerce experience. Another trend is touchless to future-proof their businesses. emissions through new technology.
Telecommunications and Information Technologies shopping, whereby shoppers pick products in a
Industries Chamber, the Mexican Association of contactless environment, choosing what they will By using a cloud platform, enterprises can deliver “In the past, enterprises looked at technology as
Online Sales and Concamin, among others. carry with them and what should be delivered. their services via flexible infrastructure that can a cost centre, but this has changed dramatically,”
be scaled up or down based on demand. Amazon Luis Velasco, Mexico country manager of AWS,
The coordination between upstream and Mexico exceeded Web Services (AWS) is a cloud-computing told OBG. “As a result of consumer needs that
downstream enterprises in the e-commerce sector platform provider that enables public and private emerged during the pandemic, technology has
the global e-commerce
is improving user experience. Artificial intelligence sector clients to develop their growth strategies become a profit centre that allows clients to
(AI) and data analytics have enabled omnichannel sales average by over and capture market share. AWS has continuously access infrastructure from cloud providers and
sales, merging digital and physical sales to create a
responsive, customer-centric experience.
10% in 2021 invested in tools and security resources in Mexico hyperscalers to expand their business rapidly.”

9 OBG Mexico Digital Economy Focus Report August 2022

Part 1: Infrastructure

Last-Mile Challenges
The final step of the e-commerce process with the New Mexico City International Airport, Half of the deliveries in Mexico are made within Deliveries within two hours and premiums
is last-mile delivery – the journey from the will increase service to warehouses and seven days, far from next-day and same-day for deliveries under 15 minutes are becoming
warehouse shelf to the customer’s doorstep. positively affect last-mile delivery services. trends seen in other markets. The challenge the global norm. In Mexico City, this service is
This is the most expensive part of the shipping The new Mayan Train in the south-east will therefore remains to improve distribution already available for certain goods. To achieve
process, with more than half of shipping costs also have a cargo service. Furthermore, major channels, mainly in rural areas, and integrate this, companies need to use so-called dark
coming from last-mile delivery. A total of 55% rail operators Canadian Pacific and Kansas electric and hybrid vehicles to reduce the hubs, similar to ghost kitchens where many
of customers abandon their shopping carts City Southern completed their merger in carbon footprint of last-mile deliveries. restaurants operate using the same kitchen.
if presented with extra costs, while 56% of December 2021, forming the first Canada-
customers will not buy from a brand again US-Mexico rail network and easing upstream E-commerce growth, 2019-23F
if unsatisfied with the shipping experience. supply chain constraints. At the state level, Volume ($ bn) Growth (%)
In rural areas, delivery points can be large the state of Hidalgo, a 90-minute drive north Mexico Brazil Mexico Brazil
distances apart, with few items to drop off for of Mexico City, has invested MXN9bn in road
logistics providers. In urban areas, increased infrastructure and its Intermodal Logistics 200 25
order volume and customer density is offset by Terminal, unique in Mexico as the connection
delays resulting from traffic congestion. point for both existing rail lines and the 160 20
country’s main motorways. These projects will
Mexico’s installed capacity supported nearly link distribution centres in Querétaro, Hidalgo, 120 15
two-fold growth in e-commerce sales during Puebla and Veracruz to Mexico City.
the pandemic, with an overall increase of 80 10
226% expected in the 2020-25 period. The AI and other software implementation
government has prioritised infrastructure technologies are being used to ensure 40 5
projects – such as the interoceanic corridor efficiency and reduce cost. Furthermore,
across the isthmus of Tehuantepec connecting software that allows customers to follow their
0 0
the Atlantic and Pacific oceans – that, together deliveries in real time is becoming the norm. 2019 2020 2021 2022F 2023F

10 OBG Mexico Digital Economy Focus Report Graph source: EBANX August 2022
Part 1: Infrastructure

Digital Solutions
Logistics challenges can be addressed via warehouses in central locations where popular demand up to 18 months in advance. This is training and utilities. The city also offers tax-
digital solutions such as direct-to-consumer products are stocked for same-day delivery. most useful in clothing sales, where different reduction opportunities, support services for
sales and marketing, delivery robots and dark styles and sizes are stocked in distinct locations. recruiting and single-point contact to help
hubs supporting several digital stores at once. The operability of logistics infrastructure companies effectively navigate the three levels
Omnichannel solutions that combine physical depends on software-enabled solutions Mexico City is the fourth-largest city in the of government bureaucracy.
and digital strategies are the most effective, as mainly applied to omnichannel sales. Such world, with a population of more than 25m
they rely on collecting data and following the solutions allow SMEs to make their inventory people living within under 1500 sq km. This While some barriers can be sidestepped
digital trail consumers leave behind to change available via popular delivery services. Another makes applying digital solutions to logistics with government help, most obstacles to
production timing and determine warehouse innovative technology is community group- challenges more accessible and more profitable digital solutions stem from heavy reliance on
locations. According to The Economist, the buy, where consumers get together to buy bulk because of economies of scale. According to data access; from robots in warehouses to
global volume of retail data in 2018 was 22trn goods at discounted rates. This service has the “2022 CBRE Industrial Outlook” report, community group-buy platforms, all e-commerce
GB, a figure expected to reach 175trn GB by been enormously successful in China via the Mexico City has discretionary cash incentives for technologies collect vast amounts of data.
2025. Machine learning and AI can recognise platform Pinduoduo. These solutions profit from firms moving into the city. These incentives are According to Panduit, the last-mile delivery
patterns in consumer behaviour and predict economies of scale: as more buyers and sellers conditional, requiring the creation of a certain segment grew by 30% in 2021, largely thanks to
demand based on the time of year and join, the digital ecosystem improves. Amazon, number of jobs, and can be applied to land the internet of things, edge DCs and in-situ DCs,
weather. Companies like Amazon maintain small for example, now uses algorithms to predict purchases, facility leasing, industrial equipment, with similar growth projected until at least 2023.

