Exclusive Interview: Medellin’s Vice-Mayor Discusses The City’s Culture Of Innovation, Pro Growth Strategy

How did Medellín go from being infamous as the most dangerous city on Earth to being famous as the most innovative city on Earth? The United Nations recently held a global conference in Medellín, bringing government officials from all over the world to learn from Medellin’s example as a destination for business, a model for social inclusion, and an incubator of innovation.

Finance Colombia’s executive editor Loren Moss recently met with the vice-mayor of Medellín Felipe Hoyos, responsible for Information and Communication Technology, Economic Development, and Internationalization to learn about Mayor Anibal Gaviria’s administration’s efforts to attract investment to Colombia’s second largest city, and their work to make sure that all sectors of society benefit from that investment.

Above photo: Vice-mayor of Medellín Felipe Hoyos  (left) with Finance Colombia’s executive editor Loren Moss

Finance Colombia:  Medellín is already famous for having transformed itself. A couple of decades ago it was infamous as the most dangerous city on earth. Now, the UN just held a global convention here and Medellin has been cited as the most innovative city in the world. How has the city been able to turn itself around in less than two decades?

Felipe Hoyos:  The fundamental principle of the current municipal administration, the fundamental values are the preservation of life and equality in its growth. Because those two things have been the biggest problems in our country: a huge inequality among our population—a concentration of wealth in very few hands; and then a large segment of the population that lacks resources. In our history we had really serious violence problems. For some years now the mayor has been working with those principles in mind: we have to develop a city that protects life, and which grows with equality for all.

In our area, related to economic development, there are three fronts: economic growth per se: everything that produces economic growth and that at the same time generates quality employment, and there are several themes: one of them would be strengthening the business sector, one of our main focuses has been, “how do we strengthen businesses, especially small business?” which is a giant base of job creation in the city, especially when we find that big corporations in Colombia are actually not hiring more people, on the contrary, they are becoming more efficient, achieving more sales with less people.

The United Nations held its World Urban Forum in Medellin from April 5-11, 2014 bringing together world municipal leaders to learn best practices and study Medellin’s success and innovation.

So job generation is greatest in the small businesses sector, and that’s why Medellín has a very powerful strategy of supporting small businesses, and formalization of those same businesses. Because another difficulty I have found is that, many of those small businessmen are informal and that is very delicate because being informal means that they are under the radar, pay no taxes, and do not pay the salaries they should. That is not sustainable in the long run. So we have a program of strengthening and formalization in the small business sector.

And the third variable of economic development is education, developing human talent for the labor market. We are not satisfied with just educating lawyers, engineers, doctors and pilots, we want to educate or population for what is really required; to close the gap between supply and demand. Because, even if someone has a degree, that doesn’t mean that’s what society needs—we will need more technicians and technologists. So the third variable for economic growth is pertinent education for labor, and that’s where the city has many programs, many of them dispensed by the three municipal universities.

Medellin, in contrast with the rest of the country, is the owner of three universities with 38,000 students. Normally, municipalities are the owners of primary schools and high schools but not universities. We have something like 450 primary schools or high schools, but three additional universities—and a large number of kindergartens. To summarize, Medellín has 380,000 high school students, and 38,000 university students, in technology careers. That is education relevant to the labor market. And that is part of the first block of economic development.

The second block is internationalization. Let’s say it’s a triangle with three points: economic development, internationalization and innovation. In internationalization there are several strategies but they are basically focused on two fronts: the promotion of the city to the world, to attract tourists, for events mostly: conventions, seminars, which attract corporate tourism. Medellín is aware that it’s not a vacation destination: there is no sea, no beaches, no high mountains with ski resorts or that type of thing, but there is a strength in corporate tourism, so there we see a strategy in internationalization, promoting the city for corporate tourism, and promoting the city to capture international investment.

There are two institutions taking care of that role: The agency responsible for attracting international investment is the Agencia de Cooperación e Inversión (ACI), and the agency for promoting tourism is the Medellín Convention and Visitors Bureau. Each one works independently but focused and with well-defined goals. They are backed by the great convention center and event operator that we have here, which also belongs to the municipality, called Plaza Mayor. So those three agencies are in charge of internationalization of the city. Not only looking for tourists to come and spend in Medellín, in hotels, restaurants, commerce, transport, or investors who build companies to generate quality labor, but to change the image of the city in the world.

Let’s say the image was once a very bad one, because [years ago] we had nightmarish violence, but we still have problems with our global image because Medellín still carries those stigmas related to violence, drug-dealing, so this strategy of marketing and city promotion is also to change that old image, to improve tourism, so that investors come and see that we have ideal conditions to invest. It’s a complex challenge, because the ideal conditions Medellín has are not enough, you need human talent, to have local and national government help the investor, you need stable regulation and legislation over the long term, you need improvement in taxation, the labor market, and so on; rules to protect the investment of the investor, to protect foreign investment, and stability in the rules of the game over time.

Medellín has found innovation to be a third quality. In Medellín, in general, the population has been quite entrepreneurial, quite creative, and it is through innovation that social and economic transformations occur. So in innovation promotion: we have a complete strategy, with a set budget, to support innovation in government entities, to promote innovation in private companies, and in the general population, through a culture of innovation: training of children at school, science contests, research groups, support, one-to-one projects with universities and private companies, innovation platforms so that investors meet with entrepreneurs and innovators, so that they find ways to finance their development; bringing universities and private corporations together to work on what is really required. We have big innovation events where we bring lecturers and expert innovators, world class entrepreneurs to tell us about their experiences.

