Identifier
Created
Classification
Origin
07MEXICO276
2007-01-19 20:52:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Mexico
Cable title:
CORRECTED -- MEXICO ECONOMIC NOTES, JANUARY 6 -
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UNCLAS SECTION 01 OF 03 MEXICO 000276
SIPDIS
SENSITIVE
SIPDIS
STATE FOR A/S SHANNON
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA
STATE FOR EB/ESC MCMANUS AND IZZO
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/ARUDMAN
USDOC FOR ITS/TD/ENERGY DIVISION
TREASURY FOR IA (ALICE FAIBISHENKO)
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND ALOCKWOOD
STATE PASS TO USTR (EISSENSTAT/MELLE)
STATE PASS TO FEDERAL RESERVE (CARLOS ARTETA)
NSC FOR DAN FISK
E.O. 12958: N/A
TAGS: ECON ECPS EFIN ELAB MX PGOV PREL
SUBJECT: CORRECTED -- MEXICO ECONOMIC NOTES, JANUARY 6 -
JANUARY 11, 2007
REF: A. 06 MEXICO 7054
B. 06 STATE 202978
C. DECEMBER 20
D. 2006 EB/CIP/BA E-MAIL
E. MEXICO 113
F. MEXICO 185
Sensitive but Unclassified
Summary
-------
UNCLAS SECTION 01 OF 03 MEXICO 000276
SIPDIS
SENSITIVE
SIPDIS
STATE FOR A/S SHANNON
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA
STATE FOR EB/ESC MCMANUS AND IZZO
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/ARUDMAN
USDOC FOR ITS/TD/ENERGY DIVISION
TREASURY FOR IA (ALICE FAIBISHENKO)
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND ALOCKWOOD
STATE PASS TO USTR (EISSENSTAT/MELLE)
STATE PASS TO FEDERAL RESERVE (CARLOS ARTETA)
NSC FOR DAN FISK
E.O. 12958: N/A
TAGS: ECON ECPS EFIN ELAB MX PGOV PREL
SUBJECT: CORRECTED -- MEXICO ECONOMIC NOTES, JANUARY 6 -
JANUARY 11, 2007
REF: A. 06 MEXICO 7054
B. 06 STATE 202978
C. DECEMBER 20
D. 2006 EB/CIP/BA E-MAIL
E. MEXICO 113
F. MEXICO 185
Sensitive but Unclassified
Summary
--------------
1. (SBU) GE/NBC asked the Embassy to continue pressing the
Mexican Attorney General's Office (PGR) to drop frivolous
criminal charges against the company, meanwhile GE Chairman
Jeff Immelt made similar points to President Calderon. The
Mexican Telecom Regulator (Cofetel) will hold a
teleconference with USTR to discuss U.S. industry complaints
against Mexico's new "Calling Party Pays" system for cell
phone charges. The regulator is also updating rules to spur
competition in combined video, internet and phone services.
Lower oil prices drove the peso to its lowest point against
the dollar since December 1, while inflation closed slightly
higher than expected for 2006. The Economy Secretariat tried
to drive down corn and tortilla prices by relaxing import
quotas for white corn. Economy Secretary Eduardo Sojo
announced plans to combat an expected economic slowdown.
Sugar workers are scheduled to strike on January 20.
Preliminary numbers for 2006 show that foreign direct
investment in Mexico was near last year's level, but below
the government's target. End Summary.
GE/NBC Seeks to End Legal Harassment by TV Azteca
-------------- --------------
2. (SBU) On January 10, GE/NBC Vice President Scott Seeley
met with Emboffs. He promised us a read-out on the August 9
meeting between GE Chairman Jeff Immelt and President
Calderon, saying that Immelt most likely made the point that
after 127 years in Mexico, GE should not be being harassed by
a competitor like TV Azteca trying to keep out competition.
The harassment of greatest concern to GE/NBC is the frivolous
criminal case filed by TV Azteca over a year ago. GE/NBC
would like the USG to encourage the Mexican Attorney
General's office (PGR) to drop the case, or at least remove
GE/NBC from it. TV Azteca has used the case to legally harass
GE/NBC -- most recently by pushing a new PGR investigator to
start a money laundering investigation. In December 2006,
the previous PGR investigator assured the Embassy that GE/NBC
would likely soon be dropped from the case because there was
no legal basis to the charges. The Embassy will continue
pressing Mexican officials about the case. Seeley noted that
previous Embassy discussions with PGR helped persuade PGR to
control TV Azteca attempts to use the legal proceedings to
harass GE/NBC. Seeley said that the recent press harassment
of GE/NBC and its Mexican partners (ref A) had been
particularly hard on GE/NBC's Mexican partners who have
requested permission to operate a third TV network in Mexico.
