Identifier
Created
Classification
Origin
09MEXICO1145
2009-04-23 13:33:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Mexico
Cable title:  

Mexico Economic Weekly - April 20

Tags:  ECON EFIN ETRD ENRG ELTN EAIR PGOV SENV MX 
pdf how-to read a cable
VZCZCXRO7344
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #1145/01 1131333
ZNR UUUUU ZZH
R 231333Z APR 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 6223
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
UNCLAS SECTION 01 OF 04 MEXICO 001145 

SIPDIS
SENSITIVE

STATE FOR WHA/MEX, WHA/EPSC
STATE FOR EEB
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GWORD
TREASURY FOR IA
ENERGY FOR WARD, LOCKWOOD AND DAVIS

E.O. 12958: N/A
TAGS: ECON EFIN ETRD ENRG ELTN EAIR PGOV SENV MX
SUBJECT: Mexico Economic Weekly - April 20

UNCLAS SECTION 01 OF 04 MEXICO 001145

SIPDIS
SENSITIVE

STATE FOR WHA/MEX, WHA/EPSC
STATE FOR EEB
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GWORD
TREASURY FOR IA
ENERGY FOR WARD, LOCKWOOD AND DAVIS

E.O. 12958: N/A
TAGS: ECON EFIN ETRD ENRG ELTN EAIR PGOV SENV MX
SUBJECT: Mexico Economic Weekly - April 20


1. (U) The Mexico Economic Weekly supplements reporting from
Mission Mexico Consulates and the Embassy Mexico Economic Section to
provide a sense of ongoing trends. Please contact Adam Shub
(shubam@state.gov) or Sigrid Emrich (emrichs@state.gov) for
questions or comments about this report.


2. (U) Table of Contents:

ECONOMY AND FINANCE:
--------------

MEXICO STILL HAS FURTHER TO FALL - Monterrey

FALLING SALES IN TIJUANA - Tijuana

STATE GOVERNMENT OFFERS FINANCIAL SUPPORT - Tijuana
BORDER COMPANIES AFFECTED BY ECONOMIC CRISIS - Tijuana


TRADE AND INVESTMENT:
--------------

MEXICAN GOVERNMENT STEPS IN TO HELP VITRO - Monterrey

TEQUILA EXPORTS INCREASING IN 2009 - Guadalajara

FIRE AT INDUSTRIAL PARK DESTROYS THREE MAQUILADORAS - Ciudad Juarez

UTB TO BEGIN MBA CLASSES IN MEXICO - Matamoros


ENERGY
--------------

MEXICAN PETROL RISES AGAIN - Tijuana


LABOR
--------------
JALISCO CREATES JOBS IN MARCH - Guadalajara

MEXICAN EMPLOYERS ARE MOVING TO THE U.S. - Tijuana

PACE OF STATE JOB LOSSES DECELERATES - Ciudad Juarez


TOURISM
--------------
LESS TOURISTS IN BAJA CALIFORNIA IN 2009 - Tijuana

TOURISM FALLS 53 PERCENT DURING "SEMANA SANTA" - Ciudad Juarez


AGRICULTURE
--------------
TAMAULIPAS FARMERS CONTINUE TO LAMENT PROCAMPO REDUCTION -
Matamoros

AGRARIAN REFORM - Monterrey




--------------
ECONOMY AND FINANCE:
--------------


3. (SBU) MEXICO STILL HAS FURTHER TO FALL: Miguel Martinez, the
CEO of financial services firm BASE, believes that the Mexican
economy still has not bottomed out. Econoffs met with Martinez on
April 13 and he argues that as Mexico is the source of many second
order inputs, such as car parts, the full effects of falling sales

in the United States have not yet hit. Martinez said Mexico is
lagging the U.S. recession by about a year and will not fully
recover until late 2010 or sometime in 2011. Also weighing heavily
on the Mexican economy is the high and uncertain price of the peso.
The peso value has fallen dramatically in relation to the dollar
despite a +6 to 7 point spread between Mexican and U.S. short term
government bonds. In Nuevo Leon, the recession is already having a
deeper than expected impact on Nuevo Leon state finances. Payroll
taxes, which represent 30% of the state's revenue, have fallen far
more than forecasted and will cause the state to readjust its

MEXICO 00001145 002 OF 004


finances. (Monterrey)


4. (U) FALLING SALES IN TIJUANA: Merchants in eastern Tijuana,
declared that sales were down by fifty percent, partly because of
closures of streets and roads. Slow work on road repairs is believed
to be the factor compounding the difficulties of an already-stressed
economy in Tijuana. (Tijuana)


5. (U) STATE GOVERNMENT OFFERS FINANCIAL SUPPORT: The governor of
Baja California, Jose Guadalupe Osuna Millan provided economical
support to the shelter homes in the State. More than 500 people
benefited from the money given by the State Government and the
Secretary of State for Social Development (SEDESOE). Benefited
shelters include: Casa del Migrante and Casa Matriz. (Tijuana)


