SCENESETTER FOR VISIT OF USOAS AMBASSADOR HECTOR MORALES'S

1. (SBU) SUMMARY. The Consulate General enthusiastically
welcomes you to Monterrey, the business hub of Northern Mexico.
We are certain that your private sector and academic
interlocutors will be very interested to learn more about the
upcoming Summit of the Americas. ConGen Monterrey actively
promotes U.S. interests through each section and agency,
including an extremely busy consular section working to
facilitate business and personal travel, and a law enforcement
contingent that cooperates with Mexican authorities to interdict
narcotics trafficking and protect our Southern border.
Monterrey has a dynamic economy based on manufacturing large
consumer products, but faces long-term issues of increasing
international competition. The state of Nuevo Leon plans to
respond by is developing a knowledge-based economy and moving
into the production of higher value added goods. However,
Mexico' s most intractable problem, including here in Nuevo
Leon, remains security, as rival drug cartels fight over
lucrative trafficking routes, resulting in a drug executions,
kidnappings and public insecurity. END SUMMARY.





2. (SBU) ConGen Monterrey is a large consulate with 78 direct
hire U.S. employees, and home to eight other agencies, including
the Drug Enforcement Administration, the Federal Bureau of
Investigation, the Department of Homeland Security and the
Foreign Commercial Service. ConGen Monterrey is the second
largest Non-Immigrant Visa (NIV) post in Mexico and fifth
largest NIV post in the world. ConGen Monterrey also handles
approximately 50% of the worldwide demand for H2 visas for
temporary unskilled and agricultural workers. Law enforcement
is also an important focus of the Consulate, and DEA, FBI, DHS,
and ATF work closely with their Mexican counterparts to arrest
drug traffickers, dismantle the drug cartels, arrest fugitives
from the United States, track and stop the flow of illegal arms,
and protect our Southern Border from threat. In addition, the
Political and Economic Section and the Foreign Commercial
Service are engaged with the Mexican and American business
communities and work well with local political leaders.
Finally, our public affairs section conducts radio interviews
and sponsors speakers to present the USG perspective on
immigration and U.S.-Mexico foreign relations.





3. (SBU) A recent survey found that Monterrey is the most
economically competitive area of Mexico. Monterrey greatly
exceeds Mexican national averages for per-capita income and
Nuevo Leon continues to enjoy higher than average economic
growth. Monterrey has benefited from its proximity to the
United States, an excellent business climate, and a nucleus of
industrialized Mexican firms. There are strong economic ties
between the United States and Mexico, as Nuevo Leon continues to
attract large flows of foreign direct investment ($1.8 billion
from the United States in 2007) and the local American Chamber
of Commerce is vibrant, with over 300 members. Monterrey
continues to focus on manufacturing, particularly bulky consumer
items such as automobiles and domestic appliances, although the
region has sought to move into higher value goods and services.
Nuevo Leon is also a leader in other fields, such as renewable
energy. Nuevo Leon uses refuse from state landfills to produce
biogas, which is used to power 40% of public lighting in the
Monterrey municipal area. Although relatively poor by U.S.
standards, Nuevo Leon has one of the highest levels of education
in Mexico and one of the lowest percentages of poverty (24% of
the population).





4. (SBU) Despite these accomplishments, Nuevo Leon has concerns
with respect to its economic future. Mexico in general and
Monterrey in particular are closely tied to the U.S. business
cycle, and Monterrey could well be affected by reduced growth in
the United States, which will lower demand for Mexican exports.
To date Monterrey's economy remains strong, although it is
likely to slow down if exports to the U.S. decline. In the
longer run, Nuevo Leon is concerned about the intensifying
international competition in manufacturing from China and other
Asian countries and from lower cost CAFTA countries. Nuevo Leon
hopes to move to high value added industries such as software
design, aerospace, and biotechnology. However, these goals are
still in the future, as the great majority of Nuevo Leon's
economic might remains in manufacturing.





5. (SBU) President Calderon remains broadly popular,

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particularly in the state of Nuevo Leon. The PRI and PAN
parties vie for dominance in Northern Mexico, while the leftist
PRD is very weak. In Nuevo Leon, Governor Gonzalez is in the
last year of his six year term, and although he still has
respectable approval ratings, he has had trouble bringing a
number of his visionary plans to fruition. Governor Gonzalez
has built substantial infrastructure in Nuevo Leon, but an
important remaining goal is to promote the Colombia railroad
bridge to connect Monterrey to Texas through the narrow 13 km
border that Nuevo Leon shares with Texas. Meanwhile, Governor
Gonzalez has built a "City of Knowledge" industrial park near
the airport to promote innovation and high technology products.
The City of Knowledge houses government agencies, local and
international businesses and Mexican and U.S. academic
institutions.





6. (SBU) As in all parts of Mexico, security overshadows all
other issues in Nuevo Leon. Previously Monterrey had been seen
as a safe city, where drug cartels would operate but would not
engage in public violence. However, the rules have changed as
the various Mexican drug cartels have fought for control of the
lucrative drug shipping routes through Monterrey to the United
States. Monterrey suffered a record 107 drug executions in
2007, although that has declined in 2008 as drug violence has
moved to Cuidad Juarez and other Mexican cities. However, there
has been an increasing in kidnapping in Nuevo Leon, and public
frustration has boiled over given the inability of state and
local police forces to crack down on crime. As in Mexico City
and other cities, citizens in Nuevo Leon marched on August 30
demanding better public security. State and local authorities
have responded with plans to provide more police training, clean
up the police forces, and have caught several kidnapping gangs.
However, as the government of Nuevo Leon has admitted that over
50% of the municipal police forces are infiltrated by the
narcotics cartels, the fight for public security will certainly
be long and difficult.
WILLIAMSON