PRESIDENT CALDERON SEEKS INVESTMENT FOR MEXICO,S

UNCLAS SECTION 01 OF 02 MEXICO 001020 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PGOV PREL PINR ECON EFIN MX SUBJECT: PRESIDENT CALDERON SEEKS INVESTMENT FOR MEXICO,S HIGH MIGRATION AREAS AND REFORMULATION OF NADBANK ¶1. (SBU) Summary: Speaking three months after taking office, President Calderon offered his perspective of why Mexico is uniquely positioned to become one of the world's leading investment destinations and gave an overview of progress on his three priorities: security and the rule of law, poverty reduction, and job creation. He specified the need to make the NADBank (NADB) more responsive to the needs of both Mexico and the U.S., and stated that he will approach President Bush in the near future with a proposal to expand the Bank's mandate. End summary. ¶2. (SBU) President Calderon on February 27 congratulated the American Chamber of Commerce in Mexico on its 90th anniversary and expressed gratitude for the contribution member companies have made to the country's development. He noted that 63 percent of Mexico's USD 19 billion in foreign direct investment last year came from U.S. companies, and said he perceived a growing international trust in Mexico's institutions and public policies. ¶3. (SBU) Marketing his country, Calderon identified Mexico's economic advantages: macroeconomic stability, including low interest rates, a strong stock market and low country risk; its strategic location next to the world's largest economy; its network of international trade agreements; its vast natural resources, including oil and diverse agricultural products; and positive trends in public finances resulting from surplus oil revenues. Calderon added that Mexico's attractiveness as a leading country for investment is bolstered by the country's sound democracy and strong institutions, its vibrant culture rooted in Latin America and connected to North America, and a "demographic bonus," with a young, economically active population that averages 27 years of age. ¶4. (SBU) Calderon offered an overview of progress on his government's three priorities: establishing security and the rule of law; fighting poverty; and creating jobs. He explained that the GOM has significantly increased the security budget and initiated surge operations in some of Mexico's most lawless states, using the strength of the federal government to recover control from drug traffickers and organized crime (septel). Cautioning that this will be a long struggle that will cost lives and money, the president said "it's a fight we have to fight" and promised to be relentless in enforcing Mexico's laws and giving Mexicans--and investors--the security and confidence they deserve. ¶5. (SBU) With regard to attacking poverty, Calderon listed a number of policy proposals and thanked the congress for its work to increase the number of health insured families from five million to seven million. Accepting that the government does not have the resources to give all Mexicans adequate medical insurance, he reiterated his pledge to ensure health coverage for all children born during his administration. Calderon added that the GOM is working on programs to help women join the workforce, by creating day care centers and other support projects. In addition, it will pay the social security premium for the first year of employment of all new employees brought into the formal sector. ¶6. (SBU) Calderon hailed the February 23 announcement of a pilot program for cross-border trucking as a firm step to replace the current inefficient and costly system for U.S.-Mexico truck traffic. He noted that within two months, the first Mexican companies would start transporting products directly from Mexico to their U.S. customers. He hailed this opening as a historic step to improve U.S.-Mexican trade, benefiting producers and consumers. (Note: The pilot program for 100 U.S. and 100 Mexican companies will allow Mexican and U.S. trucks to travel past the 25-mile commercial zone along the border for the first time since 1982. Estimated savings are USD 400 million a year. End note.) ¶7. (SBU) The president emphasized the need to channel investment toward the regions of highest migration, linking job creation with curbing migration, and spelling out his vision of a country where all Mexican men and women have their own jobs and don't need to leave in search of employment. He praised the opening of avocado exports from Michoacan, his home state, to California and Florida, MEXICO 00001020 002 OF 002 boasting that a state that has been among the biggest exporters of migrants is now the world's largest exporter of avocados. While offering his respect for U.S. autonomy, the president also took a swipe at the border "wall" by saying he believed investing in one kilometer of road in a poor state like Zacatecas, Guanajuato, or Michoacan, would have more impact on reducing migration than investing in 10 kilometers of border fencing in Texas or Arizona. ¶8. (SBU) President Calderon then offered his proposal for a reformulation of the North American Development Bank (NADB) that would expand its mandate to go beyond environmental projects and include infrastructure in general and other projects in areas experiencing the largest migration. He also called for increasing the limit on the total amount of loans available to a single debtor. Calderon turned to Ambassador Garza and asked him to take the message to President Bush that the GOM will be proposing this reformulation, acknowledging that he understands that changing the NADB's mandate would require congressional approval in the U.S. and Mexico. Calderon also hailed Mexico's February 26 signing of a Memorandum of Understanding with the Inter-American Development Bank (IDB) for IDB guarantees and possible financing for up to USD 2.5 billion for infrastructure projects. ¶9. (SBU) Calderon noted that a study completed by Goldman Sachs indicates that Mexico could become the world's fifth largest economy by 2040 if the GOM makes the right decisions now. He pledged to make those right decisions, saying he wants Mexico to be among the top investment destinations in the world. The president concluded by affirming his commitment to the rule of law, and assured his audience that Mexico is on the right path. Visit Mexico City's Classified Web Site at http://www.state.sgov.gov/p/wha/mexicocity GARZA