6. (U) BORDER COMPANIES AFFECTED BY ECONOMIC CRISIS: Industrial
manufacturers expressed concern due to the possibility that the
resources offered by the Secretary of Economy through the PRODIAT-
Program Development of High-Tech Industries will be given until the
companies conclude their technical slowdowns (paros tecnicos). The
Vice President of the Association of Border Maquiladoras, Mr.
Humberto Rodriguez Jaramillo reported that 25 companies in the
border region are already under this "work stoppage" program; out of
these, 10 are located in Baja California. As for the risk of
companies shutting operations, Mr. Rodriguez commented: "few
companies have closed, they are either seeking to consolidate their
operations or attain additional budget to avoid cutting staff."
(Tijuana)

--------------
TRADE AND INVESTMENT:
--------------


7. (U) MEXICAN GOVERNMENT STEPS IN TO HELP VITRO: On April 8,
Vitro stock jumped 30% based on a strong expectation that the
Mexican government will step in and provide a line of credit to the
struggling glass maker. Earlier this year the company had already
announced that it would suspend its debt payments, and the credit
rating agency Moody's withdrew its rating for the company until
Vitro completed its restructuring. The company has nearly 15,000
employees and the Calderon administration is reluctant to let such a
large employer fail. Vitro was unable to restructure its 1.8
billion debt in the private market due to large derivative losses
incurred in 2008 which put the viability of the company in doubt.
Similarly, the cement company Cemex has also had difficulty
restructuring its debt load and there is speculation the Mexican
government will need to intervene soon. Across Mexico, 9,000
businesses have closed in the last five months representing a loss
of over 524,000 jobs. (Monterrey)


8. (U) TEQUILA EXPORTS INCREASING IN 2009: After exporting a near
record 137 million liters of tequila in 2008, Mexico saw a 2.62%
rise in exports in the first quarter of 2009. Tequila exports
continue to grow to the U.S. and although 68% of exports head there,
Mexico sees the greatest opportunity for growth in Asia. The
Consejo Regulador del Tequila is currently studying the possibility
of opening an office in Shanghai to capitalize on China's newfound
taste for Mexico's national drink. (Guadalajara)


9. (U) FIRE AT INDUSTRIAL PARK DESTROYS THREE MAQUILADORAS: On
April 7, a fire broke out at an industrial park located directly
across the highway from the Juarez International Airport. The fire
destroyed property owned by three international maquiladoras. The
affected companies included MCS de Mexico, the Taiwan-based
technology group, Foxconn, and the Swedish-owned Dometic. According
to the Director of the Juarez Financial Development Office, Alvaro
Navarro Garate, approximately 600 employees from MCS de Mexico and
Dometic temporarily lost their jobs as a result of the fire. He
explained that the companies plan to re-hire their employees once
the factories resume operations. MCS de Mexico and Dometic are
currently in negotiations with their employees to determine the
appropriate compensation packages for the period they will be
laid-off. FoxConn reportedly salvaged its production line equipment
from the factory before it burned, and has moved its production and
the 800 affected employees to another plant on the outskirts of
Juarez. (Ciudad Juarez)


10. (U) UTB TO BEGIN MBA CLASSES IN MEXICO: The University of
Texas-Brownsville (UTB) announced at the monthly meeting of the
Matamoros Maquiladora Association (AMMAC) that it would begin
offering some of its MBA courses at the AMMAC facility in Matamoros
beginning this fall. According to UTB business professor Tom Coyle,

MEXICO 00001145 003 OF 004


the goal is to offer maquiladora employees more flexibility,
particularly for Mexican employees who may be deterred from the
program due to scheduling and long waits at international bridges.
In addition to special tuition rates for Mexican residents, special
links between the University and AMMAC for graduate certifications,
and other similar programs, this is one of the first that will
actually include UTB graduate classes being taught in Mexico.
(Matamoros)

--------------
ENERGY
--------------


11. (U) MEXICAN PETROL RISES AGAIN: Ramiro Zuniga Salazar,
president of the Association of Owners of Petrol Stations (ONEXPO
Baja),reported Tuesday that gasoline prices had risen from 9.12
pesos per liter to 9.21, an increase of 9 cents. Also, diesel has
risen more than 28% so far this year, and is now selling at 7.46
pesos per liter, as opposed to its April, 2008 price of 5.7/liter.
Diesel prices are expected to rise an additional five cents again
early May as part of an adjustment for the month by the Ministry of
Finance. (Tijuana)

