MEXICO ECONOMIC NOTES, FEBRUARY 16 - FEBRUARY 23

UNCLAS SECTION 01 OF 03 MEXICO 000936

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STATE FOR EB/ESC MCMANUS AND IZZO
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E.O. 12958: N/A
TAGS: ECON ECPS EFIN ELAB MX PGOV PREL
SUBJECT: MEXICO ECONOMIC NOTES, FEBRUARY 16 - FEBRUARY 23

Summary
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1. (SBU) The Chamber of Deputies approved a bill that
provides for up to 40 years in prison for those convicted of
financing terrorist activities. President Calderon tried to
address criticism of the January 2008 final opening of the
agricultural market under NAFTA by extending and expanding
farm subsidies. Secretary of Economy Eduardo Sojo reported
that foreign direct investment in Mexico dropped 3.6 percent
from 2005 to 2006. Felipe Munoz, who worked with the USG as
chief of Mexican Attorney General's specialized unit for
investigation of IPR crimes, was promoted to Deputy
Prosecutor General for Federal Crimes. Telecom regulator
Cofetel announced that it would not support creation of a
third national broadcasting network by auctioning regional
frequencies as a package. The North American Development Bank
has announced a USD 8.9 million loan to the city of Nogales.
DaimlerChrysler representatives told emboffs that Mexico
would gain from auto industry restructuring. The Governor of
Coahuila accused Former President Fox of urging him to accuse
a controversial labor leader of responsibility for workers in
2005's Pasta de Conchos mine disaster.

Criminalizing Terrorism Financing
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2. (U) The Chamber of Deputies on February 20, 2007 approved
a bill that provides for up to 40 years in prison for those
convicted of financing terrorist activities. If passed, the
law would establish the crimes of "terrorism financing" and
"international terrorism." Mexico currently does not have a
specific law criminalizing financing and support of
terrorists and terrorist organizations. The draft law would
enable the Attorney General's Office (PGR) to provide
information to federal government authorities for
investigations. It also would authorize prosecutors to track
and obtain information from finance and tax authorities on
suspicious transactions. The bill now goes to the Senate,
which approved a similar proposal during last year's session.
(See septel).

Calderon Extends Farm Subsidies
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3. (SBU) Facing increasing political opposition to the
January 2008 final opening of the agricultural market under
the North American Free Trade Agreement (NAFTA),President
Calderon announced that the program of subsidies for Mexican
farmers (PROCAMPO) will be extended and expanded. The program
had been set to expire in 2008. Calderon's government also
announced its plan for using the almost USD 700 million that
the Mexican Congress approved for supporting the corn, bean,
sugar, and milk sectors (the four sectors that will be fully
opened to U.S. and Canadian imports next January 1). Roughly
USD 500 million will go to promoting domestic production of
those crops, and another USD 200 million will beef up
Mexico's shared risk fund for agriculture. (See septel.)

FDI Down in 2006
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4. (U) Economy Secretary Sojo announced that Mexico received
USD 18.9 billion in foreign direct investment (FDI) during
2006, a 3.6% drop from 2005's USD 19.6 billion. Sojo
attributed the decrease to insecurity brought about by
election-related protests that plagued the country.
Nevertheless, the USD 18.9 billion figure is likely to be
readjusted as companies continue reporting 2006 investments.
Even with the delayed reports, FDI for 2006 is not expected
to end above the Mexican government's goal of USD 20 billion,
but may come closer to 2005 investments.

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New Deputy Prosecutor for IPR
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5. (U) The Attorney General's Office (PGR) finally filled
its last Deputy Prosecutor General slot. Felipe Munoz, who
had previously been the chief of PGR's specialized unit for
investigation of IPR crimes, is the new Deputy Prosecutor
General for Federal Crimes. In this capacity, he will
supervise not only his old IPR unit, but also the PGR units
responsible for investigating tax evasion, financial crimes,
environmental crimes, and crimes committed by government
officials. (See septel on upcoming meetings with Munoz and
Gonzalez.)

Cofetel: No National Network Frequency Auction
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6. (SBU) Mexico's telecommunications regulator Cofetel
announced February 22 that an upcoming auction would not
include auctioning regional frequencies as a package, which
would have facilitated creation of a third national
broadcasting network. Cofetel Chairman Hector Osuna noted
that companies that currently hold radio and television
frequencies will not be permitted to participate in the
upcoming auction; although, participants purchasing separate
regional frequencies could form a national network through
joint-ventures. Commissioner Eduardo Ruiz Vega added that
Cofetel opted not to auction regional frequencies as a
package in order to avoid creating a national network under
foreign control. Osuna meets next week with FCC Commissioner
McDowell.

NADBank Announces Loan
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7. (U) The North American Development Bank has announced
that the city of Nogales in the Mexican state of Sonora would
receive a loan of USD 8.5 million to help finance an air
quality project to improve street paving and traffic flows.
Currently in Nogales, 250 kilometers of its 385 kilometers of
streets are not paved. The Border Environment Cooperation
Commission (BECC) certified this project on July 30, 2004.

DaimlerChrysler: Mexico Benefits from Detroit Downsizing
-------------- --------------


8. (SBU) Luis Gomez Suarez, Director of Governmental
Relations at DaimlerChrysler, told Econ and Commercial
Officers that Mexico could benefit greatly from the
restructuring being done by the Big Three auto makers. He
said that DaimlerChrysler wants to increase its sourcing
outside of North America, and moving to Mexico would be of
greater benefit than moves to South America or Asia. He
mentioned the possibility of having President Calderon visit
Detroit to promote Mexico as promising location for increased
investment.

Governor Accuses Fox Over Mine Disaster
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9. (SBU) During a February 18 national radio interview,
Humberto Moreira, the PRI Governor of Coahuila, accused
former President Vicente Fox of pressing him in 2006 to
falsely accuse a controversial labor leader of responsibility
for workers in a mining accident. According to the Governor,
PAN President Fox not only wanted him to accuse the labor
leader but to arrest him as well. Moreira says he refused
the President's request; however, it appears he said nothing
about the presidential pressure for an entire year. In
commenting on the Moreira's accusations, a senior official in
the national office of the CTM labor confederation remarked

MEXICO 00000936 003 OF 003


that the Governor's allegations are impossible to prove. That
said, the CTM official averred, allegations do underscore the
fact that very few people in Mexico are willing to seriously
take on a sitting president.


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