Identifier
Created
Classification
Origin
08MONTERREY100
2008-02-27 22:25:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Monterrey
Cable title:  

SAN LUIS POTOSI GROWING ECONOMICALLY BUT NOT ENOUGH TO

Tags:  PGOV EAID ECON KCRM EIND EINV SMIG SNAR SOCI MX 
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DE RUEHMC #0100/01 0582225
ZNR UUUUU ZZH
P 272225Z FEB 08
FM AMCONSUL MONTERREY
TO RUEHC/SECSTATE WASHDC PRIORITY 2734
RUEHME/AMEMBASSY MEXICO PRIORITY 3621
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHMC/AMCONSUL MONTERREY 8099
UNCLAS SECTION 01 OF 03 MONTERREY 000100 

SIPDIS

SENSITIVE
SIPDIS

PASS TO USTR

E.O. 12958: N/A
TAGS: PGOV EAID ECON KCRM EIND EINV SMIG SNAR SOCI MX
SUBJECT: SAN LUIS POTOSI GROWING ECONOMICALLY BUT NOT ENOUGH TO
PROVIDE NEEDED JOBS

MONTERREY 00000100 001.2 OF 003


UNCLAS SECTION 01 OF 03 MONTERREY 000100

SIPDIS

SENSITIVE
SIPDIS

PASS TO USTR

E.O. 12958: N/A
TAGS: PGOV EAID ECON KCRM EIND EINV SMIG SNAR SOCI MX
SUBJECT: SAN LUIS POTOSI GROWING ECONOMICALLY BUT NOT ENOUGH TO
PROVIDE NEEDED JOBS

MONTERREY 00000100 001.2 OF 003



1. (SBU) Summary: In a February 12 meeting with San Luis Potosi
Governor Marcelo de los Santos Fraga (PAN),the Governor told
the Consul General that the state's current economic situation
is strong and growing and projected a 50% increase in jobs by
the end of his administration in the summer of 2009. The
Secretary of Economic Development was equally upbeat, noting

SIPDIS
that the state is growing faster than expected. However,
meetings with media leaders and the state's largest university
painted a different picture, one of concern over the lack of
professional opportunities for young people and the growing gap
between rich and poor. During their February 12-14 visit to San
Luis Potosi, the CG and EconOff observed that foreign investment
opportunities for economic growth in the state are increasing,
but remain limited. Meetings with security officials also
indicated that, although the state remains relatively free of
narco-violence and activity, common crime appears to be on the
rise. The growing concern is that the state's strategic central
location and role as a transit point will inevitably lead to an
increase in organized crime. Key security officials are taking
a proactive role to prevent this and requested U.S. government
support, specifically for more training and greater cooperation
with U.S. law enforcement agencies. End Summary.


2. (U) The state of San Luis Potosi (SLP) is located in the
north central part of Mexico. Its capital of the same name sits
approximately at the midpoint of a triangle formed by Monterrey,
Guadalajara and Mexico City. The majority of the population
lives within the metropolitan area of the capital (which has an
approximate population of two million); the total state
population is 2.5 million. SLP is divided into four regions and

has 58 municipalities. Although it began as a mining
settlement, today the capital is more of an industrial city and
a distribution point for foreign and domestic merchandise.
Agriculture and ranching continue to be important industries,
and there is a growing tourism industry. Governor de los Santos
noted that SLP's historic downtown center may soon be named a
UNESCO World Heritage site.


A Younger Version of Monterrey
--------------


3. (U) San Luis Potosi is strategically placed to be a transit
point in all directions. It is at a mid-way point between
Monterrey and Mexico City. In addition, the current
administration of Governor de los Santos has invested
considerably in expanding and improving infrastructure. For
example, a new road from Mazatlan to Tampico that cuts through
SLP has been completed. Governor de los Santos reported that
there is another new road in the works from SLP to Matamoros
that will cut the transport time to the border to five hours,
down from the current eight. The airport is also being
expanded. According to Carlos Barcena Pous, Secretary of the
SLP Economic Development Agency (SEDECO),65% of all cargo
passes through SLP. Barcena cited SLP's economic advantages as
its location, combination of infrastructure and investment on
both the public and private side, and its people.