Growth in digital solutions in Mexico’s retail sector, 2021

Smart warehousing A warehouse occupier in Mexico City can
70% 35% 30% solutions are expected reach nearly 53m people within 400
More building requests Increase in infrastructure Increase in
to rise by 70% in 2022, km, including those in the major cities of
for smart warehouses investment by companies distribution
according to Panduit Guadalajara, Veracruz and Puebla
with e-commerce operations centres

11 OBG Mexico Digital Economy Focus Report Infographics sources: Panduit, CBRE August 2022
I 2 3
PART PART PART
INFRASTRUCTURE INTELLIGENCE INNOVATION
5 Data Centres 13 Intelligent Technologies 19 Financial Technology

6 5G Rollout 14 Artificial Intelligence and 20 Open Banking

Machine Learning
7 Smart Cities 21 Payments and Transfers
15 Telehealth
8 Cybersecurity 22 Government Participation and Regulation
16 Education
9 E-Commerce Trends 23 Citizen- and Business-Focused Services
17 Open-Source Software
10 Last-Mile Challenges 24 Internal Process Optimisation

11 Digital Solutions 25 National Digital Strategy

28 Outlook

29 Key Takeaways

12 OBG Mexico Digital Economy Focus Report August 2022

Part 2: Intelligence

Intelligent Technologies
Internet of things (IoT), augmented reality (AR) dense factories which could only connect up to Mexico has successfully applied several of these Geographic distribution of the
and virtual reality (VR) applications are expected 60,000 devices while relying on 4G. The low latency technologies. BMW opened a plant in San Luís internet of things revenue, 2025 (%)
to increase productivity and efficiency in various of 5G also helps to capture real-time insights about Potosi in 2019 that applies Industry 4.0 principles
industries globally in the coming decade. However, manufacturing operations. with the help of robots, paperless production Asia North America Europe MENA
these technologies rely on the rollout of 5G and AR in its assembly line. Firms in Mexico are Latin America CIS Sub-Saharan Africa
communications infrastructure to enable broader The deployment of 5G-based technologies has been innovating by using robots powered by machine
and faster internet connectivity. 5G networks allow slow for several reasons, including chip shortages learning to increase productivity in factories and 1
factories, manufacturing facilities and mining sites and China-US tensions. In 2018 it was forecast elsewhere in the supply and value chains. 2
to use these technologies simultaneously to monitor that by 2020 around 20bn devices would be in use. 4
production, predict maintenance requirements and However, by 2021 the number of active connections Remote monitoring using AR, VR and IoT can reduce 5
35
even pre-empt malfunctions. amounted to 12.2bn, and is currently expected to the need for travel to a facility, saving inspection
reach 25bn by 2025. In a 2021 report research firm time and preventing production stoppages. This is
22
5G networks can simultaneously connect 1m McKinsey Global Institute forecast that IoT could especially useful in industries such as oil and gas
devices within an area of 1 sq km. This is ideal for generate $5.5trn-12.6trn in value globally by 2030. where breakdowns and interruptions are costly.

Compound annual growth rate, 2020-30F (%)

Autonomous vehicles Human productivity Condition-based maintenance Inventory management Sales enablement Safety &
security
Operations optimisation Health Environment management Energy management Product development

37 27 26 25 24 24 23 19 19 18 16 31

13 OBG Mexico Digital Economy Focus Report Graphs source: McKinsey; UNCTAD August 2022
Part 2: Intelligence

Artificial Intelligence and Machine Learning

Artificial intelligence (AI) is a term used to describe the main application of this field. AI and ML are set several sectors, changing the way humans produce such as fAIr LAC, a joint programme with the
machines performing human-like cognitive to become the next general-purpose technology, goods and live. The analytical capacity of these Inter-American Development Bank under which it
processes such as learning, understanding, following in the footsteps of the internet, rail and technologies will help to display relevant information installed an innovation and entrepreneurship AI
reasoning and interacting. Machine learning (ML) is electricity. They have the potential to be used in to customers within fractions of a second, like in laboratory. It has also launched the Industry 4.0
an ATM. Its adaptability can assist in marketing, Enablers Programme and Jalisco’s cluster for ICT,
Compound annual growth rate, 2020-30F (%) purchases and payment transactions. which has more than 180 companies. It generates
By advance analytics By AI $1bn in added value annually.
PwC Research estimates that AI may increase
global GDP by 14%, or by $15.7trn, between 2018 Mexico City also has important initiatives and hosts
3.3-6 and 2030, especially as more IoT-generated data the Mexican Society for AI, which promotes the
3.6-5.6
is released. The North American and Chinese application of AI in the country. In mid-2021 Diebold
0.5-0.9 0.6 economies are expected to gain the most from Nixdorf, a US financial technology firm and the
0.2 AI technology; 14.5% and 26%, respectively. Latin largest manufacturer of ATMs globally, opened its
0.2 American countries, including Mexico, are expected logistics and manufacturing centre on the outskirts
1.4-2.6 1.2-2
Risk Service to earn 5.4% of the total gains. AI has immense of Mexico City. The facility is set to service most of
operations transformative potential in Mexico, but unequal the Latin American region. Arturo de la Rosa, vice-
distribution of benefits hampers its application. president and general manager for Latin America
Marketing & sales Supply chain management The federal government lacks a coordinating body at Diebold Nixdorf México, told OBG, “AI and ML
& manufacturing and the institutional ability to foster the segment’s can be used in ATMs and terminals to display hyper-
0.9-1.3
growth. However, several initiatives involving personalised marketing information in fractions of
0.3 0.3 0.2 0.2
0.2-0.4 intergovernmental institutions, state organisations a second. Some firms allow banking and insurance
0.1 <0.1 0.1 0.1
and academia are in the works. One such example firms to use terminals and software as neutral
Product Strategy & Finance HR Other is Jalisco, which is home to Mexico’s most developed access points. Personnel operating these terminals
development corporate finance & IT operations technological ecosystem. It has created initiatives can help these companies to connect with clients.”