In terms of innovation, we have big things are going on here, which I think are unique in Colombia. There is no municipality investing so much in innovation, there is a specific ten year plan of science, technology and innovation, with a set budget which started in 2012 and is planned out until 2021. 25 million dollars per year, to be invested exclusively on innovation, through Ruta-N, the center that coordinates innovation.

In Medellín, in general, the population has been quite entrepreneurial, quite creative, and it is through innovation that social and economic transformations occur.

That’s the platform we have for economic development, to try to generate growth with equality, and generate quality labor opportunities. Labor is seen as the biggest obstacle for security in the country: as long as there is not enough employment opportunity for everybody, it will be very difficult for low and middle class individuals to grow and to have the rest of the things they ought to have access to. So we believe one basic necessity is employment. To work on employment is fundamental for human dignity and a decent life. Unemployment rates are still high, not only in Colombia but also in Medellín, the rate is 9%. In Colombian cities it is 10%, in the countryside it is 8%, and the national average is 9%).

Finance Colombia: There are a lot of people in the countryside who say, “I have no job, I’m off to the city”. So the unemployment rate increases in the city, which has to attend to those people who arrive, they are citizens, although recent arrivals. So that puts pressure on the city.

Medellin’s Metrocable system that integrates with the city’s metro, ensures that the low income residents that live in the city’s mountanside neighborhoods have safe, inexpensive access to the city’s transportation infrastructure. This is an integral part of Medellin’s long term social inclusion strategy.

Felipe Hoyos:  And among the cities, there are some that are much more attractive than others, for a variety of reasons. Medellín is one of the most appealing, because it has universal coverage in public services. The whole city has public services, light, water, sewage, natural gas, and basic sanitation everywhere. It has a nice climate; free education for all children. And full health coverage in Colombia, practically for everybody, there are some of the best EPSs [health service provider entities] everywhere. Medellín has a good transport system.

Those five variables contribute to the arrival of more people to Medellín. Bogotá is the city that attracts the most, but Medellín is the second by far, and that puts some extra pressure on the unemployment rate. These are the reasons Medellín stands out compared to the rest of the country. The propositions not only for economic development, but also the ones related to security, education, health, recreation, infrastructure, and general development. We have seen that Medellín, in the previous years, has been growing above the national average by at least 1 percentage point. When the country grows 4%, Medellín grows 5%. In the same way it has been growing faster than the rest of the country, it has been keeping the unemployment well under the national average.

12, maybe 14 years ago, it was decided that in Medellín there would be six clusters, six segments in which it would be important to make an extra effort: Energy, Health, Construction, Textiles, Business tourism, and TICs (Information and Communications Technology). In those six clusters, it was found the in the first five, there was already a wealth of experience and a strong backing from the municipal administration. In energy for instance, historically this region has been wealthy in rivers and water, so it has had the biggest energy companies. The electric companies are headquartered in Medellín: EPM, CELSIA, ISA, ISAGEN, four of the five most important in the country. In health, we have historically had very good hospitals of the highest quality.

In construction we have seen the growth of big construction companies in Medellín. In textiles, Medellín has been historically a textile city, in spite of that sector being so badly injured during the last 25 years, due to the lack of competitiveness and excessive labor cost, and the obsolescence of machinery. But despite that, textiles are still important. And finally in the area of tourism, Medellín has started to stand out and attract big events here, not only because the municipal administration supports them, but because it we have very good facilities and a good marketing team. Finally, ICT (Information and Communications Technology), is an area where we have placed a bet, in order to diversify our economy. It’s a smaller sector still, but we have great expectations.

Finance Colombia: What programs does the city have to help those who have not traditionally had access to the higher education or the capability to participate in those high-tech or targeted growth sectors?

Felipe Hoyos:  Part of the strategy of the municipality through the three universities it has, is to create an education plan adjusted to the needs of the clusters. So there we have the Pascual Bravo, a university that has a lot to do with software development, computer programming, all that related to technology, Pascual Bravo is offering a series of programs at a very affordable price, trying to capture students interested in those vocations.

The Colegio Mayor has a lot to offer in the area of tourism. It has all the education for gastronomy, restaurant administration, hotel administration, service, bilingualism. And ITM is much bigger, all technologies focused on industry, so automotive tech, automotive mechanic, electronic engineers, and so on, it’s more about technicians and engineers but Pascual Bravo and Colegio Mayor have their specific focus, one in ICTs and the other in tourism. Obviously beyond those three universities there are many others, private ones, of very good quality. And there is a complete academic offering in health sciences, engineering, practically everything for a city of the size of Medellín and the surrounding metropolitan area, with some 3.6 million inhabitants.

Finance Colombia: So Medellin is focused on education and developing human talent in order to attract employers and investment?

Felipe Hoyos:  The topic of talent is key for any city to become an attractive destination for investment. It’s the first thing the investors ask me about: “talent, have you got it?” And in that respect, Medellín is very conscientious that it has to work hard.