4. (U) Barcena reported that 35% of SLP's GDP is industry-based,
with a 2007 GDP of 16.6 billion USD. Its exports in 2007
totaled 1.72 billion USD and FDI from 1999-2007 was 935.6
million USD. At the end of 2007, SLP's growth rate was 4.3%,
higher than the national growth rate. That put SLP into the top
8 among all Mexican states. In manufacturing, it was ranked 4th
place with a growth rate of 5.2%. Barcena noted that SLP is the
5th or 6th largest industrial city in Mexico, with six
industrial parks and hundreds of foreign companies. In
comparison, Monterrey's 2007 GDP was 54.5 billion USD and its
FDI in the last two years was over 3 billion USD. It is no
wonder then that Barcena described SLP as "like Monterrey in the
70s."


5. (U) A visit to the Cummins factory in SLP illustrated some of
the reasons for the state capital's growth and potential to
attract more foreign investment. Cummins is a U.S. company that
specializes in manufacturing and repairing diesel engines. It
is headquartered in Columbus, OH and has a presence in 160
countries. It opened a plant in SLP in 1980 and currently
employs 1,200 workers. As described by Miguel Kindler, Director
of Operations, the Cummins SLP plant is a success story. It
appears to have everything it needs in terms of human,
electrical and water resources.


6. (SBU) Despite these positive economic indicators, SLP is not
necessarily where it should be in terms of economic development.
Given all the advantages cited by government officials, SLP

MONTERREY 00000100 002.2 OF 003


should be on par with Monterrey, which it sees as its main
competitor. Yet, SLP appears to be in a much earlier stage of
development. The fact is, even though SLP may be a strategic
transit point, it cannot compete with Monterrey's proximity to
the border. Another drawback is the lack of skilled labor in
SLP. An executive of Rockwell recently reported that the
company had considered opening a plant in SLP but chose
Monterrey instead. The reason he gave was that Monterrey has a
large engineering base sufficient to support a high-tech
investment, while SLP does not. The executive also noted that
SLP might be appropriate for low-tech manufacturing, but when it
came to high-tech, Monterrey is really the only choice.

Government Downplays Real Issues
--------------


7. (SBU) Governor de los Santos, whose six-year term will end in
summer 2009, reported that 160,000 new jobs have been created
during his administration and that unemployment will have
dropped 50% by the end of it. He stated that "only those who
don't want to work don't have jobs." SEDECO's Barcena also
reported that there are plenty of job opportunities in SLP. He
claimed that SLP is growing so fast, faster than expected, that
"we can't stop it."


8. (SBU) Yet, non-government officials painted a less rosy
picture. In a roundtable discussion with local media
representatives, each one cited a shortage of jobs as the number
one challenge facing SLP. They noted that although the local
universities are producing plenty of accountants, lawyers, and
other traditional professions, these students are often unable
to find employment within their fields upon graduation. Only IT
graduates are exempt from this problem.


9. (SBU) The media reps also noted that outside of the capital
the situation is even worse, and is greatly contributing to
migration. One reporter stated that, essentially, most young
people have two options: migration to Nuevo Leon or to the U.S.
The issue of migration was down played by government officials.
Both Governor de los Santos and Barcena cited Zacatecas,
Michoacan and Durango as states with high migration rates. They
never mentioned migration as an issue of concern for San Luis
Potosi. Yet, according to figures from the National Population
Council (CONAPO),SLP is the Mexican state with the 8th highest
rate of migration to the U.S.


10. (SBU) The lack of job opportunities was also noted by Mario
Garcia Valdez, Rector of Universidad Autonoma San Luis Potosi
(UASLP). UASLP is the largest, and only public, university in
SLP. There are currently also 40 private universities. UASLP
has 17,000 students in the capital and 30,000 throughout the
state. Garcia was very frank in stating that the university's
students have a hard time finding employment upon graduation,
again with the exception of IT graduates. He noted that UASLP
is instead encouraging students to pursue self-employment
options. Garcia also pointed out that the division between rich
and poor is a growing concern. Specifically, the poor continue
to have fewer opportunities for education, work and access to
health care compared to the well-connected. He did not,
however, specify ways in which the university or the state
government are addressing this issue.

Security A Growing Concern
--------------


11. (SBU) Security in San Luis Potosi is relatively good, with
the overall number of reported drug-related executions near the
lowest for any state in Mexico. However, there are several
areas within the state that have seen a recent increase in
criminal activity, namely the Ciudad Valles area in the eastern
portion of the state and the capital city of San Luis Potosi.
It is important to note, however, that the lack of reliable
reporting of criminal incidents and other security issues makes
assessing the level of security in the state of San Luis Potosi
very difficult.