14 OBG Mexico Digital Economy Focus Report Graph source: McKinsey August 2022
Part 2: Intelligence

Telehealth
The catch-all term for telemedicine, at the national level and is widely accepted by
teleconsultation, remote monitoring and health supranational health organisations like the World Telehealth reach & revenue, 2019-21
data analysis is telehealth. It also includes big data Health Organisation and the Pan-American Health
on health such as epidemiological research, AI- Organisation. Improved connectivity and nationwide Virtual consultations Revenue
enabled diagnosis and vaccine development. The rollout of 5G infrastructure is seen as crucial for the increased by increased by
global telehealth market is expected to grow from success of the telehealth segment in Mexico.
$83bn in 2020 to $218bn by 2025. In Mexico, the 73% 77%
Centre for Excellence in Health Technology was According to a 2021 report by the Marketing from 1.46m to 2.53m from $150m to $266m
created in 2009 to lead and coordinate telemedicine Research Company, approximately 56%, or 20m,
Mexican households have internet access and 44%
Health care spending, 2017-25F ($ m) have access to a computer. In 2021, 16% of private Telehealth survey results, 2021
consultations in the private sector were conducted
80 remotely. Certain real-time applications, such as 84% 40% 18%
70 telesurgery, require 5G to run effectively due to its of doctors of doctors of respondents
60 higher speed and low latency. use the provide virtual received
50 internet consultations complete medical
Digital health solutions such as telemedicine
consultation
40 based on 5G will require substantial and robust
infrastructure. Investment in telehealth will likely
30
attract innovative applications. Global investment in 60% 40% 82%
20 the technology reached $6.6bn in 2021. According of respondents had of respondents of respondents
10 to Precedence Research, by 2030 this tally is at least one remote received medical used it to
expected to reach $188bn, growing at a compound
0 consultation advice via video call clarify doubts
2017 2019 2021 2023F 2025F annual growth rate of 18.8% from 2021 to 2030.

15 OBG Mexico Digital Economy Focus Report Graph source: Statista August 2022
Part 2: Intelligence

Education
Spending on education as a Educational attainment of population Two particularly innovative technological IoT, AI and ML, hold the most potential as they have
share of GDP, 2018 (%) aged 15 & above, 2020 (%) applications for education are tutoring and a double democratising power: to make education
adaptive teaching. Tutoring can be conducted accessible to all, and simultaneously adapt course
Lower Upper Primary
secondary secondary online, increasing the time devoted to teaching content to different levels and learning styles
4.64 rather than commuting and preparing activities. within the same cohort. Data collected from
Incomplete Post No
primary secondary education ML can be used in adaptive course delivery where learning activities can also help stakeholders make
In Mexico, the education system was the first 4.6 the speed and depth of subject matter can be informed decisions by analysing emerging patterns.
sector to face mobility restrictions during the 33.7 personalised to different learners according
9.3 Government expenditure on education,
Covid-19 pandemic, beginning on March 17, 2020. to their abilities. AR and VR are also seen as
By mid-April 2020 students resumed their studies having sizeable growth potential, but the initial 2014-18 (% of GDP)
through online platforms. In 2020, 44% of students 15.4 investment can be restrictive. Both technologies
6
had computers, 56% had internet access and a need specialised software and, in the case of VR,
third had to access their assignments via mobile a headset is needed for every student. As with 5
devices. Low-income families’ perceptions of telehealth, robust infrastructure is crucial for
smartphone ownership transitioned from a luxury 18 19 improving competitiveness in the sector. 4
for entertainment to a necessity for education.
Bridging the rural-urban divide in internet 3
Latin America is the fourth-largest education connectivity is key to making edtech available to
technology (edtech) market in the world, behind the total went to higher education. As of June 2022 a broader population segment, especially in areas 2
North America, Western Europe and Asia. Venture there were 158 education techology start-ups in where it has the most transformative potential,
capital (VC) investment in LAC increased six- Mexico, accounting for about 10% of the total in such as in remote or rural communities – of 1
fold in 2021, reaching $1bn, a previously unseen the Latin American region. The exponential growth which there are many in Mexico. With improved
figure in the region. A third of VC was invested in experienced in the education technology segment connectivity infrastructure and eventually 5G, 0
kindergarten to the 12th grade, while a quarter of is due to the substantial potential in the region. interactive and adaptive learning, along with the 2014 2015 2016 2017 2018