Seeley said GE/NBC has had no further physical threats or
actions against its staff since the forcible closure of the
studio filming a Telemundo program last fall, but GE
executives remain sensitive to any possible recurrence of
such action. Telemundo plans to begin filming a new
telenovela in Mexico City some time in the fall /summer
timeframe.
Calling Party Pays
--------------
3. (SBU) The Mexican Press featured stories this week
MEXICO 00000276 002 OF 003
claiming that U.S. telecom firms are pushing USTR to start a
trade case against Mexico in the WTO based on the high
interconnection fees and other controversy surrounding
Mexico's implementation of an international Calling Party
Pays (CPP) system for cell phone charges. The papers drew
their information from the public letters submitted to USTR
as part of its 1377 process, though they did not explain this
in their articles. As requested in refs B and C, Post
provided these letters to Mexico's telecom regulator,
Cofetel, and the Secretariat of Communications and Transport
(SCT) in December for comment. Cofetel will hold a
teleconference with USTR before submitting their reply. The
SCT has also expressed interest in learning more about the
USG's opposition to Mexico's implementation of CPP, possibly
in a separate telecon (ref D).
Peso Falls to Five-Week Low
--------------
4. (U) The Peso fell to 11.03 to the dollar, its weakest
since December 1. The decline was largely driven by lower
oil prices, since oil accounts for more than one-third of
government revenue. Mexico's crude export mixed dropped to
USD 44.09 per barrel, lowest in a year as a result of
decreased demand for heating fuel brought on by warmer
weather in the United States. Mexico's 2007 budget is based
on an average export price of USD 42.80 per barrel, so a
continued oil price drop could spur spending cuts and slow
Mexican growth.
Inflation Slightly Above Expectations
--------------
5. (U) Annual consumer price inflation for 2006 closed at
4.05 percent, slightly above the Central Bank's comfort zone
and market expectations. The Central Bank's inflation target
was 3 percent, plus or minus one percent. Inflation was at
the upper end of this range during the final months of 2006,
largely due to sharp increases in the price of fruits and
vegetables. Most recently, however, prices for other items
particularly tortillas, have also fueled inflation.
Economy Secretariat to Increase Corn Import Quotas
-------------- --------------
6. (U) The Economy Secretariat announced it would open white
corn import quotas and give smaller tortilla businesses
access to the foreign-grown version of Mexico's staple food
grain to reduce domestic tortilla prices. The Secretariat is
already working with the Agriculture Secretariat to gauge
local demand and determine if additional quotas should be
provided for U.S. and Canadian imports. Mexico currently
imports 9 million tons of corn annually (mostly yellow corn
for animal feed.) Domestic demand for all types of corn is
about 28 million tons. Post is looking into the details of
rising tortilla prices, and will report further.
Telecom Regulator to Issue Convergence Regulations
-------------- --------------
7. (U) Mexico's Telecom Regulator, Cofetel, will update
secondary regulations that now serve as an impediment to full
convergence in telecom services for combined video, internet
and phone services. Cofetel Commissioner Eduardo Ruiz Vega
said that with the adjustments, the regulator would spur
competition and reduce bureaucracy. He added that even the
telecom monopoly Telmex could be required to pay for the
right to offer additional telecommunication services.
Sugar Workers Strike Scheduled for January 20
--------------
MEXICO 00000276 003 OF 003
8. (U) Mexican Sugar Producers are likely to strike January
20. Rene Martinez, Chairman of the National Sugar and
Alcohol Chamber, reported that the union is unwilling to
negotiate. According to Martinez, speaking on behalf of the
sugar producers, the 36,000-member union is demanding a
pension of 170% of a workers final salary upon retirement.
Sojo Introduces Plans to Face Economic Slowdown
-------------- --
9. (U) Economy Secretary Eduardo Sojo told the press the
Calderon Administration would work more proactively to
address the expected future economic slowdown by stimulating
the domestic market, diversifying, and supporting small- and
medium-sized businesses (SMEs). Efforts include creating more
programs to promote business start-ups, 150 programs to
support SMEs, and coordinating the efforts of government
agencies to promote exports.
