SONORA STATE OFFICIALS SEE 5 PERCENT ECONOMIC GROWTH IN

UNCLAS SECTION 01 OF 02 HERMOSILLO 000009

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EIND ENRG EINV EPET MX
SUBJECT: SONORA STATE OFFICIALS SEE 5 PERCENT ECONOMIC GROWTH IN
2006, HIGH INVESTMENT PROSPECTS

REF: HERMOSILLO 0005 (NOTAL)

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1. (U) Summary. Sonora economic officials are projecting that
the state's economic growth rate for 2006 will be 5 percent.
This would match 2005, when the Ford Company's major expansion
of its automobile assembly operations in Hermosillo gave Sonora
a major boost. Plans for a new LNG terminal in Puerto Libertad
and an extended gas pipeline network throughout the state, the
officials said, could have a similar impact. End Summary.


2. (U) On January 9, Consulate personnel (PO, Vice Consul
Storrow, Assistant Escobosa) were invited to an introductory
meeting with Ricardo Platt, Sonora State Secretary of Economy,
Ivan Manuel Alvirez, his chief of staff, and Ignacio Escalante
Sanders, Director General of the Economic Development Council
for Sonora (COPRESON). Discussion focused on Sonora initiatives
to promote investment, the current state of the state's economy,
and economic prospects for 2006.

ENCOURAGING INVESTORS IN SONORA


3. (U) Platt, who came to his first government job in August
2005 from the construction business, mentioned industry
(including automobiles),new investment, local small business,
and housing for the Sonora workforce as primary areas his office
supports. His responsibilities encompass COPRESON and the
Housing Institute for Sonora (INVES),organizations funded by
public budgets but largely run by private sector experts. He
was especially keen to talk about "Soft Landing," an
investor-friendly operation within his purview funded by the
state of Sonora. Potential investors - most of whom are
Americans, he said - could use the office space and computers,
and draw on Soft Landing's staff for information as they
explored possibilities in the state. Escalante, who travels
frequently to Asia to develop business contacts for the state,
said that Japanese investors especially were showing increasing
interest in Sonora.

THE FORD COMPANY PRECEDENT


4. (U) The Sonora officials described the major economic impact
in 2005 of the Ford Company's decision to produce several
automobile models -- the Fusion, Mercury Milan, and (for the
first time outside the U.S.) a Lincoln (Zephyr) -- in
Hermosillo. This mega-project brought in dozens of American
essential "first and second tier" suppliers. Tens of thousands
of jobs were created and some local businesses have flourished
as service providers. Platt said that the decision was
competitive and Hermosillo had won on the basis of Ford's
earlier experience here with a good work force and a generous
incentive package fully supported by the Sonora government and
its pro-business governor, Eduardo Bours Castelo.

LNG TERMINAL MEGA-PROJECT~AND RUMORS OF A NUCLEAR PLANT


5. (U) Platt and Escalante were optimistic that Sonoran economic
growth would continue in 2006 at the 5 percent rate achieved in
2005, and generate another 30 thousand new jobs. Asked if there
were other mega-projects on the horizon, they spoke of a USD 1.2
billion project to construct a LNG terminal at Puerto Libertad,
as well as a pipeline network that in 2007 would bring gas as a
power-generating source to Hermosillo, Navojoa and other cities
in Sonora for the first time. U.S. pipeline company El Paso and
an unnamed energy partner are close to finalizing an agreement
on it. Platt said this project addressed the state's strategic
need for reliable power generation for further development. He
claimed that Sonora's government had carefully considered the
environmental impact and had concluded that the terminal offered
a balanced approach, one which would even move the state away
from oil as a power source and the current risk of a major
polluting incident at Guaymas or other points in the Sea of
Cortez where oil transport ships stop. (Note: In December
2005, media reports circulated that the National Institute for
Nuclear Research (ININ) had proposed construction of a nuclear
plant just south of Hermosillo. This provoked NGO criticism and
led Governor Bours to state that he would never contemplate such
a "crazy" project without public hearings. The issue faded
after it became clear that the idea of a nuclear plant in Sonora
is still very notional. End note.)

OTHER ECONOMIC DEVELOPMENTS~AND WATER, PRECOS


6. (U) Platt also listed 18 industrial park projects underway in
Sonora, expected strong tourism growth, and the hopes of Guaymas
officials to rapidly expand port infrastructure and existing
aerospace manufacturing capacity as positive prospects. Asked
whether Hermosillo's water shortages were a potential obstacle
to further development, Platt said that Sonora was careful to
recruit investors for businesses that are not heavily dependent
on water. He noted that Hermosillo is enforcing restrictions on
water consumption but said that no company had ever rejected

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Hermosillo as a business site on that basis. While
acknowledging the need for drug searches, the Sonora officials
also spoke of the economic threat posed by long delays at the
army inspection points (PRECOS) - especially at the Benjamin
Hill PRECOS -- on the highway north to the U.S. border crossing
at Nogales (reftel). Platt said that Governor Bours would meet
January 10 in Mexico with the Secretary of National Defense to
discuss the matter, and that Sinaloa officials were coordinating
their complaints with Bours'. Platt commented that, while
Mexico City was not always fully responsive to the concerns of
northern Mexican states, some reasonable solution probably would
be worked out.


7. (U) This report has been cleared with American Consulate
Nogales.
CLARKE