16 OBG Mexico Digital Economy Focus Report Graphs source: World Bank August 2022
Part 2: Intelligence

Open-Source Software Case Study

Unlike closed or proprietary software, the code for the state university. They launched Labsol, a free Trends born from the Covid-19 pandemic to transform industries and solve problems on a
open-source software (OSS) is publicly available for software library in 2012. This library has since created an impetus for firms to meet evolving global scale. As a result, companies can develop
use, modifications and improvements. OSS is now forged strategic alliances with Intel, the GNOME needs and implement new business models. new agile methodologies to innovate without
ubiquitous and a prerequisite for the smartphone Foundation and Google Cloud. Whether a company needed to reinforce having to rely on a sole supplier.
boom. It runs on 80% of Android-enabled business continuity, or deal with clients,
smartphones and over half of websites globally. In The main benefit of OSS is that it builds suppliers or other parts of the value chain Technology adoption has accelerated in both
Mexico the Congress enacted the Austerity Law interoperable systems, which can be integrated remotely, the new context solidified the mature industries, like financial services,
in November 2019, mandating that the Federal into a wider web of solutions to complex problems. role of ICT as an enabler for all industries. and historically less-developed areas, like
Government prioritise the use of OSS to reduce Recent global developments have also added Amid double-digit growth in the adoption telemedicine, making them more resilient.
expenditure on paid licences. As a result of this law, to the utility of OSS. The US, China and other of digital transformation strategies, open- The public sector, for its part, stands to gain
Microsoft reduced its participation in contracts to large economies are pursuing self-reliance in key source collaboration based not on intellectual significantly from technology, as it can empower
administer software for the Federal Government technologies and the hardware on which they property, but authorship, has soared, enabling transparency and efficiency in health care,
from 19 in 2018 to four in 2020. operate. Open-source components offer more millions around the world to innovate together. education and security, among other sectors.
alternatives in supply chains.
Specific laws to develop and promote OSS were Red Hat, a provider of enterprise open- “Emerging trends have not only forced
first launched in Mexico, in the state of Zacatecas, The most recent innovation in the OSS industry was source solutions (OSS), has made gains in companies to deploy new technologies,
in 2013. This initiative is being led by the National the development of the RISC-V microprocessor. This the development and deployment of OSS but also created a new work culture,” Javier
Council of Science and Technology along with innovative instruction-set architecture determines in close collaboration with customers, Cordero, general manager of Red Hat México,
how microprocessors communicate with software. partners and communities. Focusing on four told OBG. “Technology is a critical enabler of
It was developed at the University of California, core pillars in Mexico – financial services, digital transformation; however, without a
Open-source software runs on Berkeley in 2010 for the purpose of research. In telecommunications, retail and government receptive culture in place, it does not have the
80% 2014 the new RISC-V was launched, tech companies – the company has not only created more full desired effect. Technology has proven to
of Android-enabled smartphones like Intel, Google and Qualcomm, Apple and Huawei efficient processes, but also fostered be an important tool to improve processes and
are using and investing heavily in this technology. innovation. OSS allows innovation communities make them more agile,” Cordero added.

17 OBG Mexico Digital Economy Focus Report August 2022

I 2 3
PART PART PART
INFRASTRUCTURE INTELLIGENCE INNOVATION
5 Data Centres 13 Intelligent Technologies 19 Financial Technology

6 5G Rollout 14 Artificial Intelligence and 20 Open Banking

Machine Learning
7 Smart Cities 21 Payments and Transfers
15 Telehealth
8 Cybersecurity 22 Government Participation and Regula-
16 Education tion
9 E-Commerce Trends
17 Open-Source Software 23 Citizen- and Business-Focused Services
10 Last-Mile Challenges
24 Internal Process Optimisation
11 Digital Solutions
25 National Digital Strategy

28 Outlook

18 OBG Mexico Digital Economy Focus Report August 2022

Part 3: Innovation

Financial Technology Case Study

Since the introduction of the 2018 Law to Regulate these opportunities, enabling fintech companies to Sofagro is a non-banking financial institution GDP and account for 72% of employment. More
Fintech Institutions, also known as the Fintech Law, collaborate with various financial entities. operating in Mexico since 2006 under the than half of SMEs get their first credit through a
Mexico has become the largest financial technology Sociedad Financieras de Objeto Múltiple SOFOM entity, making these institutions highly
(fintech) market in Latin America, accounting for The number of fintech platforms in Latin America regime, known as SOFOM. This permits financial important for economic reactivation, especially in
nearly 20% of investment in the region. Seeking to and the Caribbean has risen, with 2482 in 2021, entities to specialise in certain sectors, thereby key sectors such as agriculture.
promote innovation and facilitate the integration up 112% from 2018. Mexico has led this growth, facilitating expedited credit authorisation and
of new technologies in the sector, the Fintech Law expanding its number of fintech start-ups by 16% in greater financial flexibility. Sofagro specialises in Agricultural production has been instrumental in
outlines licensing categories for companies that 2021 to 512. The ecosystem has grown in size and agricultural financing, allowing small and medium- the post-pandemic recovery, contributing roughly
deal in crowdfunding and transacting electronic maturity, with a fintech mortality rate of 4.5% during sized enterprises (SMEs) to borrow at competitive the same value as remittances and oil exports
payments, regulates open banking and digital 2020, compared to 11.3% in 2019. Fintech currently rates while partnering with an institution that in 2021. Sofagro’s financing of technology
assets, and created a regulatory sandbox. Other represents 0.88% of the capital stock of Mexico’s knows their industry. Mexico is the third-largest and process improvements indirectly boosts
fintech businesses continue to operate under commercial banking sector, with 90% of payments agricultural producer in Latin America and the agricultural output, fosters economic growth and
transitory provisions as they seek full authorisation. still made in cash. Some 24 companies received an 12th biggest globally. The sector contributes spurs innovation, all of which has a positive effect
operating licence from the National Banking and around 4% to Mexico’s GDP and accounts for on macroeconomic health. “Mexico’s agricultural
With a population of roughly 130m and GDP in Securities Commission (Comisión Nacional Bancaria 12% of total employment. Although the economy sector is constantly integrating new technologies
excess of $1trn, Mexico has one of the highest y de Valores, CNBV) in 2021, while the regulator is contracted by 8.3% in 2020, the only sector and modernising its operations. Farmers are
bank asset concentration scores in Latin America; expected to speed up authorisation in 2022. that registered growth was agriculture. Mexico looking for the financial and technological
however, it has low banking penetration, with produced 5m tonnes more food in 2020 than in resources to continue on their path of
around 37% of the population above the age of 15
holding a bank account, and a credit-to-GDP ratio of 80% of young people 2019, and an extra 7m tonnes in 2021. innovation,” Iñigo Pérez-Rasilla, director-general
of Sofagro, told OBG. “Given the importance of
39%. Fintech entities can fill in gaps and capitalise have smartphones Sofagro’s sector specialisation and its target the sector to many areas of Mexico’s society
on a digitally literate young population, 80% of
whom have smartphones and 95% of whom have
and 95% have customers – SMEs – make its financing relevant
to the broader economy. SMEs contribute 52% to
and economy, the financial products offered to
producers are relevant across the board.”
internet access. The Covid-19 pandemic underlined internet access

