there are a wide range of societal needs throughout the state of
Baja California Sur, these cannot be adequately addressed without
the creation of new and better jobs, as well as economic growth.
Nevertheless, these priorities need to be balanced with the
environment, social justice, and community-building in mind.
Currently, 60% of the state’s territory is in protected areas,
putting a great deal of pressure for development on the remaining
40% of land.
California Sur has the seventh-largest state economy in the country. The state GDP showed an annual average growth of 3.5% between 1993
and 1998. However, because of insufficient federal funds and the
need to address the growing demand for public services and
infrastructure, the state government needs to increase its own
revenues to continue its impressive growth rates. In addition,
health and education issues must be addressed at the same time as
job creation to ensure a well-trained and healthy workforce.
the state experienced economic growth without an equally impressive
investment in economic development? The evolution and structure of
the state’s GDP over the past several decades reflect natural,
historic, economic, and land use conditions, as well as the main
economic trends in Baja California Sur, which includes a growing
tertiary sector (financial services, insurance, community, social
and personal services, and trade, restaurants and hotels) that is
linked to economic forces outside of the state’s economy. The
current pattern is characterized by a declining share of the primary
(agriculture, livestock, fishing, and mining) and secondary
(construction and manufacturing) sectors in the GDP, and growth in
the tertiary sector. By 2000, the majority of the state’s
economically active population (EAP) was centered in the tertiary
sector (68.32%), and the primary sector had declined to 14.94%.
resulting social consequences of this trend have included increased
participation in the labor market, particularly by women. Accordingly, women’s increased participation in the workforce has
brought social challenges, including a need for an increased number
of day care centers.
this same timeframe, Baja California Sur attempted to develop
through the modernization of agriculture, growth in tourism, and the
development of an extensive fishing and marine commerce sector.
Unfortunately, these efforts were not undertaken in a sustainable
manner, and neither environmental nor regional social dynamics were
taken into consideration. Modernized agriculture occupied and
devastated the state’s valleys; tourism was associated with
irreversible changes to the coastal landscape; and extensive fishing
and marine commerce depleted resources and endangered local species.
Economic development in Baja California Sur continues to be
dependent on availability of renewable natural resources, primarily
water. Tourism, agriculture, and fisheries are all affected by the
diminishing groundwater resources in Baja California Sur.
Desalination is being considered as the next solution, but water
distribution infrastructure must be repaired and upgraded to ensure
that additional resources are not wasted.
availability of energy resources must also be considered if Baja
California Sur is to grow sustainably. First, natural energy
sources, such as oil, natural gas and hydro, which are abundant in
other parts of Mexico, are not found within the state. Also, in
the case of oil and natural gas, the state does not have an
energy distribution system (i.e.pipelines), making production and
distribution very expensive. Second, the Baja California peninsula
is the only part of the country that is not connected to the main
which has forced reliance in Baja California Sur on local power
stations at Punta Prieta in La Paz and Puerto San Carlos in
Comondú, both of which are using oil as a primary fuel source. As
neither of these facilities currently has scrubbers installed, there
are resulting environmental health impacts to those communities
downwind. Third, a geothermal electricity plant is planned for
Santa Rosalía, but there is presently no estimated timeframe for its
completion. Fourth, because of its abundance of sun, Baja
is ideally suited for concentrating solar
power plants (CSP). Solar has the potential to provide a
vast, low-cost source of alternative energy but land use issues need
to be considered given the given the large "footprint" that a CSP
typically occupies. On the other hand, CSP plants have one
primary advantage, namely that they produce no environmental
contaminants or greenhouse gases.
Clearly, Baja California Sur’s expected growth will fuel a dramatic
increase in the demand for electricity from the state's industrial,
commercial, and residential sectors. A key driver in the state's
energy demands will be its thirst for water. Because depleting
groundwater resources and expanded urban growth in Los Cabos, La Paz
and Loreto, the state will ultimately need to turn to desalinization
facilities as a primary source of potable water in the future. Desalination
facilities require substantial energy resources to operate. Hence,
failure to effectively identify sustainable renewable and
nonrenewable energy resources for Baja California will seriously
challenge the state's prospects for long-term economic development.
coming years, Baja California Sur faces a number of unique
challenges as it confronts the need to diversify its economy to
adjust to new economic realities and changing market conditions.
Avoidance of “Cabosanlucazation” is a major concern among some
residents to alleviate the possibility of overcrowding and the
creation of new slums, the destruction of natural habitat, and
shortages in natural resources. Migration issues are also of
particular concern to the region, as over 30% of the population is
migrants, with an additional 5% of the population consisting of
transitory migrant labor during the high season. 
