SCENESETTER FOR THE OCTOBER 14-16 VISIT OF WHA P/DAS KELLY

UNCLAS SECTION 01 OF 02 MONTERREY 000455

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: OVIP PGOV ECON SNAR MX
SUBJECT: SCENESETTER FOR THE OCTOBER 14-16 VISIT OF WHA P/DAS KELLY
TO MONTERREY

REF: A) MONTERREY 10; B) MONTERREY 194; C) MEXICO 2948; D) MONTERREY 433; AND E) MONTERREY 438

MONTERREY 00000455 001.2 OF 002



1. (SBU) SUMMARY. The Consulate General of Monterrey
enthusiastically welcomes your October 14-16 trip to Monterrey,
the business hub of northern Mexico. We are certain that your
participation in the International Conference on Philanthropy
and the Non-Profit Sector will advance collaborative work on key
areas such as education, economic development and poverty
reduction. You will find that the state of Nuevo Leon is ahead
of the curve in many economic and social indicators, but it
still faces, as does the rest of Mexico, daunting security
issues and lagging international economic competitiveness.
END SUMMARY.



NCCEP Conference




2. (SBU) The International Conference on Philanthropy and the
Non-Profit Sector ('conference') seeks to promote partnerships
among business, charitable foundations, civil society
organizations and government, in the spirit of the July 2007
White House Conference on the Americas, hosted by President Bush
in Washington DC. The Monterrey conference will bring together
U.S. and Mexican business executives and civil society leaders
to share best practices and form new alliances to make an impact
in areas such as health, education, economic development, and
the environment. To fund and coordinate projects in these
fields throughout Mexico, participants will also be invited to
establish an international donors' group. Although there are
impressive NGOs in Mexico, the sector would be stronger if it
were not hamstrung by burdensome regulations and (legitimate)
donor concerns about transparency. The conference is
co-sponsored by the Mexican chapter of the National Council for
Community and Education Partnerships (NCCEP),a U.S.-based NGO,
the Consulate General of Monterrey, the state of Nuevo Leon, and
the federal Ministry of Public Education.



Northern Mexico Relatively Developed




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 (see reftel A). 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, but the region has sought to move into
higher value goods and services as well. Nuevo Leon is also a
leader in other fields, such as renewable energy. The state
uses garbage from landfills to produce biogas, which is in turn
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) President Calderon remains broadly popular,
particularly in the state of Nuevo Leon. The PRI and PAN
parties vie for dominance in northern Mexico, and the leftist
PRD is very weak. In Nuevo Leon, Governor Jose Natividad
Gonzalez Paras 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 Paras has built substantial infrastructure in
Nuevo Leon, and an important remaining goal is to promote the
Colombia railroad bridge to connect Monterrey to Texas through
the narrow 13.5 km border that Nuevo Leon shares with Texas.
Governor Gonzalez Paras 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
three U.S. academic institutions.




5. (SBU) Nuevo Leon has been a leader in educational reform,

MONTERREY 00000455 002.2 OF 002


one of the keys to generating more and better jobs for Mexican
citizens. Mexico does a poor job educating its children, as
they were dead last in the OECD in mathematics, reading and
science in the latest test in 2006. However, Nuevo Leon's test
scores have started to improve, showing gains in all three
areas. The state has started to test prospective teachers and
has provided classrooms with additional technology (reftel B).
Nationally, President Calderon, his Secretary of Education
Josefina Vazquez Mota and the head of the SNTE teachers union,
Elba Esther Gordillo have agreed on an 'alliance for quality' to
implement teacher testing on a national basis. However, the
prospective teachers did very poorly on the first round of tests
(two/thirds failed the test),and there are teachers strikes in
several states protesting the teacher testing and claiming the
right for teachers to inherit or sell their teaching positions
(see reftel C).




6. (SBU) Although low by Mexican standards, an estimated 1
million people in Nuevo Leon live in poverty (24.6% of the
population). Gonzalez Paras has implemented a Council for
Social Development which has unpaid civil society advisors, and
focuses on the elderly, the disabled, and mobile social services
units. A recent survey of the poor found that 80% expressed
general satisfaction with food, housing and public services.
Charitable NGOs, including religious ones, also provide housing
and services to the poor and disadvantaged (see reftel D). You
will visit one such NGO, Back-to-Back Ministries/Casa Hogar
Douglas, which provides housing and education to orphans and
homeless children.



Troubles Loom over the Horizon: Economic and Security Issues




7. (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. Moreover,
remittances from Mexicans living in the United States to their
relatives in Mexico have already declined by 12% compared to a
year ago. Mexico is also concerned that tighter global credit
markets will further depress Mexican economic growth in the near
term. In the longer run, Nuevo Leon worries about the
intensifying international competition in manufacturing
production 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.




8. (SBU) As in all parts of Mexico, security overshadows all
other issues in Nuevo Leon. In a recent poll by the leading
newspaper El Norte, 68% of the public thought that security was
the most important issue, and only 61% felt secure, a decline
from79% only three years ago. Previously Monterrey had been
seen as a safe city, where drug cartels would operate but
without disruptive violence. However, the rules have changed as
the two main Mexican drug cartels, the Gulf Cartel and the
Sinaloa Cartel, 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 number has declined in 2008 as drug violence has
moved to Cuidad Juarez, Tijuana and other Mexican cities.
However, kidnapping has risen in Nuevo Leon, along with
concomitant public frustration at 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. For their part, state and
local authorities have caught several kidnapping gangs and
responded with plans to provide more police training and clean
up the police forces (see e.g. reftel E). However, even the
government of Nuevo Leon admits that over 50% of the municipal
police forces have been infiltrated by the narcotics cartels, so
the fight for public security will be long and difficult.
WILLIAMSON