MEXICO ECONOMIC NOTES, JANUARY 25 - FEBRUARY 1

UNCLAS SECTION 01 OF 04 MEXICO 000548

SIPDIS

SIPDIS

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STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA, EAP/CM, EAP/EP
STATE FOR EB/ESC MCMANUS AND IZZO
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/ARUDMAN
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STATE PASS TO FEDERAL RESERVE (CARLOS ARTETA)
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E.O. 12958: N/A
TAGS: ECON ECPS EFIN ELAB ENRG MX PGOV PREL
SUBJECT: MEXICO ECONOMIC NOTES, JANUARY 25 - FEBRUARY 1

REF: MEXICO 483

Sensitive but unclassified, entire text.

Summary
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1. (SBU) Commerce Secretary Gutierrez discussed
criminalization of
commercial disputes, the current tortilla crisis, conformity
assessment,
competitiveness, the Security and Prosperity Partnership
(SPP),and border
cooperation with Secretary Sojo of Economy. Gutierriez
learned of a GOM
interest in U.S.-Mexico Open Skies talks in 2008 from
Secretary Tellez of

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Communications and Transport. Tellez raised preclearance in
Cancun and
making the Tijuana airport binational. On telecoms,
Gutierrez received a
realistic assessment of the difficulties liberalizing the
sector. Secretary
Kessel told industry insiders Mexico would seek technical
associations with
foreign firms to help develop deep water oil production, but
stopped short of
calling for constitutional change. Secretary Sojo signed a
Customs
Cooperation Agreement with USTR Schwab in Davos January 26.
End Summary.

Gutierrez and Sojo Discuss Tortillas, Disputes, Border
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2. (SBU) Commerce Secretary Gutierrez met Mexican Economy
Secretary Eduardo

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Sojo February 1. Sojo said that the GOM is investigating
what may or may not
have happened to raise corn and tortilla prices in Mexico,
but did not expect
a U.S. firm to be singled out. Gutierrez raised GE/NBC's
problems with TV
Azteca in the context of U.S. concerns over the
criminalization of commercial
disputes. The two secretaries also agreed to set up a
bilateral working
group to develop a border agenda in the next few months.
Gutierrez and
Calderon also met to discuss a number of bilateral commercial
issues.
Complete reporting cables will follow.

U.S. - Mexico Aviation Issues
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3. (SBU) Secretary of Communications and Transportation Luis
Tellez met with
Secretary of Commerce Carlos Gutierrez on February 1. In

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response to
Gutierrez asking whether the Mexicans would be interested in
such talks,
Tellez addressed the idea of negotiating an Open Skies
agreement between the
United States and Mexico, saying that the GOM could be ready
to discuss the
agreement in 2008. Tellez said that the first step toward
Open Skies would
be the privatization of Aeromexico, which should take place
in 2007, and to
see what effects privatization has on the aviation market in
Mexico. Tellez
and Under Secretary of Transportation Manuel Rodriguez also

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raised the idea of establishing CBP preclearance in Cancun, an
issue that former president Fox and President Bush discussed in

2006. Tellez mentioned Mexico's hope to make the Tijuana airport
binational, though he noted that Tijuana would need a new airport
terminal to make this more realistic.

Mexico Telecom Topics
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4. (SBU) In the same meeting, Tellez expressed the Calderon
administration's commitment to encouraging competition in the
telecom market, but said that it is a "very hard goal" to meet.
Under Secretary Rafael del Villar told Secretary Gutierrez that
Mexico has a long way to go to match US telecom rates and that
Mexico must work through foreign investment restrictions in this
sector, but that the SCT faces difficult political issues. Tellez
and del Villar also mentioned the current debate between the SCT
and Cofetel, saying that Cofetel "is neither as pro-competitive
nor as independent as it should be."