--------------
LABOR
--------------


12. (U) JALISCO CREATES JOBS IN MARCH: On the heels of losing
11,000 jobs in January and February the state of Jalisco created
4,124 jobs in March, according to the Secretary of Labor and Social
Security. That figure makes Jalisco the state with the second most
jobs created last month, behind only Veracruz. Of the job gains in
Jalisco roughly 60% were part-time positions. Analysts believe that
the gains could be attributed in great part to a part-time worker
program organized between the state government and various
municipalities that gives the unemployed jobs in landscaping and
public works, among other employment opportunities. (Guadalajara)


13. (U) MEXICAN EMPLOYERS ARE MOVING TO THE U.S.: On Tuesday,
March 31st, the president of the Employer's Confederation of Mexico
(Coparmex),Ricardo Gonzales, said that Mexican employers from
border cities have migrated to the United States due the security
situation, threats and extortion attempts. Coparmex has documented
a significant number of businessmen in the border cities of Tijuana
and Ciudad Juarez who have moved to locations in San Diego and El
Paso in the United States. (Tijuana)


14. (U) PACE OF STATE JOB LOSSES DECELERATES: In March,
Chihuahua's labor market lost 6,243 formal sector jobs, according to
the Mexican Social Security Institute (IMSS). This latest report
follows a six month period in which the state lost a total of 70,000
formal sector jobs, primarily in the manufacturing sector. With
these latest losses, total statewide formal sector employment stood
at 596,000 at the end of March 2009. Manuel Ochoa, Vice President
for the El Paso Regional Economic Development Corporation, forecasts
that manufacturing activity in Chihuahua will begin to improve by
the third quarter of this year. The lower number of job losses in
March raises the specter that labor market conditions may already be
stabilizing. Nonetheless, local economists contend that more
investment will be required for the labor market to return to peak
employment levels reached in late 2000. The maquila industry, in
particular, made significant productivity gains in response to the
2001 crisis. As such, at current production capacity levels, the
industry is less labor intensive than it was ten years ago. (Ciudad
Juarez)

--------------
TOURISM
--------------


15. (U) LESS TOURISTS IN BAJA CALIFORNIA IN 2009: According to the
press during the Easter Holiday "spring break", there were fewer
tourists this year. Approximately 50,000 thousand tourist visited
the beaches of Baja California, when last year's numbers reached
more than 140, 000 thousand tourists thus affecting the sector in
Baja California. (Tijuana)


16. (U) TOURISM FALLS 53 PERCENT DURING "SEMANA SANTA:"
South-bound border crossings into Ciudad Juarez from the United
States declined 53 percent year-over-year during the Easter holiday
(Semana Santa),according to Chihuahua state tourism authorities.
The representative for the Chihuahua State Tourism Department in

MEXICO 00001145 004 OF 004


Ciudad Juarez, Demetrio Sotomayor Cuellar, told local press that the
local decline in tourism mirrors international trends, which have
been impacted by the economic crisis. He denied that the drop in
visitors is associated with the poor security environment. Cuellar
estimated that Chihuahua lost $US 2.5 million in tourism revenue as
a result of the decline in travel to the state. (Ciudad Juarez)


--------------
AGRICULTURE
--------------


17. (U) TAMAULIPAS FARMERS CONTINUE TO LAMENT PROCAMPO REDUCTION:
Agricultural organizations claim that the reduction of qualifying
land for PROCAMPO subsidies from 200 hectares to 103 is an
"injustice." In particular, seasonal farmers, such as the state's
large contingency of sorghum farmers, are said to be most at risk as
the lost subsidy income will harm investments in irrigation and
other technology that can help reduce potential crop and financial
losses in poor seasons. The director of the Local Agriculture
Association of Matamoros, Refugio Leonel Soto Perez, also noted that
the lost of roughly 50 percent of the subsidies received by larger
farmers could threaten some farmers abilities to cover debts to
creditors. Tamaulipas Governor Eugenio Hernandez Flores is also
quoted as stating that Tamaulipas needs the federal support to
continue in its role as the nation's agricultural leader and that
the subsidy loss would be a severe blow to food production in
Mexico. The subsidy reduction represents an estimated loss of 250
million pesos for Tamaulipas farmers. (Matamoros)


18. (U) AGRARIAN REFORM: The Federal Attorney General for
agricultural issues in Nuevo Leon (Procuraduria Agraria) is actively
working to attract foreign capital to the rural sector. Private
investors have been reluctant to invest in ejidos and communally
owned properties because of onerous ownership and rights issues but
now the federal government is backing private investments to
overcome these hurdles. A major local issue is the unavailability
of large unused tracts of land in the Monterrey area. (In contrast,
the federal government has been crucial in getting multiple property
owners together to combine their properties for large scale
industrial development.) The Procuraduria Agraria in Neuvo Leon has
a 2009 goal of creating 42 new investment projects, improving 6,758
hectors of land and attracting US$1.5M in new investment.
(Monterrey)



BASSETT