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Identifier
Created
Classification
Origin
06MEXICO2280
2006-04-27 20:45:00
UNCLASSIFIED
Embassy Mexico
Cable title:  

PROPOSED LAW TO LIMIT FOREIGN INVESTMENT DEAD FOR

Tags:   EINV  ECON  MX 
pdf how-to read a cable
VZCZCXRO7219
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #2280/01 1172045
ZNR UUUUU ZZH
R 272045Z APR 06
FM AMEMBASSY MEXICO
TO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/SECSTATE WASHDC 0568
INFO RUEHFR/AMEMBASSY PARIS 0347
						UNCLAS SECTION 01 OF 02 MEXICO 002280 

SIPDIS

SIPDIS

STATE PLEASE PASS TO USTR JOHN MELLE
STATE FOR WHA/MEX, WHA/EPSC, EB/OIA
USDOC FOR ANDREW RUDMAN
PARIS FOR USOECD

E.O. 12958: N/A
TAGS: EINV ECON MX
SUBJECT: PROPOSED LAW TO LIMIT FOREIGN INVESTMENT DEAD FOR
NOW

REF: A. MEXICO 1864


B. STATE 60478



1. SUMMARY: The Mexican Chamber of Deputies rejected a bill
passed by the Senate on April 4 that would have limited
foreign neutral investment (i.e. investment in non-voting
shares) to trusts, mutual funds, and other investment funds.
Although the law would likely have affected investors from
European countries - whose free trade agreements do not offer
the same protections as the North American Free Trade
Agreement (NAFTA) - EU embassies we contacted were not aware
of the proposed bill, or its potential effects. The American
Chamber of Commerce (AMCHAM), working with other foreign
chambers of commerce, led an effective lobbying and press
campaign, highlighting the negative implications of the law.
END SUMMARY.

LAW REJECTED


--------------------------





2. On April 26 the Economic Committee in Mexico's Chamber of
Deputies voted against a bill approved April 4 (Ref A) by the
Mexican Senate that would have restricted neutral investment
(i.e. investment in non-voting shares) in Mexico. The bill
was returned to the Senate with 43 proposed changes. The
bill proposed restricting neutral investment in Mexican
companies to trust funds and investment funds. The proposal
would have also restricted neutral investment in important
sectors such as transportation, telecommunications,
broadcasting, and gasoline and LP gas distribution. It would
have extended the period of time needed to get Mexican
government approval before completion of the neutral
investment. The Chamber of Deputies vote returns the bill to
the Senate, which had already finished meeting for this
session, effectively killing it. However, this bill could be
reintroduced when Congress opens its new session in September.


CONTACT WITH MEXICAN OFFICIALS


--------------------------





3. Post's Economic Section and Foreign Commercial Service
Office closely monitored the progress of the law in the
Chamber of Deputies. The Charge sent a letter to Minister of
Economy Garcia de Alba (Ref B) criticizing the proposal.
U.S. Commerce Secretary Gutierrez also sent a similar letter
to President Fox. Econ Min Couns conveyed the message to U/S
of Economy Villalobos. Gregorio Canales, Director General
for Foreign Investment at the Secretariat of Economy,
provided frequent updates to Econoff on his discussions with
the Chairman of the Economic Committee in the Chamber of
Deputies.

EUROPEANS REACT SURPRISINGLY


--------------------------





4. Econoff spoke April 21 to the European Commission (EC) in
Mexico and the Spanish Embassy. Post's understanding of the
proposed law is that it would have a greater impact on
European investors as free trade agreements between Europe
and Mexico do not offer the same investment protections as
NAFTA does to North American investors. The Economic Advisor
at the EU mission here told Econoff that they believed the
new law would affect Americans more than Europeans
(contradicting Post's understanding). They mentioned that
they too were in contact with Canales but were not speaking
to the press. The Commercial Counselor at the Spanish
Embassy told us April 26 that they were unaware of the
proposed law until they were contacted by the U.S. Embassy.
The Spanish advised Econoff that they did not know any
Spanish businesses that would be affected by the law and did
not appear very concerned about the law's potential effects.

AMCHAM LEADS MULTILATERAL OPPOSITION


--------------------------





5. A multilateral coalition, coordinated by the AMCHAM,
included representatives from Canadian and Japanese business
associations. Coalition members met individually with
Secretariat of Economy officials and individual members of

SIPDIS
the Economic Committee of the Chamber of Deputies to show how
the proposed law would harm current investment and deter new
investment in Mexico. AMCHAM also organized presentations by
large companies such as GE which would be negatively affected
if the law passed.

MEXICO 00002280 002 OF 002



COMMENT


--------------------------





6. Most observers here believed the Senate revived this
bill, dormant since 2002, due to pressure from supporters of
the anti-competitive new Radio and TV laws as well as the
National Trucking Chamber of Commerce (CANACAR) to restrict
investment in trucking. This bill now is like a zombie, dead
until revived to walk the Earth again. It is imperative that
the foreign business community continues to remind Mexican
officials why FDI is important to Mexico and how laws such as
this would affect it. Post hopes that this proposed law
demonstrates to other countries with significant investments
in Mexico the need to closely monitor the legislative
activity of Mexico in order to be able to stop something like
this from occurring again.



Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity

GARZA