This report examines the development and upgrading prospects of the medical device and aerospace clusters in Baja California, Mexico within the context of global value chains (GVCs). Prepared for the Economic Commission for Latin America and the Caribbean (ECLAC) and the Government of Baja California, the study applies two complementary analytical frameworks: cluster development, which highlights the differentiated roles of firms within local production systems, and GVC analysis, which emphasizes how global lead firms, governance structures, and standards shape upgrading trajectories. The analysis finds that Baja California has experienced a marked process of industrial transformation over the past two decades. Building on capabilities developed in consumer electronics and other export-oriented industries, the region has consolidated its position as a strategic nearshoring platform for advanced manufacturing serving North American markets. The medical devices cluster has reached significant scale, employing approximately 100,000 workers and hosting a dense concentration of multinational firms. While production remains focused on manufacturing and assembly, evidence of process, product, and functional upgrading is observed, particularly in areas such as sterilization services, automation, and selected design and engineering activities. The aerospace cluster follows a distinct development path. Rather than being organized around a few flagship firms, it is shaped by multiple Tier-1 and Tier-2 companies operating under stringent certification and quality regimes. This distributed structure has supported diversification but also underscores the need for strong coordination mechanisms, including industry associations, logistics platforms, and workforce certification systems. Drawing on comparative international experiences, the report highlights the role of targeted public policies in supporting upgrading through supplier development, skills formation, institutional coordination, and environmental performance. The findings emphasize that sustained competitiveness depends on aligning economic upgrading with social upgrading—through improved job quality and skill development—and environmental upgrading, particularly in regulation-intensive sectors. The study concludes that an integrated productive development approach is essential for strengthening local capabilities, increasing value capture, and supporting inclusive and sustainable industrial development in Baja California, Mexico.