*By Philip Stevens and Alberto Saracho
Mexican policymakers know that the country’s long-term economic prospects depend on accelerating away from low-value manufacturing and agriculture towards an economy based on knowledge-intensive, innovative industries.
Biotechnology is one such industry with intriguing possibilities for Mexico’s ongoing journey towards high-income status. This science-based sector harnesses the power of biology to develop cleaner fuels, better crops, new medicines and more efficient industrial processes.
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Biotech’s economic potential is enormous: the world leader in biotechnology, the United States, currently derives a massive 2% of its GDP from biopharmaceuticals, biotech crops and industrial biotechnology.
Mexico is well placed to become a regional biotech leader. It enjoys macroeconomic stability, several regional biotech enterprise clusters and a good science base amongst its graduates. Mexico has huge biodiversity and is a neighbor of the world’s greatest knowledge economy, the United States.
Mexico’s biopharmaceutical stars already include Mexico City’s Probiomed. The country has also attracted investment in manufacturing and clinical trials from overseas companies.
Overall, though, it’s an undeveloped sector. Mexican pharmaceutical industry spending totalled just USD $160 million on Research and Development (R&D) in 2015.
Mexico’s challenge is to build on its advantages and become the regional leader in biotech innovation.
The re-booted NAFTA, whose negotiators meet this week in Mexico City, could be a catalytic opportunity.
Modern trade deals are not just about reducing import tariffs for physical products, important as that is. Increasingly they are focused on shaping local regulatory frameworks and laws that facilitate the international transfer of capital, skills and know-how.
— PanAm Post (@PanAmPost) September 2, 2017
In particular, certainty over intellectual property rights is crucial for biotech investors, including clearly defined and easily enforceable patent rights. Strong protection means companies will be more likely to invest in local R&D facilities, and develop partnerships with local companies.
Over time, Mexican companies receiving this investment and participating in global projects will develop their own innovative capacities, boosting long-term economic growth. It’s already happening in the aerospace and automotive sectors.
The original NAFTA, negotiated in the early 1990s, was pioneering in this area and laid solid IP groundwork including introducing patent terms of 20 years for all inventions.
However, minimum IP standards agreed over 20 years ago are insufficient today. The modern biotech sector is characterised by capital intensiveness, high risk, huge technical and scientific complexity and cooperation across borders. For Mexico to become a global biotech player, its IP rules need an appropriate update.
For instance, NAFTA originally required five years’ protection for the data generated during medicine clinical trials. This intellectual property right is crucial to biotech medicines whose molecular complexity makes them difficult to protect with patents alone.
The growth in the importance of this category of medicines over the last 10 years means many places now provide longer terms than NAFTA’s five years, including the EU, US and Japan.
— OpenCanada (@OpenCanada) August 24, 2017
More crucially, these rules are not yet on Mexico’s statute books, existing only as guidelines, and are therefore not legally enforceable.
Mexico also falls down on excessive delays of up to six years for the approval of new biotech medicines. Another drawback is its opaque medicines procurement system in the public health system, although there have been recent improvements.
The NAFTA renegotiation is an opportunity to refine and modernize these rules to bring Mexico in line with emerging international standards. With a world-class IP framework in place, Mexico will be better placed to participate in global biotech R&D networks and bring capital, knowledge and skills into the country.
The potential prize is enormous: thanks in part to modernized intellectual property rules, China now captures more Foreign Direct Investment in biopharmaceutical R&D than the US, with investments totalling USD $1.6 billion between 2010 and 2015, according to FDI Markets.
During the Trans-Pacific Partnership negotiations, Mexico agreed to update many of its IP rules. With this agreement unlikely, the NAFTA renegotiation gives Mexico another opportunity to attract a level of global biotech investment to benefit the whole country.
*Philip Stevens is director of Geneva Network, a UK research organisation focusing on innovation policy. Alberto Saracho is director of Fundacion Idea, a public policy think tank based in Mexico City.