FDI a Disappointment Again
--------------
10. (U) Preliminary 2006 numbers from the United Nations
Conference for Trade and Development (UNCTAD),show that
foreign direct investment (FDI) flows to Mexico have stalled
for yet another year. FDI flows to Mexico reached USD 18.9
billion, below the government's goal of USD 20 billion, and
comparable to last years USD 18.93 billion. President
Calderon recently addressed the issue during a speech to
Mexico's Ambassadors and Consuls, where he beseeched them to
work to attract foreign investors to the country (ref F).
Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity
GARZA
SIPDIS
SENSITIVE
SIPDIS
STATE FOR A/S SHANNON
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA
STATE FOR EB/ESC MCMANUS AND IZZO
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/ARUDMAN
USDOC FOR ITS/TD/ENERGY DIVISION
TREASURY FOR IA (ALICE FAIBISHENKO)
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND ALOCKWOOD
STATE PASS TO USTR (EISSENSTAT/MELLE)
STATE PASS TO FEDERAL RESERVE (CARLOS ARTETA)
NSC FOR DAN FISK
E.O. 12958: N/A
TAGS: ECON ECPS EFIN ELAB MX PGOV PREL
SUBJECT: CORRECTED -- MEXICO ECONOMIC NOTES, JANUARY 6 -
JANUARY 11, 2007
REF: A. 06 MEXICO 7054
B. 06 STATE 202978
C. DECEMBER 20
D. 2006 EB/CIP/BA E-MAIL
E. MEXICO 113
F. MEXICO 185
Sensitive but Unclassified
Summary
--------------
1. (SBU) GE/NBC asked the Embassy to continue pressing the
Mexican Attorney General's Office (PGR) to drop frivolous
criminal charges against the company, meanwhile GE Chairman
Jeff Immelt made similar points to President Calderon. The
Mexican Telecom Regulator (Cofetel) will hold a
teleconference with USTR to discuss U.S. industry complaints
against Mexico's new "Calling Party Pays" system for cell
phone charges. The regulator is also updating rules to spur
competition in combined video, internet and phone services.
Lower oil prices drove the peso to its lowest point against
the dollar since December 1, while inflation closed slightly
higher than expected for 2006. The Economy Secretariat tried
to drive down corn and tortilla prices by relaxing import
quotas for white corn. Economy Secretary Eduardo Sojo
announced plans to combat an expected economic slowdown.
Sugar workers are scheduled to strike on January 20.
Preliminary numbers for 2006 show that foreign direct
investment in Mexico was near last year's level, but below
the government's target. End Summary.
GE/NBC Seeks to End Legal Harassment by TV Azteca
-------------- --------------
2. (SBU) On January 10, GE/NBC Vice President Scott Seeley
met with Emboffs. He promised us a read-out on the August 9
meeting between GE Chairman Jeff Immelt and President
Calderon, saying that Immelt most likely made the point that
after 127 years in Mexico, GE should not be being harassed by
a competitor like TV Azteca trying to keep out competition.
The harassment of greatest concern to GE/NBC is the frivolous
criminal case filed by TV Azteca over a year ago. GE/NBC
would like the USG to encourage the Mexican Attorney
General's office (PGR) to drop the case, or at least remove
GE/NBC from it. TV Azteca has used the case to legally harass
GE/NBC -- most recently by pushing a new PGR investigator to
start a money laundering investigation. In December 2006,
the previous PGR investigator assured the Embassy that GE/NBC
would likely soon be dropped from the case because there was
no legal basis to the charges. The Embassy will continue
pressing Mexican officials about the case. Seeley noted that
previous Embassy discussions with PGR helped persuade PGR to
control TV Azteca attempts to use the legal proceedings to
harass GE/NBC. Seeley said that the recent press harassment
of GE/NBC and its Mexican partners (ref A) had been
particularly hard on GE/NBC's Mexican partners who have
requested permission to operate a third TV network in Mexico.
Seeley said GE/NBC has had no further physical threats or
actions against its staff since the forcible closure of the
studio filming a Telemundo program last fall, but GE
executives remain sensitive to any possible recurrence of
such action. Telemundo plans to begin filming a new
telenovela in Mexico City some time in the fall /summer
timeframe.
