This article focuses in particular on the recent economic dynamism of the state of Coahuila, situated directly along the US-Mexican border. Since the mid-1970s, the development strategy of Coahuilas administrative elites has become increasingly centred on creating favourable conditions for foreign direct investment, which became widely considered a recipe for triggering higher levels of productivity and economic growth.
Besides generating employment and contributing to manufactured exports, foreign direct investment can theoretically generate positive spill-overs to domestic firms by transferring technology and upgrading worker skills. In particular after the effectuation of the North American Free Trade Agreement (NAFTA) in 1994, Coahuila has become a major receptor of foreign direct investments, making it one of Mexicos most important export-oriented manufacturing states, backed above all by sizeable investments in the automobile and garment industries. However, detailed analysis of these investments shows that the total number and volume of new investments since NAFTA, as well as the employment it has generated, has been unevenly divided across Coahuilas sub-regions.
Moreover, qualitative analysis of the different industrial sectors demonstrates that Coahuilas export-oriented growth in the second half of the 1990s relied predominantly on foreign capital instead of building upon existing local industrial traditions. Consequently, there is only little evidence of local learning, innovation and upgrading. These outcomes argue for an institutional approach, where supportive public policies are needed to promote endogenous productive capacities and create more sustainable, long-term economic development.