Identifier
Created
Classification
Origin
06MEXICO1429
2006-03-16 18:12:00
UNCLASSIFIED
Embassy Mexico
Cable title:  

THE COMPETITIVENESS FORUM: A FRANK LOOK AT

Tags:  EFIN EINV ECON EPET 
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DE RUEHME #1429 0751812
ZNR UUUUU ZZH
R 161812Z MAR 06
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TO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
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UNCLAS MEXICO 001429 

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EFIN EINV ECON EPET
SUBJECT: THE COMPETITIVENESS FORUM: A FRANK LOOK AT
MEXICO'S CHALLENGES AND OPPORTUNITIES

REF: MEX 06086

UNCLAS MEXICO 001429

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EFIN EINV ECON EPET
SUBJECT: THE COMPETITIVENESS FORUM: A FRANK LOOK AT
MEXICO'S CHALLENGES AND OPPORTUNITIES

REF: MEX 06086


1. SUMMARY. The Special Commission for Competitiveness and
Regional Development for the Mexican Chamber of Deputies held
a forum to discuss the "Agenda to Promote the Competitiveness
of the Nation" on March 7-9 in Mexico City. Attendees heard
a wide range of viewpoints regarding the challenges the next
administration will confront in order to raise the
competitiveness of the Mexican economy, especially in light
of international competition. Most of the speakers agreed
that there is no panacea for enabling the Mexican economy to
compete more effectively in the global marketplace, but
instead positive change will depend upon durable political
leadership with the ability and will to enact difficult
reforms, foster a new openness to foreign investment, and
expand educational and social opportunities to all. The
attendees heard from representatives of the three leading
presidential candidates, business leaders, government
officials, and political analysts. END SUMMARY.

MORE COMPETITION NEEDED
--------------


2. Most of the representatives agreed that "crony
capitalism" and the lack of competition in many sectors of
the Mexican marketplace had resulted in higher prices, little
innovation, and a generally weaker Mexican economy versus the
economies of global competitors. Guillermo Ortiz Martinez,
Governor of the Bank of Mexico, flatly stated that Mexico's
ability to compete has been hurt by sectors of the economy
controlled by monopolies. Mr. Ortiz pointed out the
telecommunications sector, in which 94 percent of fixed
telephone lines, and 80 percent of cellular services are
controlled by one company (TelMex),thereby ensuring high
prices and poor service. Political scientist Denise Dresser
said that policymakers needed to ensure economic and
educational opportunities for all instead of the few "at the
top of the pyramid". She also demanded that policymakers
enact real reform, instead of superficial agreements such as
the Chapultpec Accord (reftel),an understanding between
business and political leaders to support a climate of
economic growth and increased investment (reftel which she
claimed was good for appearances but lacked substance.
According to Dresser, "we cannot allow the wealth to be
concentrated in the hands of the Azcarragas (owner of
Televisa)...the Slims (owner of TelMex),at the expense of
the Sanchez."

SLIM RESPONDS
--------------


3. Responding to criticism from Ortiz, Dresser, and others,
Carlos Slim, the owner of TelMex and Mexico's richest man,
rejected the notion that his company stifles competition and
is to blame for the low competitiveness of the Mexican
economy. Slim stated that Ortiz was responsible for the
problem, by instituting high interest rates which inflate the
value of the peso. Slim also charged that Ortiz was a member
of a group of policymakers who protect the electricity
monopoly's high rates, in order to obtain revenue for public
funding.

ENERGY SECTOR REFORM
--------------


4. Reform of the energy sector was an important feature of
all three presidential candidates' plans. Nearly every
speaker at the con