12. (SBU) The primary reason for the problems in Ciudad Valles
is its proximity to the port city of Ciudad Tampico, Tamaulipas
on the Gulf Coast, which is a major hub for cocaine and weapons
smuggling and is currently under the control of the Gulf Cartel.
Home invasions, robberies and petty crime are on the rise in
Ciudad Valles, with many of the victims coming from the local
business community. The state police explained that when the
federal government cracks down on the Gulf Cartel in Tampico;
the cartel members take refuge in Ciudad Valles, only an hour
drive west. From Ciudad Valles the next stop heading west is

MONTERREY 00000100 003.2 OF 003


the city of San Luis Potosi, and the proximity to Ciudad Valles
makes it an obvious second choice for cartel members to hide.


13. (SBU) The city of San Luis Potosi has also been faced with a
growth in petty crime as well as narco-violence; however this is
largely due to its strategic placement on several main transit
routes (Mex Hwy 57 and 63) which are critical trade corridors
from central Mexico to the northern border. As a result of
increasing international investment and urbanization, the city
has been growing in population and the police force has not been
able to keep up with the operational requirements.


14. (SBU) The state police force is growing its capabilities,
but remains very undermanned and lacks training. There are
approximately 1,000 state police who are operational on a daily
basis. The state police also have a force of 500 federal police
detailed to them to support operations, a recent and unusual
occurrence which came about as a result of the connections of
the new police commissioner.


15. (SBU) The majority of the leadership in the state police
force is new to the state, and was brought in from other states
under the new police commissioner Cesareo Carvajal. Carvajal
was the Director of Public safety for the state of Morelos, and
is a graduate of the FBI National Academy. Since his arrival to
San Luis Potosi, there has been at least one attempt on his
life, when a supposed cartel assassin shot multiple times into
what he apparently mistook for Carvajal's vehicle.
Notwithstanding this, Carvajal remains very proactive in his
attempts to improve the intelligence and operational
capabilities of the San Luis Potosi State Police, coordinate the
development of a 24 hour "911" call-in center, and develop
databases of intelligence on all incidents and persons of
interests operating in the state. Police analysts have also
begun to monitor major intersections and areas of concern within
the capital city via closed circuit television, as well as all
open sources reporting via radio, television and local
newspapers. Advanced training has been made available to a
fraction of the state police through the local federal police
academy, which is a large, well-designed facility.


16. (SBU) Carvajal requested the CG's assistance with securing
more U.S. government support. Specifically, he told the CG that
one of his police force's deficiencies is that with weapons
seizures his officers do not have the ability to trace the arms.
The CG offered to arrange a training with post ATF officials to
teach SLP officers how to collect the data necessary to begin a
trace. Carvajal also expressed an interest in expanding
cooperation with U.S. law enforcement agencies and emergency
services, such as the FBI and Los Angeles EMT. He proposed
hosting a training conference in SLP for Monterrey, Zacatecas,
Guadalajara and SLP security forces. Post is working to respond
to Carvajal's requests.


17. (SBU) While the efforts by the new police commissioner and
his staff are likely to have an effect in the city of San Luis
Potosi, outlying areas will likely continue to face major
problems maintaining security. Personnel shortages, training
deficits and corruption will continue to plague the police force
and have a negative effect on the gains made by the police.

Comment
--------------


18. (SBU) San Luis Potosi is clearly developing economically,
but continues to face long-standing issues that are difficult to
address -- such as the socio-economic divide. In addition, the
capital city's economic growth has yet to keep pace with the
number of graduating students, as well as those with lesser
education of working age, thereby contributing to the elevated
migration rates. The SLP government may be addressing these
issues, but did not specify how or to what extent. In addition,
the government's focus appears to be on further developing the
capital city with little attention being paid to the outlying
regions and municipalities where these problems are exacerbated.
On the other hand, the willingness of security officials to
take a preemptive and proactive approach to the overall security
situation within the state could help to enhance SLP as an
attractive option for both investors and tourists. Indeed, if
the level of narco-violence were to escalate in Nuevo Leon, San
Luis Potosi could potentially become the more attractive option.
WILLIAMSONB