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Identifier
Created
Classification
Origin
07MEXICO306
2007-01-23 14:48:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Mexico
Cable title:  

MEXICO'S NEW ECONOMY SECRETARY MEETS WITH

Tags:   ETRD  EAGR  ECON  BEXP  WTRO  MX  CH 
pdf how-to read a cable
VZCZCXRO5788
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #0306/01 0231448
ZNR UUUUU ZZH
P 231448Z JAN 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 5025
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0386
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RULSDMK/DEPT OF TRANSPORTATION WASHDC PRIORITY
RUEAHLA/DEPT OF HOMELAND SECURITY PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
						UNCLAS SECTION 01 OF 02 MEXICO 000306 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/FO/SHANNON AND EB/FO/SULLIVAN
STATE PASS USTR FOR VERONEAU AND EISSENSTAT
COMMERCE FOR ITA/MAC/NAFTA/WORD/BASTIAN
USDA FOR OCRA AND ONI

E.O. 12958: N/A
TAGS: ETRD EAGR ECON BEXP WTRO MX CH
SUBJECT: MEXICO'S NEW ECONOMY SECRETARY MEETS WITH
AMBASSADOR

Summary
---------



1. (SBU) Mexico's top trade and industry official wants to
deepen North American economic integration and improve the
country's investment climate to counter growing competition
from China and elsewhere. After a short briefing on the
Mexican government's (GOM) approach to dealing with the
recent spike in tortilla prices, Secretary Sojo and the
Ambassador exchanged ideas on how best to work together to
achieve the Calderon Administration's longer-term strategic
goals, in particular by taking advantage of the Security and
Prosperity Partnership. Three areas they agreed to look at
more closely were: 1) increasing the number and capacity of
border bridges; 2) looking at industrial sectors that might
be ripe for cumulation agreements or other rule of origin
adjustments to keep more manufacturing supply chains in the
Americas; and 3) comparing ideas for facilitating passage of
legitimate goods across the border. Outstanding bilateral
trade issues like trucking, chicken, conformity assessment
bodies, and investment disputes were also discussed. End
summary.

Setting


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





2. (U) Ambassador Garza hosted breakfast for Eduardo Sojo,
Mexico's new Economy Secretary, and his five top deputies
January 19. The DCM and officers from ECON, FAS, and FCS
also attended. Over the course of a very candid
conversation, the Mexicans expressed enthusiasm about working
with the USG on the whole range of bilateral, regional, and
global trade issues.

Dodging the Tortilla Fastball


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





3. (SBU) By permitting more corn imports and reaching
agreement with a number of important corn merchants and
tortilla producers on temporary price restraints, Sojo and
his team believe they have largely defused the tortilla
"crisis" that has grabbed headlines and prompted protests
here the past two weeks. Post will send septel a more
detailed read-out and analysis of this issue, but so far, the
GOM seems to have dodged a bullet.


Looking to Continental Trade Integration...


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





4. (SBU) With this crisis hopefully on the wane, Sojo said he
wants to focus on the Calderon Administration's strategic
goals. Foremost among these are building a more competitive
North American economy and improving Mexico's investment
climate. On the former, his team made clear their
understanding that NAFTA, while a great success, cannot be
relied on by itself to face the challenges of an increasingly
globalized world economy. Sojo applauded the textiles
cumulation agreement between the U.S. and Mexico that will

allow Central American countries to ship duty-free to the
U.S. garments made with Mexican inputs, and vice versa. He
wants to expand such agreements (or use other mechanisms that
can loosen rules of origin) to new sectors (like electronics)
and new free trade partners we have, or hope to have, in
common (such as Colombia). The Ambassador indicated that we
would be willing to hear out the GOM's ideas on what other
sectors might be ripe for such arrangements, but noted that
we could expect opposition from vested interest groups with
strong lobbies in Washington.



5. (SBU) Another area Sojo emphasized as key to improving
trade flows in North America was the harmonization of the
three countries' regulatory regimes. The Ambassador agreed,
and added that improving the functioning of our border system
was also critical. He agreed to share with Sojo's team a
list of simple ideas for facilitating the cross-border flow
of legitimate goods, and to look jointly at the issue of
border bridges, many of which are becoming ever-more

MEXICO 00000306 002 OF 002


congested bottlenecks. The two agreed to tee up these issues
for Secretary Gutierrez's February 1 visit to Mexico City and
the SPP ministerial in Toronto later in the same month.
While professing Mexico's strong commitment to the SPP, Sojo
admitted that no one has yet been identified as the overall
GOM lead coordinator, a position crucial to ensuring that the
work of the Security and Prosperity pillars meshes
coherently. He attributed this to the fact that the
transition process is still not complete. Sojo has
personally urged Juan Camilo Mourino Terazo, the policy chief
in the Office of the Presidency, to take up this role, at
least through the February ministerial, but Camilo has made
no commitment.

And an Improved Investment Climate


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





6. (SBU) Sojo predicted that President Calderon will use his
attendance at the World Economic Forum in Davos to project
one principal theme -- Mexico, unlike some of its Latin
American neighbors (e.g., Venezuela, Bolivia, and Ecuador),
is not interested in turning back the clock to state-run
economies. To the contrary, Mexico's doors are wide open to
foreign investment, and the GOM will work hard to improve
further the country's investment climate, particularly given
the challenge posed by China, which in recent years has
attracted more and more money and manufacturing capacity.
The Ambassador and DCM noted that most U.S. investors paid
close attention to the following two areas: 1) security and
the rule of law and 2) competition in crucial sectors like
telecoms. Sojo took both these points onboard, and with
regard to opening up key sectors to more competition, said
that President Calderon would "no doubt" take on some of
Mexico's more egregious monopolies and oligopolies within his
first three years in office, even though these would be tough
political fights. The Ambassador suggested that Calderon
could also use his time in Davos to plug for re-engaging on
the stalled Doha trade negotiations, one of President Bush's
priorities.

Bilat Issues - Trucking, Corn, Poultry, Standards Bodies


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



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





7. (SBU) Sojo was enthusiastic about the planned upcoming
announcement of the U.S. cross-border trucking pilot program,
noting compliance with this long overdue NAFTA commitment
would provide a boost to President Calderon's political
standing, but acknowledged that similar plans had been
scuppered at the last minute before. With regard to Mexico's
obligation to open its corn and bean markets at the start of
2008, he said it would be fully honored, but would require
delicate handling due to the almost religious significance of
corn to Mexico's cultural identity. There was also
discussion of the steps that agricultural officials from both
sides need to take to ensure that Mexican chicken breasts
meet U.S. health standards and can be exported north --
currently, the ball is in the court of the Mexican poultry
industry, which still needs to pass muster with its own
regulators. The U.S. side raised the pending applications of
two U.S. standards certification organizations that still
have not been approved to operate in Mexico, despite having
complied with all the requirements. Finally, referring back
to how Mexico can attract more investment, the Ambassador
noted that quick resolution of outstanding disputes with U.S.
investors would send a clear signal that the GOM is indeed
serious about improving the climate here for foreign business.


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