19 OBG Mexico Digital Economy Focus Report August 2022

Part 3: Innovation

Open Banking
Article 76 of the Fintech Law compels financial standardise APIs used to exchange transactional protection services and cybersecurity companies as a catalyst and expand the financial services
entities operating in Mexico to establish open data, a key security measure. Handing over to help secure new financial platforms. market, increase competitiveness and enhance
data application programming interfaces (APIs) data to third parties in an environment where transparency. The new regulatory framework is
that allow third parties access to users’ financial digital fraud is pervasive poses challenges to the Open banking encourages institutions to be customer-centric, with client ownership of data
data. This open-banking framework requires banking sector’s transformation, as Mexico ranks more innovative and collaborate with third facilitating movement across financial service
different stakeholders within the financial second in Latin America in terms of cyberattacks, parties while also offering enhanced fraud- providers. Signalling the growth potential of open
ecosystem to share aggregate, transactional and according to the Wilson Center, a US think tank. prevention measures through stronger customer finance, in 2021 Citibanamex debuted its API Hub,
open financial data, provided that the user grants Reinforced authentication in data processing and identification and authentication systems. allowing fintech entities to connect to the bank’s
them access. Mexico is the only country in the consent management compliance can encourage Moreover, open banking levels the playing API. More recently, new financial infrastructure
world to opt for a bidirectional data exchange adoption, opening new opportunities for data- field for fintech companies, which could act providers have emerged in the finance market.
between traditional financial institutions and
fintech firms, presenting opportunities to over Fundraising value of digital banking companies in Mexico, 2021
2300 entities. This exchange promises to create
a more dynamic financial ecosystem where
traditional players can capitalise on digitalisation Digital banking
and dual-shared data flows to collaborate with company
multiple parties, migrate clients offline and
strengthen customer engagement.
B2C pre-paid debit Neobank, Investment Credit card &
Activity cards & accounts debit cards services banking services
Mexico’s financial regulator, the CNBV, has yet
to publish secondary provisions to regulate the
sharing of financial data. Current provisions refer Fundraising
to open financial data, which does not pose high
value ($) 72.1m 18.2m 13m 1.5m
data-protection risks. However, there is a need to

20 OBG Mexico Digital Economy Focus Report Infographic source: Statista August 2022
Part 3: Innovation

Payments and Transfers

In 2021 total digital transactions in Mexico were America’s e-commerce boom, which saw 22% Digital payments in Mexico
valued at $54bn, a figure expected to nearly annual growth between 2017 and 2021; Mexico’s
double to $90.1bn by 2025. This growth is taking e-commerce segment is projected to post 17% The digital payments
place in tandem with the rise of e-commerce average annual growth through to 2025. In 2024, segment is projected to reach a Total transaction value
since the pandemic. As shoppers seek contactless digital wallets are forecast to surpass credit cards total transaction value of is expected to post an
payment options in stores or shop more online,
new forms of payment have proliferated.
as the leading e-commerce payment method
by share of transaction value. Banco de México $75.2bn annual growth rate of
Payments using debit and credit cards accounted (Banxico) launched its national digital payments in 2022 15.75%,
for around 65% of Mexican digital transactions platform Cobro Digital (CoDi) in September resulting in a projected
in 2020, with credit comprising over a third of 2019. Seeking to lower overall reliance on cash The market’s largest segment
all payments as the top method, followed by and cards, CoDi uses QR codes and near-field is digital commerce, with a $135bn
debit cards at 23%, up 16% in terms of value communication to allow consumers to use their projected total transaction value by 2026
from 2019. Digital wallets, which accounted for smartphones for digital payments, with money
19% of all payments in 2020, currently rival cash, moving via Mexico’s interbank electronic payment of $59.1bn in 2022
with Mexico’s traditional payment voucher OXXO system known as SPEI. However, CoDi adoption
representing 19% of online purchases. The 2021 has been modest, with 6.4m users and just over 2021
National Survey of Financial Inclusion found that 1m transactions by the end of 2020, a trend
64% of respondents prefer to pay in cash, 9% Banxico is seeking to reverse through increased
distrust electronic payment methods and 6% do promotion and an enhanced user interface.
not know how to use them – a figure that helps to Simultaneously, Mexico’s position as the third-
explain the low penetration of such methods. largest recipient of remittances worldwide in
2021, with 99% of these remittances sent via 51.7% 36.4% 30.2%
high-income 25- to 34-year-
The regional appetite for more convenient electronic wire transfer, has garnered attention male users users old users
electronic payments will increase alongside Latin from cryptocurrency-based remittances services.

21 OBG Mexico Digital Economy Focus Report Infographic source: Statista August 2022
Part 3: Innovation

Government Participation and Regulation

Fintech Law breakdown The 2018 Fintech Law regulates the licensing 2020 established minimum standards regarding
of electronic payment institutions (EPIs) and cybersecurity protocols. Fintech businesses are
Principles Objectives crowdfunding institutions, and oversees the use of similarly required to comply with regulations
sandboxes and virtual assets. The CNBV provides aimed at preventing illegal financial behaviour,
Financial Inclusion Create access to financial services for individuals and temporary authorisation of business models which include anti-money-laundering policies
economic sectors or sandboxes that allow fintech firms to test and customer due diligence, as well as the
innovative solutions. The first sandbox challenge appointment of a compliance officer.
Innovation Provide tools to increase the use of financial services was launched in September 2020 to promote
entrepreneurs within the fintech ecosystem. The Fintech Law requires that any foreign player
Consumer Protection Establish defense mechanisms and verification of minimum incorporate themselves under Mexican law and
standards At present the law does not provide regulatory operate per local corporate law. Software can
guidance for other technology-enabled be registered under the Federal Copyright Law,
Preservation of Provide a framework for authorisation and supervised innovations in financial services. However, it allowing fintech firms and their databases to be
Financial Stability operations while monitoring risk provides space for fintech entities offering registered as intellectual work. The CNBV issued
investment services other than crowdfunding, its first licence to an EPI in January 2020, out of
Healthy Competition Promote diversity of distribution channels for financial indicating that additional regulations may follow. 85 applicants. As of June 2022 over 100 platforms
services to reduce cost and improve the quality of services Regulators have sought to address two main had applied for a fintech licence and 33 had
concerns around fintech adoption: privacy risks been approved. Not having a licence prevents
Crime Prevention Introduce measures to limit money-laundering and the and illicit operation financing. The Fintech Law organisations from branding themselves as fintech
financing of terrorism provides a regulatory framework for fintech firms and could carry high fines. Having a single
institutions to protect users’ data, privacy and law that covers all types of fintech organisations
assets, and mandates disclosure of evidence has slowed the pace of regulatory approval,
Technologic Neutrality Imply that technology is indifferent to the services provided that companies are supported by trustworthy though the CNBV is expected to speed up the
infrastructure. Secondary provisions released in process as it continues to review applications.

