MEXICO ECONOMIC NOTES, FEBRUARY 10 - FEBRUARY 16

UNCLAS SECTION 01 OF 02 MEXICO 000777 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: MEXICO ECONOMIC NOTES, FEBRUARY 10 - FEBRUARY 16 Summary -------------- ¶1. (U) Missouri Governor Matt Blunt promoted the Kansas City Smart Port on a visit to Mexico City February 12. The Embassy worked successfully to ensure Mexico included petroleum products when it approved a third track of NAFTA rule changes this week, thereby facilitating trade worth roughly USD 20 billion. Calderon nominated Dr. Carlos Hurtado, former Undersecretary of Spending, as one of the Bank of Mexico's four deputy governors, and announced creation of internal audit committees to oversee procurement decisions of Pemex and the electricity monopoly, CFE. The Supreme Court of Justice ruled that international treaties including trade agreements like NAFTA take precedence over federal and state laws. Economy Secretary Sojo said his Secretariat would create a new organization for Mexican trade SIPDIS promotion. The Secretary of the Chamber of Deputies Finance Committee does not expect that fiscal reform will be debated in the Chamber before August. And, despite renewed calm, some striking teachers are still causing unrest in Oaxaca. End summary. Governor of Missouri visits Mexico -------------- ¶2. (U) Governor Matt Blunt of Missouri headed a trade delegation to Mexico City on February 12. During the visit he met with Secretaries Carstens (Finance),Tellez (Communications and Transport),Espinosa (Foreign Relations) and President Calderon. Accompanying him was a delegation of businessmen from the Kansas City Smart Port. While the meetings were mainly to promote the Smart Port facility with the new administration (see septel),the governor also spoke with Calderon about promoting Missouri investment projects in Mexico and the mutual support for expanding the Port of Lazaro Cardenas in the state of Michoacan. During the visit, Gov. Blunt also participated in the signing ceremony between Kansas City Southern de Mexico and the State of Michoacan for an 80 million USD inter-model terminal at the port. At the ceremony Kansas City Southern de Mexico announced additional investments of 300 million USD. NAFTA Rule of Origin Changes Finalized -------------- ¶3. (U) As part of the ongoing process of simplifying NAFTA rules of origin, which determine whether a particular product qualifies for preferential NAFTA treatment, the three North American governments have agreed on a Track Three package of products for which the rules of origin will be changed. These changes will make it easier for American, Canadian, and Mexican exporters to take advantage of NAFTA's benefits. The total amount of trade covered by these changes will be roughly USD 67 billion, USD 20 billion of which will be accounted for by the inclusion of a variety of petroleum products. Earlier this week, the Embassy was active in ensuring that the Mexican government approved inclusion of these petroleum products. These changes must still be approved by the Mexican Senate. Previous sets of changes were implemented in 2002 ("the seven"),2004 (Track One),and 2006 (Track Two),covering a total trade value of USD 39 billion. The three countries are working on a Track Four set of changes. Hurtado Nominated to Central Bank Board -------------- ¶4. (U) President Calderon on February 9 nominated Dr. Carlos Hurtado Lopez, a former Ministry of Finance Undersecretary of Spending, as one of the Bank of Mexico's four deputy governors. If ratified by Congress, Hurtado would replace MEXICO 00000777 002 OF 002 Jesus Marcos Yacaman, whose eight-year term ended December 31, 2006. Hurtado has an economics degree from the Autonomous Technological Institute of Mexico (ITAM) and a doctorate in economics from the University of Chicago. Calderon Announces New Audits for Energy Sector Contracts -------------- -------------- ¶5. (U) President Calderon announced creation of internal audit committees to oversee procurement decisions made by Pemex and the Mexican Electricity monopoly, CFE. In making the announcement, Calderon said that fighting corruption is essential for a competitive economy. Pemex and CFE together account for 48 percent of Mexican government procurement. Supreme Court Rules for NAFTA Ahead of Domestic Law -------------- -------------- ¶6. (U) Regarding 14 injunctions filed by 12 companies against Mexico's General Import Law, the Ministers of the Supreme Court of Justice ruled six to five that international treaties including trade agreements like NAFTA, were above federal and state laws, with the exception of the Constitution. The majority determined that international treaties such as NAFTA are the equivalent to a "supreme law" and should be respected at all levels of the government as if they were the Constitution itself. New Mexican Trade Promotion Organization -------------- ¶7. (U) Economy Secretary Sojo announced that his Ministry would create a new organization for Mexican trade promotion during the first quarter of 2007 that will take on some of the functions of the current Bancomext,the Mexican export credit bank. Deputies to Debate Fiscal Reform in August -------------- ¶8. (U) Antonio Soto, Secretary of the Chamber of Deputies Finance Committee, told the press he expected Congress would work on fiscal reform during August 2007 as he did not believe there would be sufficient time during the current session, which ends in April. Oaxaca: Not All Quiet with the Teachers' Union -------------- - ¶9. (SBU) Although civil unrest in Oaxaca has improved measurably (Mexico 719),the situation for the teachers' union remains unstable. As a result of the Oaxaca protests, membership in the national teachers' union (SNTE) split. In December 2006, those teachers disposed to work with besieged governor Ulises Ruiz broke away from the existing local 22 with the support of the union's national leadership forming their own local, 59. SNTE members in local 59 work in 2000 of Oaxaca's schools. On February 14, section 22 members staged a protest which forced the closure of schools with local 59 teachers. The local 22 teachers also protested in front of the office of Oaxaca's Lieutenant Governor. Visit Mexico City's Classified Web Site at http://www.state.sgov.gov/p/wha/mexicocity GARZA