Energy Secretary:Foreign Tech Associations
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5. (SBU) In a speech to energy industry representatives in
Mexico January 31, Energy Secretary Georgina Kessel emphasized that
Mexico was interested in developing "technical associations" with
foreign companies to develop deep water oil production, but when
asked whether this meant that the Calderon administration would
seek a change to Article 27 of the Mexican Constitution, she
demurred. On the same program, Carlos Morales Gil, CEO of Pemex
Exploration and Production rejected reports over the past two
weeks that the Cantarell field was declining faster than expected
and presented a production forecast showing the field declining
by 13 percent annually through 2015.

A Big Step Toward Textiles Cumulation
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6. (SBU) U.S. Trade Rep Sue Schwab and Mexico's Secretary of
Economy Eduardo Sojo took a step toward implementing the textiles
cumulation provisions in the U.S.-Central America Free Trade
Agreement (CAFTA) by signing a Customs Cooperation Agreement
January 26 in Davos. Cumulation would allow Central American
apparel makers who use Mexican textile inputs to still qualify for
duty-free export to the U.S. market under the CAFTA. The Customs
Cooperation Agreement would allow customs officials to perform
inspections to verify the origin of the textile inputs of CAFTA
apparel exports. Before these cumulation provisions can take effect,
Mexico must first reach an agreement

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with the Central Americans that would also permit them to
export duty-free to Mexico apparel using U.S. textile inputs.
Mexican and Central American trade negotiators are meeting
January 30-31 to work out just such an agreement. The Secretary
of Economy issued a press release (echoed in a number of news
publications) declaring that cumulation would be a major boost
for Mexico's textiles sector as it faces rising competition from
Asia in general and China in particular. See upcoming septel for
a broader look at the impact of China's economic rise on Mexico.

Union Leader Suspicious of U.S.
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7. (SBU) According to Francisco Hernandez Juarez, the head
of the Telephone Workers union and a leader of the National
Workers Union (UNT),many of the major unions Mexico are
suspicious of the US Embassy and have preferred to keep their
distance from Mission Mexico. Hernandez attributed this attitude
to these organizations' belief that the USG is not interested
in worker rights. He also added that many union members and
ordinary Mexicans believe that last year's approval by congress
of the construction of a wall along parts for the U.S./Mexico
borders is an indication that the U.S. is not really interested
in good neighborly relations with Mexico.

Remittances Break Record
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8. (SBU) Remittances to Mexico reached USD 23,1 Billion in
2006 exceeding last years USD 20 Billion figure. According to an
Interamerican Development Bank (IDB) survey 73 percent of the 12
million Mexicans living in the U.S. sent funds to Mexico. The
average Mexican migrant earned USD 900 per month, 6 times more
than he earned before migrating.

2006 Not a Good Year for Mexican Tourism
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9. (SBU) Mexico was the only country in Latin America to
experience a decrease in international tourist, according to figures
published last week by the World Tourism Organization. Secretary of
Tourism Rodolfo Elizondo confirmed that 550 thousand fewer tourist
visited Mexico last year than in 2005. Political upheaval caused
by the elections and Oaxaca, fallout from Hurricane Wilma, and the
dollar's weakness created a perfect storm to reduce the number of
travelers. The Mexican government is optimistic that the number of
tourists will rebound in 2007. They are likely right if WHTI
continues to have a miniscule effect and the political situation
remains under control.


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Calderon Pounds Pavement for European Investment
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10. (SBU) Calderon completed a 6-day trip to Europe this
week with stops in Berlin, Madrid, London and the World Economic
Forum in Davos, Switzerland. The overarching theme of Calderon's
European trip was investment promotion. In each stop he met with
multinational business leaders and promoted Mexico as a safe place
for foreign investment. The Economist study naming Mexico as
the 5th largest world economy by 2040 was repeatedly cited
and Calderon assured investors that his administration would
continue the development advances necessary to make it a reality.
See (reftel) for political analysis and media reaction to the visit
and upcoming septel for the investment message.

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