22 OBG Mexico Digital Economy Focus Report Infographic sources: Legal Paradox; Deloitte August 2022
Part 3: Innovation

Citizen- and Business-Focused Services

The pandemic accelerated the digital UX investment approaches & outcomes UX Return on Investment
transformation of corporations in Mexico as in-
person meetings declined, creating challenges • It costs six times more to
Company attract a new customer than it
in terms of employee engagement and overall
productivity. Similarly, whereas moving to the
Investment does to keep an old one
Outcomes
cloud has helped businesses scale and distribute
workforce capabilities, it has also led to increased • A 5% increase in customer
Customer Customer
vulnerability to data and privacy breaches. These A/B Testing Wireframing User Stories
retention increases profit by up
Loyalty Retention
factors have resulted in ongoing efforts to make to 125%
user experience (UX) a strategic priority for Customer
employees so that they have access to easy-to- Field Data Usability • Every $1 invested in UX will
Personas Satisfaction
use digital tools to work more productively. Research Testing generate $2-100 in returns

Inadequate workflow processes or platforms A focus on customer experience (CX) beyond a To attract and retain customers, these digital information collected via survey-based systems.
can negatively impact innovation and growth, basic level of digital engagement has become offerings need to create a personalised However, as research methods grow more
overburdening IT teams and unleashing essential in a digital economy that gives people experience that remains consistent across sophisticated, CX leaders have begun generating,
potential security risks. UX strategies can more options for purchasing goods and services. multiple channels. According to the CX Network’s aggregating and analysing data – including
effectively improve how companies engage with Customer loyalty is no longer based on price or 2020 “Global State of Customer Experience” data from customer interactions, transactions
employees, resulting in less retraining and more product, but on degree of consistency, ease of report, 47% of CX experts believe it is getting and profiles – to draw insights that can result
collaboration, improved employee retention use and quality of experience. According to a harder to please customers, and 52% believe in improved CX. Data-driven decision-making
and limited app sprawl. Similarly, due to rapidly McKinsey survey polling 3600 individuals across customers are willing to switch brands if empowers companies to deliver customised
evolving shopping behaviour, maintaining relevant a wide range of business and consumer sectors, unsatisfied, creating increasing pressure on messages to the right audience, improve product
and meaningful interactions with users has companies with expansive digital offerings companies to raise their CX investment. Both development by implementing consumer
become increasingly important for companies. receive more positive feedback from customers. the UX and CX fields have grown based on feedback and cross-sell more effectively.

23 OBG Mexico Digital Economy Focus Report Infographics source: Forrester Research August 2022
Part 3: Innovation

Internal Process Optimisation

Accelerated investment in digital strategies Against a backdrop of accelerated digital To get higher return on digital investment, and data governance allow for the end-to-end
enables businesses to react faster to change transformation, corporations in Mexico have companies need to identify how to deploy automation of business processes, increasing
harnessed emerging technologies to streamline technological solutions strategically to discover cooperation among teams.
No. of days required to respond to
internal processes, primarily by digitalising manual weak points in their workflow, become more
or implement changes tasks via applications. However, companies cost-effective and minimise resource waste. Companies in Mexico have already implemented
Pre-Covid-19 estimate Actual have taken an increasingly holistic view of Digitalisation can optimise processes ranging automation in back-end operations, ranging
digitalisation, developing long-term strategies from customer onboarding to financial reporting from generating reports to processing invoices,
that facilitate corporate transformation and and insurance claims. Digitalising workloads eliminating redundant tasks and minimising
Remote work 454 11 nurture a culture of innovation. can allow businesses to downscale or eliminate errors, ultimately improving the capacity
entire operational functions, freeing up resources to process more complex data. Enhanced
The ever-changing technological environment to be used elsewhere. Similarly, industries can efficiency and accuracy improve overall business
means that investment in digital innovation, reduce human error by recording and analysing performance and create a better workplace
whether artificial intelligence (AI), cloud data, which is then uploaded to the cloud to be culture by allowing employees to engage in
Migration of
computing, the internet of things or automation, accessed by any company stakeholder at any time. more strategic functions while bridging gaps
547 23 helps companies deliver a better business between different teams to promote cooperation.
assets to cloud
portfolio while unlocking value internally through Data collection empowers digitalisation by Externally, automation offers sizeable potential
scalable processes. “There were three general generating insights that can improve or overhaul to improving client-facing functions, including
phases in the digital acceleration throughout the internal processes. Data governance can help client onboarding, customer communication
pandemic. First, companies switched to remote companies better organise data and make it more and even sales. In addition, machine learning is a
Increased use work. Second, they invested in AI, data analytics accessible. When a company’s data is digitalised powerful tool to drive automation and increase
of advanced and other smart technologies. Lastly, they learned and searchable, the workflow in the organisation efficiency within corporations. Unlike basic rule-
672 27
technology
of the cybersecurity risks that accompanied this is both more efficient and more transparent. As based automation, machine learning can handle
in operations
growth in digitalisation,” Julio Heshiki, managing these processes span multiple departments that increasingly complex processes by learning over
director of IT company Kyndryl, told OBG. would otherwise work in isolation, integration time, which leads to improvements in accuracy.

