Starring Humphrey Bogart and directed by John Huston, Treasure of the Sierra Madre is the tale of three gringos who set out to strike it rich in Mexico’s remote Sierra Madre mountains. Set in the 1920s, the story has many parallels with a current renewed interest in the Durango region.
Except, of course, that the bandit-riddled post-revolution landscape of eighty years ago bears little resemblance to the investor-friendly environment we see today. The annual FDI inflow in the State of Durango now amounts to $500 million USD – putting it amongst the top 10 investment locations in Mexico. The regional government is very pro-business and the state offers incentives to industries wishing to invest in Durango.
The state has a population of 1.5 million, with almost a third of them living in the state capital of Durango. Though the state has the second lowest population density next to Baja California Sur, Durango has a reputation for excellent education facilities and low labour costs.
In fact, the Financial Times affiliated FDI magazine recently ranked Durango as one of North America’s top five small cities for economic, development, and investment potential. The FT’s endorsement has prompted a flurry of interest into the region from supply chain companies from the US, Canada, Germany, and the US - mainly characterised by the auto-parts, software, and electronics sectors.
Global concerns like the Korean-Dutch electronics strategic merger LG-Philips, the Canadian automotive supplier Linamar, Japanese automotive suppliers Yazaki and Sumitomo, and U.S. air conditioning manufacturer York have all bought into Durango’s business success. Coca-Cola also invested $25 million in an expansion in the city of Durango in 2003, and recently invested a further $65 million for expansion in the state’s Laguna region.
Bordered to the north by Chihuahua and Coahuila, to the south by Zacatecas and Nayarit, Durango occupies a strategic location right at the heart of Mexico. It sits on top of excellent road connections north to the USA, south to Mexico City 500 miles away. There are also major infrastructure developments in the offing. 2010 will see the completion of the new Durango-Mazatlan super highway – the biggest investment of its kind in Mexico.
Costing more than $1.5 billon USD, the 230km road passes through the Sierra Madre mountains and links the Pacific port of Mazatlan with Altamira on the Atlantic coast via Durango. The development will effectively create more direct links between Durango and the European and Asian markets.
The five major FDI revenue streams involve mining, forestry, car manufacture, textiles, and food production. However, it’s Durango’s abundance of natural resources that are the focus of inward investment.
Mining has played an intrinsic part in Durango’s fortunes since the Spanish Conquistadors found gold in the Sierra Madre 500 years ago. In 2005 Mexico produced 31.5 tonnes of gold which represents a 28.8% increase over the previous year. Today, Durango’s La Cienega is the second highest producing mine in Mexico, and the State is the leading source of gold in Mexico. Durango’s silver, copper, and zinc deposits all rank in Mexico’s top five.
Consequently, global mining companies are among the biggest investors in the region. Pan American Silver Corporation recently announced a successful new phase of testing at a 32,000 hectare site the company have bought with partners The Orko Silver Corporation. The La Preciosa project in Durango is one of Pan American’s main focuses for exploration and development.
The tests yielded average silver recoveries of 91% prompting Geoff Burns President and CEO of Pan American to say: “These are very good results and better than we expected. We are fully engaged in all aspects of the project and still expect to produce a full feasibility study for La Preciosa by the end of next year.” Burns is confident that La Preciosa will become the world’s largest primary silver deposit.
Durango’s land mass covers an area approximately equivalent to that of the U.S. state of Mississippi. The Tropic of Cancer passes through the southern part of Durango, and the Sierra Madre Occidental occupies the western and central part of the state. Temperate forests of pine and oak dominate the high sierra mountain region. This mountain range contains Durango’s second main source of income – forestry, making the state one of the major wood producers in Mexico.
In fact, Durango accounts for 30% of all Mexico’s timber and the sector employs around 18,000 workers in the state – and not all of them directly employed by large organisations. Farmers and indigenous communities collectively own some 80 percent of Durango’s forests, called ejidos. However, this hasn’t put off one of the world’s most visible brands from forming a symbiotic working relationship with them.
IKEA uses sustainable Durango timber from community managed forests for its sofas
The Swedish furniture and lifestyle giant, IKEA, has developed a strategy to use timber from sustainably managed ejidos for some of their sofa ranges. The company helped with investment and development loans to cover equipment costs and through this programme, both livelihoods and valuable natural resources have been safeguarded.
Corporación Durango, one of the biggest paper, carton and pulp producers in North America is also intrinsically associated with the timber industry and has a turnover of $1.2 billion USD. One of the top 50 companies in Mexico, Corporacion Durango are headquartered in the city of Durango and have operations across Mexico and the USA, where the company employs 8,000 directly, and a further 4,000 indirectly. Other companies and employers in this sector include Forestal Alfa, Forestal Halcón and Masisa.
Durango is also one of the only places in Mexico that are permitted to produce Mezcal, a spirit distilled from the agave plant. The National Program of Certification of the Quality of Mezcal certifies places of origin and exportation has been on the increase in recent years. Mezcal is now sold in 27 countries on three continents with the United States and Japan leading the market. However, 90,000 litres per month are also distilled in Durango for the growing Chinese market.
It’s an acquired taste as they say, but government agencies have been helping smaller-scale producers obtain the equipment and techniques needed to produce higher quantities and qualities for export. The investment has paid off and more and more importers in the US are also teaming up with Mezcal producers in the region to promote and sell their artisan product at a premium for discerning customers in the United States. Some single barrel bottlings of Mezcal in the US can retail for over $200 a bottle.
You could almost say that Durango is drunk on it’s own success…