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Identifier
Created
Classification
Origin
07MEXICO2837
2007-06-01 19:41:00
UNCLASSIFIED
Embassy Mexico
Cable title:  

MEXICO ECONOMIC NOTES, MAY 26 - JUNE 1

Tags:   ECON  ECPS  EFIN  ELAB  MX  PGOV  PREL 
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VZCZCXRO3195
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DE RUEHME #2837/01 1521941
ZNR UUUUU ZZH
P 011941Z JUN 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 7289
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEHOT/AMEMBASSY OTTAWA PRIORITY 2292
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHMFIUU/CDR USSOUTHCOM MIAMI FL PRIORITY
RHMFIUU/CDR USNORTHCOM PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
						UNCLAS SECTION 01 OF 02 MEXICO 002837 

SIPDIS

SIPDIS

STATE FOR A/S SHANNON
STATE FOR WHA/MEX, WHA/EPSC, WHA/CAN/GREG SPROW, EB/IFD/OMA
STATE FOR EB/ESC MCMANUS AND IZZO
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GWORD
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: MEXICO ECONOMIC NOTES, MAY 26 - JUNE 1

Summary
-------



1. (U) President Calderon said he was displeased by the
appreciate of the peso resulting from the Bank of Mexico's
decision to raise interest rates. He also urged governors to
negotiate on fiscal reform. Finance Minister Carstens expects
mid-year GDP growth to reach 3.8 %. Cofetel issued
regulations on local number portability. The U.S., Canada
and Mexico agreed on an Energy Science and Technology
agreement to be signed at the upcoming SPP Energy
Ministerial. End summary.

The Peso Appreciates


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





2. (U) During a May 30 conference organized by the
Economist, President Calderon indirectly joined criticism of
the April 27 decision by the Bank of Mexico to raise the
benchmark interest rate for the first time in two years.
Calderon said that the appreciation of the peso is not
"something that makes us very happy." The peso has
strengthened 1.8 percent since the Bank of Mexico raised the
benchmark interest rate for the first time in two years.
This week, the peso appreciated 40 percent to 10.78 pesos per
dollar. Mexico's currency is expected to remain strong
during 2007 due to economic stability, low country risk and
reduction in foreign debt. For similar reasons, Mexico's
stock market continues to rise to record levels. Bank of
Mexico figures show a continuing decline in the pace of
remittances coming into Mexico, but this has not affected the
exchange rate to date.

Finance Minister Predicts an Economic Recovery


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

-



3. (U) Finance Minister Agustin Carstens told Mexican
finance executives that GDP growth should reach 3.8% in the
second half of the 2007 due to a dynamic service sector as a
result of strong domestic demand, a U.S. economic recovery, a
recovery of the Mexican automobile sector, higher consumption
and investment in machinery and equipment, increased job
creation in the service sector, growing bank lending, stable
Qonsumer prices (except for agricultural products), positive
performance of finance markets, a low country risk premium,
sound public finances and recovery in oil prices.

Governors and Finance Ministry to Discuss Fiscal Reform


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



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





4. (U) During the annual Mexican National Governors
Conference, President Calderon urged governors to negotiate
on tax reform, and instructed Finance Minister Carstens to
find alternate income sources for the states. Calderon said
he supports "true fiscal federalism," which encourages tax
uniformity and corrects in disparities in income
distribution. Carstens will meet the governors next week to
lobby for tax reform.

Phone Number Portability Approved


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





5. (U) Mexico's telecom regulator Cofetel has issued
regulations allowing customers to keep their phone numbers
when they change fixed-line or cellular service providers
starting next year. The rules should be published in the
Official Gazette soon, and will take effect 255 days after
being published. Companies will be allowed to charge a
one-time fee to customers who change providers and keep their
phone numbers. Number portability was one of the
requirements under the convergence law passed in October
2006, which required that Cofetel set regulations on

MEXICO 00002837 002 OF 002


portability and companies ensure portability before being
allowed to offer triple-play services.

Energy S&T Agreement Reached


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





6. (U) The Embassy participated in negotiations with Mexico
and Canada to reach a framework agreement to allow
cooperation on Science and Technology projects among the
three countries. Plans are on-track for ministers to sign
the accord at the July 23 SPP Energy Ministerial in Ottawa.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
BASSETT