24 OBG Mexico Digital Economy Focus Report Infographic source: McKinsey & Company August 2022
Part 3: Innovation

National Digital Strategy

Mexico’s e-government initiatives date back to the prioritised,” Carlos Funes, CEO of digital solutions by the social and anti-corruption priorities of the Inter-American Development Bank. However,
launch of its National Digital Strategy (Estrategia provider Softtek México, told OBG. the government, the updated strategy aims roughly 10% of Mexicans reported using digital
Digital Nacional, EDN) 2013-18, under then- to improve the well-being of the population channels to carry out government services. As
President Enrique Peña Nieto, which aimed to Announced in 2018, Mexico’s National Digital and government transparency. In 2018, 90% of technology evolves, the country will need to
advance key public sector performance objectives Strategy 2021-24, published by the National government transactions could be initiated online upgrade its e-government systems and capabilities
through five enablers: connectivity; digital skills and Commission for Regulatory Improvement, and 75% could be completed digitally, according to to successfully cope with digital disruption.
inclusion; interoperability; a legal framework; and constitutes an updated set of actions to promote
open data. Over the six-year period EDN translated the use of ICT divided into two distinct areas: A higher level of digitalisation could boost Mexico’s GDP by up to 15%
into multiple platforms and initiatives aimed at digital policy in the federal public administration Early adoption Late adoption
145
improving public management and service delivery. and digital social policy. The first aims to improve 95 1846
83 240
Centring digitalisation and data in Mexico’s public the existing regulatory framework by standardising 115
sector reform efforts paid off, with the country ICT purchases via transparent and cost-effective 309 1606 31 1721
positioning itself as a leader in e-government in methods, facilitating maximum use of computing
1297
Latin America. Its open data policy has raised its applications and infrastructure, and promoting a
ranking in the 2020 UN E-Government Survey to culture of information security. The second seeks
the 61st spot, up from 64th in 2018. to expand internet coverage in remote areas and
promote free connectivity in public squares, health
This evolution towards a more digitally empowered centres and community spaces.
public sector has continued under the country’s
new administration. “To ensure continued growth The strategy promotes coordination with the
GDP Projected GDP Traditional Emerging GDP GDP boost from
in the digital sphere, the IT sector will require more private sector for last-mile connectivity and (2018) growth (2025F) ICT technologies (2025F) digitalisation
support from the federal government. It should be the use of new technologies for the integration (2018-25F) (2018-25F) (2025F)
considered a strategic sector, such as aerospace, of institutional databases to store and share
petrochemicals and automotive, which are already information from government systems. Influenced

25 OBG Mexico Digital Economy Focus Report Infographic source: McKinsey & Company August 2022
Part 3: Innovation

Case Study

Accenture is a technology consulting firm devoted to production in North America. This, in tandem with models provides scalability for the future, which is a
Digital Transformation
integrating the latest digital solutions into the design, Russia’s invasion of Ukraine, has resulted in a new characteristic at the core of the digital world.
production and delivery of a business’ products and kind of globalisation, with security at its heart and
services. Founded in 2001, it arrived in Mexico City as preference to conduct business with reliable Reducing the time between identifying needs and Reinvention of operational practices
three years later. In 2008 it added a second centre in partners. In this context, Accenture looks to leverage new trends and implementing solutions accelerates
Monterrey, Mexico’s industrial capital, to strengthen its worldwide presence and expertise to help growth and results in a more significant market
its outsourcing capabilities and systems integration companies re-invent and diversify their supply chains share for firms. In early 2020 Accenture’s Advanced
services in North America. Accenture operates across to include trusted partners from stable regions of the Technology division worked with a leading health care From physical to digital/virtual
all sectors, from manufacturing to health care. world. This will optimise costs and achieve resilience, provider in Monterrey to perform the first augmented
while still retaining the benefits of openness. reality-assisted surgical procedure in Latin America
The globalisation trend throughout the 1990s using holographic lenses. The system that was
and 2000s saw all companies competing in an More recently, the Covid-19 pandemic and the developed allows access to surgical schedules, Comprehensive integration of
technological capabilities
international economy to become more efficient, resulting acceleration of digitalisation has positioned patient records, x-rays, CT and MRI scans, and 3D
with optimising supply chains a priority. Over recent Accenture’s technical capabilities and know-how at models built by the integration of scans. During the
years, Mexico has transitioned from an economy the forefront of the digital transformation, assisting procedure, the medical team can overlay the scans
dependent on oil to a producer of high-value-added companies to transition seamlessly to the digital and models to assist the surgeon in determining the Collaborative intelligence:
manufactured goods such as vehicles, aerospace world. As the pandemic imposed a new daily reality, best point of entry in order to minimise recovery human & digital
parts and ICT components through the development companies were presented with difficult choices time and optimise outcomes for the patient. Since
of more vertical supply chains. – namely, how to adapt to the new context. In this the procedure and resulting press coverage of the
regard, Accenture assists companies in actioning their successful intervention, there has been a surge in
Since 2017 tensions between China and the US led vision into a workable strategy and reality. Integrating demand from patients, hospitals and doctors seeking Scalability
to supply chain re-organisation and nearshoring technological capabilities in a company’s business to apply this new solution for surgical challenges.