Promoting small- to mid-sized enterprises (SMEs) would allow the
state to make the most of its human and natural capital, including
better distribution of wealth among diverse sectors in the local
direct investment (FDI) has become an important part of the state’s
economy, most notably for the tourism sector. From 1994-2001, Baja
California Sur received approximately 0.4% (US$262.5 million) of
Mexico’s total FDI. Of the 987 enterprises that invest in the state,
74.3% are from the US. Most of this foreign investment is in the
service sector, which represents 75.4% of FDI, the majority of which
is directed toward tourism-related accommodations and services. Not
surprisingly, foreign investment is focused primarily in the
municipalities of La Paz (34%) and Los Cabos (63%),
although Loreto is a future target for foreign investment. Recent
articles in the USA Today, Christian Science Monitor, San
Diego Union-Tribune, Arizona Republic, and in Canadian
news publications acknowledge a “Baja housing rush” focused on
Although Baja California Sur has a booming tourism sector, as long
as the state continues to have a steady inflow of migrant labor
willing to work for extremely low wages, employment opportunities
will continue to be scarce and poorly paid. Statewide, 54.9% of the
population over the age of twelve is economically active, and the
unemployment rate is just 2.3% on average.
in Baja California Sur are higher than the national average. There
are three tiers of minimum wages for Mexico, and areas are placed
into one of the tiers based upon the cost of living in that area.
Baja California Sur is in the top tier, along with Mexico City and
other large cities, where the average wage is $48.67 pesos per day (US$4.59), as
opposed to $47.16 (US
$4.44) or $45.81
(US$4.32) per day in
other geographic zones, as of January 1, 2006. Most people in the
state earn between one and two times the minimum wage. 
cost of living in Baja California Sur is significantly higher than
in many parts of Mexico. The fact that the area depends highly on
the supply of goods and inputs from the rest of the country and from
the United States results in higher market prices. Additionally, the insufficient and high cost of infrastructure,
basic services, and utilities (water, electric power, and roads) as
well as high transportation, freight, and fuel costs affect
individual consumers as much as businesses.
California Sur ranks low in access to financial services, especially
banking in rural areas. The state has the third fewest number of
bank branches in Mexico and only 0.31% of all credit card accounts.
Volatile interest rates, bank consolidations, and peso devaluations
have caused instability in Mexico’s banking sector, yet there is
still a high degree of confidence in banks. Mexico has improved its
financial infrastructure since the 1980s crises by revising its bank
investment and ownership regulations, creating a federal deposit
insurance program, and revising regulations on credit union and
Yet, banks have not invested in Baja California Sur for reasons of
cost ($400-600,000 to open a bank branch), transportation (bringing
currency to the region by armored car, ferry, or plane), and lack of
population (returns on investment are not high enough to justify
opening a branch).
This lack of investment has caused economic losses for the state’s
residents and businesses, as they experience missed sales,
transportation cost and lost time, and missed money transfers.
Remittances are one of the largest sources of foreign income into
Mexico – after petroleum and before tourism. Approximately US$14.5
billion was sent by Mexican family members living in the U.S. to
communities in Mexico. These transfers can be up to 30-50% of
household income in many cases. Innovative financial transfer
mechanisms are emerging, such as debit cards, phone transfers, and
cross-border mortgages to help facilitate remittances, far beyond
the expensive wire transfers that have dominated the market in the
past. In the case of Baja California Sur, only 1.7-2% of the
households in the state received remittances in 2000. This may, in
fact, be due to lack of access to banking services, rather than lack
of family members working in the U.S. This also affects emergency
funding during natural disasters (such as Hurricane Marty in 2003),
when family members were not able to send money locally, and roads
to banking centers were damaged and unpassable.
 Newscast, Panorama
Informativo, Promomedios California, Host: Miguel Ángel
Ojeda, 09-03-04, La Paz, BCS.
 Gobierno del Estado de BCS.
Programa Estratégico de Ordenamiento Territorial (
PEOT), version preliminary digital,, pg. 32.
 Mexico has a national
interconnected power grid divided into four regional
divisions: Northern, Baja Norte, Baja Sur, and Southern (the
largest). Northern Mexico (including North Baja) is
connected to the U.S. grid, and additional interconnections
are planned. Baja California Sur is the only area of the
country that is not inter-connected to either the U.S. or
Mexican grid. Source: U.S. Department of Energy, Energy
 González Sotomayor,
Luis Alberto, (ed.), Diagnóstico sobre Jornaleros
Agrícolas en el Municipio de La Paz,
UABCS-SEDESOL-Organización para la Investigación del
Desarrollo Sustentable, A.C. México 1998, pp. 39-41
Antonina Ivanova-Boncheva; Manuel Ángeles-Villa (eds.),Diagnstico
Estratégico de Baja California Sur,
UABCS-SEP, México 2003, p. 288.
 Harman, Danna. “Americans look to
the next Baja boom town,” in Christan Science Monitor,
November 21, 2005.
 Servicio de
Administración Tributaria (SAT),
Mexico, published in the Diario Oficial, December 26, 2005.
 H. VIII Ayuntamiento de Los Cabos..
Plan Municipal de Desarrollo, 2002-2005.,
pp. 48,55,57 and 67-69.
 Gob. Del Estado de BCS. Programas
de Desarrollo Regional 2001.(Regional Development Program),La
Paz, BCS, pp. 3-4.
 Crossborder Business Associates. “Insufficient
Funds: The Demand for Banking Services in Mulegé, Baja
California Sur, and Opportunities for Community
Development.” June 2004, p. 5.