Our urban world

In recent decades, the world has experienced a rapid urbanization process that has turned our cities into the primary space where the political, social, and economic events shaping our society occur.  In 2007, more people lived in cities than in rural areas, for the first time in history. Currently, cities host more than 56% of the world’s population; by 2050, it is projected to reach 68%. According to the United Nations (UN), 95% of the urban population increase will occur in developing countries in the coming decades.  

In North America, this trend is notably more accentuated than in other regions. In the U.S., 80% of the population lives in cities, 81% in Canada, and 79% of Mexicans live in urban areas.

This urban growth is not coincidental.  Cities generate economies of agglomeration and scale, meaning that the concentration of people and goods leads to gains in productivity and innovation. Cities are where opportunities, capital, and talent concentrate, leading to significant public and private infrastructure investments. Cities have become major engines of economic growth, contributing approximately 60% of the world's GDP. 

City infrastructure allows many people to live in relatively small areas, facilitating collaboration and creative encounters, reducing the need for mobility and transportation of people and goods, and generating significant social and environmental benefits. The inherent nature of a city—its ability to bring people together, foster collaborations, attract talent, and enable specialization—enhances the competitiveness and productivity of society."

However, cities also present significant challenges.

World cities occupy only 3% of the territory but account for 60% to 80% of energy consumption and 75% of carbon emissions.  The air quality in urban areas is affecting the living environment and public health.  As per the UN, since 2016, 90% of city dwellers breathe air that does not meet the safety standards established by the World Health Organization (WHO).  Rapid urbanization is exerting pressure on freshwater suppliers and affecting the proper wastewater and urban waste management. Faced with the climate emergency, cities play a fundamental role in the “future of humanity and the long-term sustainability of the planet”.

The urbanization process in México and Latin America has been marked by dynamics of informality and irregularity, leading to inefficient urban development with inadequate and overstretched infrastructure and public services, deficient mobility services, insufficient and inadequate housing, impacts on natural ecosystems, and a growing periphery that generates social segmentation and territorial lack of equity.

The evolution of cities in México

Over the past three decades, urban dynamics in Mexico have undergone drastic changes. Today, there are 384 urban areas in the country, 95 of which have populations of over 100,000 inhabitants. Although 79% of the Mexican population lives in urban areas (approximately 100 million people), urban growth has far outpaced demographic growth. Between 1990 and 2020, the country’s urban population grew by 1.78 times, and the total built-up area expanded by 2.13 times.  This trend indicates a prevailing pattern of low-density horizontal growth. 

Urban sprawl is marked by the expansion of urban settlements beyond the official boundaries of a city. This pattern of urbanization has been characterized by factors that include insufficient housing supply, insecurity, violence, environmental deterioration, long commuting times, high infrastructure costs, a prevalence of the informal economy, a lack of public services provision, and high land prices. Unlike in developed countries, such as its North American partners, where urbanization generally produces increased economic prosperity, in many developing and highly urbanized countries like Mexico, social development and economic growth are less certain when urbanization occurs.

Between 1990 and 2020, the Mexican economy underwent major economic changes. Mexico signed the North American Trade Agreement (NAFTA), which evolved in 2018 to the United States, Mexico, and Canada Agreement (USMCA). Foreign Direct Investment (FDI) increased from an average of 0.8% of GDP to  2.5% of GDP after Mexico joined NAFTA. 

Various studies have pointed out that the southern states of Mexico have not benefited from NAFTA/USMCA because of poor infrastructure, lack of access to telecommunication services, social instability, and poor governance. This situation has led to divergences in the geographical distribution of income and caused polarization within the Mexican economy, particularly between the Northern and Southern regions.

Are Mexican cities ready for nearshoring?

It is well documented and confirmed by concrete investments, that Mexican cities are poised for nearshoring opportunities due to their proximity to the United States. Mexico offers a convenient time zone and short logistic distances, which offer strategic benefits. Mexico’s multiple trade agreements provide a favorable regulatory environment for FDI. Mexican cities boast a young and increasingly educated population.

However, challenges remain for our cities to fully harness the potential of nearshoring.  It is broadly acknowledged that infrastructure deficiencies, particularly in transportation and digital connectivity, pose obstacles to efficient operations and supply chain management. Addressing these gaps requires significant investments in upgrading roads, ports, airports, and telecommunications networks to ensure seamless connectivity and logistics efficiency.  A clear commitment to clean energy generation, water governance and management, and climate action is required.  

An issue that has not been documented and needs urgent attention is the need for Mexican cities to tackle segregation and disorganized urban growth with carefully crafted strategies, public policy, and incentives to regulate land use and mitigate the social disparities within the urban fabric. The design and effective implementation of policies and incentives that foster affordable and well-located housing, the enhancement of infrastructure and services, and the development of efficient public transportation systems stand out as imperatives to promote greater social proximity and urban cohesion. These interventions should be complemented by efforts to boost urban productivity through education, innovation, climate action, and local economic development, balancing economic growth and investment with proximity, accessibility, social inclusion, and social cohesion.

By addressing these challenges and capitalizing on their inherent strengths, Mexican cities can position themselves as premier nearshoring destinations, driving economic growth and prosperity across Mexico and North America.  

SOURCES:

- UN, 2023 https://unstats.un.org/sdgs/report/2019/goal-11/
- UN Habitat, World Cities Report 2022
- US Census Bureau, 2022
- Statistics Canada, 2021
- INEGI, 2020
- Fujita, Masahisa & Thisse. “Economics of agglomeration”, Journal of the Japanese and international economies (1996)
- UN, 2023
- Geoffrey West, Scale, The Universal Laws of Life and Death in Organisms, Cities and Companies (2017)
- A Trejo Nieto, 2019
- Ponce-López, Cruz-Sandoval, Peraza-Mues. Center for the Future of Cities. Tec de Monterrey (2024)
- CAF- Economic Commission for Latin America and the Caribbean, 2017
- A Trejo Nieto, Niño-Amézquita. Metropolitan economic development: the political economy of urbanization in México (2019)
- Esquivel et al., 2002; Rey & Sastré-Gutiérrez, 2010; Rodríguez-Pose et al., 2003.
- Cruz-Sandoval, Ponce-López, Peraza-Mues, Gómez-Zaldivar.