26 OBG Mexico Digital Economy Focus Report August 2022

Part 3: Innovation

Viewpoint
Luis Velasco, Country Director, Amazon Web Services

“
In recent years corporate decision-making geared effectively, but also optimise and scale their could continue receiving information and basic
towards the digital economy has accelerated activities. These benefits extended to customer services through the use of technology, whether it
dramatically. Although this was already a global engagement and interaction, making is possible for Companies recognise the was patients seeking medical care via telemedicine
trend, the Covid-19 pandemic was a critical catalyst companies to resume and expand their ability to economic and reputational risks or students learning online. Basic social services
for digital transformation in companies of all reach potential customers and engage with existing were digitalised for the wider public, and moving
sizes and in all sectors of the Mexican economy. ones. These solutions have been a matter of survival
associated with a data breach, forwards increased deployment of technological
Lockdowns and mobility restrictions have posed and have helped firms maintain business continuity and these will be key drivers tools will empower governments to be more agile,
significant challenges to businesses as they sought while minimising revenue loss. for cybersecurity expenditure, transparent and cost-effective.
to acquire and retain new customers, engage especially as the number
employees and maintain business continuity amid Cloud services also facilitate scalability and flexibility As both the public and private sector become more
an uncertain sanitary and economic environment. – significant priorities for small and medium-sized
of vulnerabilities and hacks digitalised, strengthening cybersecurity safeguards
As a result, new digital tools and platforms enterprises looking to expand their business and continues to rise globally
“ will become increasingly important. Companies
have become essential elements in a company’s limit expenses. Digital solutions have created a recognise the economic and reputational risks
performance, particularly as emerging technologies more even playing field whereby smaller Mexican associated with a data breach, and these will be key
become more sophisticated and ingrained in companies can access tools that strengthen their convenience and easy access to digital services. drivers for cybersecurity expenditure, especially as
corporate settings. position and put pressure on larger companies As mobile and digital platforms have become key the number of vulnerabilities and hacks continues
to improve their offerings. Likewise, e-commerce drivers of customer satisfaction, this expenditure is to rise globally. Given that the world’s top security
Telecommunications solutions have been deployed has broadened the competitive landscape and the top of mind for CEOs and boards of directors. agencies and largest global financial institutions
in key business functions to make companies more customer base for companies that can now cater access information in the cloud is a testament to
resilient. For instance, video-conferencing and to clients globally and grow market share. This Technology adoption has not only affected private the security controls and standards being deployed
cloud-based software have made it possible for a acceleration was triggered by business initiatives enterprise, but also transformed how governments by the industry. As these measures continue to
distributed workforce to not only communicate and also evolving consumer habits that include operate. In the midst of the pandemic, citizens evolve, market confidence is expected to improve.

27 OBG Mexico Digital Economy Focus Report August 2022

Part 3: Innovation

Outlook
As a result of early regulatory support, human resources will be key to supporting Against the backdrop of the US-Mexico- adopter of Industry 4.0, smart factories and
favourable demographics, expanding digital the growth of new businesses and promoting Canada Agreement and disrupted global supply robotics. To achieve these goals, the country will
accessibility and a thriving start-up ecosystem, increased digitalisation for corporations and chains, Mexico has benefitted by becoming the nurture research and development and start-up
Mexico has outperformed its regional peers in the government. Similarly, the deployment of undisputed manufacturing hub for the region. It ecosystems to attract investment and reinforce
terms of digital maturity. Although consumer Mexico’s digital strategy seeks to strengthen also maintains this position in the manufacturing its cybersecurity capabilities as threats escalate.
behaviour, corporate priorities and industry e-government infrastructure, increasing efficacy of more advanced technologies. “Out of the
trends related to digitalisation had been on the and transparency in public administration as the six stages of semiconductor manufacturing,
rise before the pandemic, these were greatly country endeavours to raise productivity. Mexico from research and development to assembly
accelerated and became mainstay factors of the has risen in the Global Innovation Index from and testing, five are done in Mexico.” Santiago Mexico ranks 55th of
Mexican economy post-pandemic. In particular, 81st in 2011 to 55th in 2021, underlining the Cardona, country manager at Intel México, told
this period exposed how much economic country’s overall aim to develop a more digitally OBG. “The only step that Mexico is not involved
151 countries surveyed
development relies on the ability of the public empowered government model and become a in concerns the silicon wafer manufacturing in terms of digital
and private sectors to react quickly and more attractive destination for investment in process. Otherwise, the country has built strong maturity
effectively to change and leverage digital tools emerging technologies. capabilities in areas like design validation. This
for recovery and long-term growth. puts the country in a privileged position to
To compete in an increasingly digital world, capitalise on its strengths and proximity to the
Mexico still has much to unlock from emerging Mexico will capitalise on technological key Western Hemisphere market to grow its Mexico has risen
technologies to weather a more unpredictable innovation by scaling initiatives in new nearshoring opportunities and further expand
international outlook and improve its global technologies including cloud computing, data, its presence in the semiconductor supply chain.”
in the Global
digital position. Moving forwards, Mexico’s artificial intelligence, the internet of things Innovation Index
short-term priorities centre on closing the gap and cybersecurity. These technologies will This innate competitiveness has created an from 81st in 2011 to
by expanding reliable and affordable internet allow the country to transform traditional opportunity for the country to lead innovation 55th in 2021
access to the remaining 30% of its population industries while also exporting and interlinking in emerging industries – such as automated and
that does not yet have access. Digitally enabled these competencies regionally and globally. electric vehicles – and become a large-scale

28 OBG Mexico Digital Economy Focus Report Infographic source: McKinsey & Company; Statista August 2022
6 Key Takeaways

1 Growing investment in digital infrastructure

will help bridge Mexico’s digital divide while
empowering companies, large and small, to
strengthen their competitiveness and future-
proof their business strategies.
2
Threats and vulnerabilities have grown
in tandem with the accelerated digital
transformation of the government and private
companies, making cybersecurity a critical part
of corporate concerns and expenditure.
3
Despite considerable progress in
e-government initiatives, the country has the
potential to reach underserved segments of
the population and drive its social agenda.

4 In tandem with increased digitalisation,

corporations are looking to harness the
potential of emerging technologies that
address industry-specific needs.
5
Given the rapidly evolving global economic
environment, digital investment has boosted
business resilience across the corporate
landscape. This will link the country more
effectively to the wider global economy,
making it more competitive internationally.
6
Mexico’s ICT future will depend on human
capital development and technological
innovation as well as digital investment, making
research and development expenditure vital.

29 OBG Mexico Digital Economy Focus Report August 2022

In collaboration with
www.oxfordbusinessgroup.com