Calling Party Pays
--------------
3. (SBU) The Mexican Press featured stories this week
MEXICO 00000276 002 OF 003
claiming that U.S. telecom firms are pushing USTR to start a
trade case against Mexico in the WTO based on the high
interconnection fees and other controversy surrounding
Mexico's implementation of an international Calling Party
Pays (CPP) system for cell phone charges. The papers drew
their information from the public letters submitted to USTR
as part of its 1377 process, though they did not explain this
in their articles. As requested in refs B and C, Post
provided these letters to Mexico's telecom regulator,
Cofetel, and the Secretariat of Communications and Transport
(SCT) in December for comment. Cofetel will hold a
teleconference with USTR before submitting their reply. The
SCT has also expressed interest in learning more about the
USG's opposition to Mexico's implementation of CPP, possibly
in a separate telecon (ref D).
Peso Falls to Five-Week Low
--------------
4. (U) The Peso fell to 11.03 to the dollar, its weakest
since December 1. The decline was largely driven by lower
oil prices, since oil accounts for more than one-third of
government revenue. Mexico's crude export mixed dropped to
USD 44.09 per barrel, lowest in a year as a result of
decreased demand for heating fuel brought on by warmer
weather in the United States. Mexico's 2007 budget is based
on an average export price of USD 42.80 per barrel, so a
continued oil price drop could spur spending cuts and slow
Mexican growth.
Inflation Slightly Above Expectations
--------------
5. (U) Annual consumer price inflation for 2006 closed at
4.05 percent, slightly above the Central Bank's comfort zone
and market expectations. The Central Bank's inflation target
was 3 percent, plus or minus one percent. Inflation was at
the upper end of this range during the final months of 2006,
largely due to sharp increases in the price of fruits and
vegetables. Most recently, however, prices for other items
particularly tortillas, have also fueled inflation.
Economy Secretariat to Increase Corn Import Quotas
-------------- --------------
6. (U) The Economy Secretariat announced it would open white
corn import quotas and give smaller tortilla businesses
access to the foreign-grown version of Mexico's staple food
grain to reduce domestic tortilla prices. The Secretariat is
already working with the Agriculture Secretariat to gauge
local demand and determine if additional quotas should be
provided for U.S. and Canadian imports. Mexico currently
imports 9 million tons of corn annually (mostly yellow corn
for animal feed.) Domestic demand for all types of corn is
about 28 million tons. Post is looking into the details of
rising tortilla prices, and will report further.
Telecom Regulator to Issue Convergence Regulations
-------------- --------------
7. (U) Mexico's Telecom Regulator, Cofetel, will update
secondary regulations that now serve as an impediment to full
convergence in telecom services for combined video, internet
and phone services. Cofetel Commissioner Eduardo Ruiz Vega
said that with the adjustments, the regulator would spur
competition and reduce bureaucracy. He added that even the
telecom monopoly Telmex could be required to pay for the
right to offer additional telecommunication services.
Sugar Workers Strike Scheduled for January 20
--------------
MEXICO 00000276 003 OF 003
8. (U) Mexican Sugar Producers are likely to strike January
20. Rene Martinez, Chairman of the National Sugar and
Alcohol Chamber, reported that the union is unwilling to
negotiate. According to Martinez, speaking on behalf of the
sugar producers, the 36,000-member union is demanding a
pension of 170% of a workers final salary upon retirement.
Sojo Introduces Plans to Face Economic Slowdown
-------------- --
9. (U) Economy Secretary Eduardo Sojo told the press the
Calderon Administration would work more proactively to
address the expected future economic slowdown by stimulating
the domestic market, diversifying, and supporting small- and
medium-sized businesses (SMEs). Efforts include creating more
programs to promote business start-ups, 150 programs to
support SMEs, and coordinating the efforts of government
agencies to promote exports.
FDI a Disappointment Again
--------------
10. (U) Preliminary 2006 numbers from the United Nations
Conference for Trade and Development (UNCTAD),show that
foreign direct investment (FDI) flows to Mexico have stalled
for yet another year. FDI flows to Mexico reached USD 18.9
billion, below the government's goal of USD 20 billion, and
comparable to last years USD 18.93 billion. President
Calderon recently addressed the issue during a speech to
Mexico's Ambassadors and Consuls, where he beseeched them to
work to attract foreign investors to the country (ref F).
Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity
GARZA