Mexico Economic Weekly - January 23

UNCLAS MEXICO 000195 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 - January 23 ¶1. (U) The Mexico Economic Weekly supplements individual reporting from the 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: TRADE AND INVESTMENT: -------------- HONDA CONTINUES UNINTERRUPTED PRODUCTION - Guadalajara "TIME" FOR A CHANGE IN NAYARIT? - Guadalajara ATM THEFTS THREATEN MAQUILADORAS ANEW - Matamoros ENERGY: -------------- OIL PRODUCTION FALLS TO 13 YEAR LOW - Mexico City CEMEX SHIFTING TO RENEWABLE ENERGY SOURCES - Monterrey CROSS-BORDER ENERGY SHARING CATCHING ON SLOWLY - Matamoros TRADE AND INVESTMENT: -------------- ¶3. (U) HONDA CONTINUES UNINTERRUPTED PRODUCTION: A senior executive of Honda-Mexico, which operates a motorcycle and vehicle production plant in the Guadalajara suburb of El Salto, told the CG that Honda has no current plans for a temporary suspension of operations. This is in contrast to competitors Nissan, Volkswagen, General Motors, and Ford, all of whom have recently closed their Mexican plants for varying periods of time. In addition to domestic sales, Honda exports vehicles made in the El Salto plant to the U.S. and various South American countries. (Guadalajara) ¶4. (U) "TIME" FOR A CHANGE IN NAYARIT? A Federal Deputy has introduced a bill to switch the Pacific coast state of Nayarit from the Mountain to the Central time zone as a means of facilitating trade, commerce, and tourism. Neighboring Jalisco state observes Central time, and this causes confusion especially in the greater Puerto Vallarta area, where the state and time zone border divides the tourist zone. The change might also lead to improved coordination between the municipalities of Puerto Vallarta, Jalisco and Bahia de Banderas, Nayarit on common development and infrastructure issues. (Guadalajara) ¶5. (U) ATM THEFTS THREATEN MAQUILADORAS ANEW: In August, a string of thefts of ATMs placed in maquiladoras threatened industry in Reynosa, Tamaulipas. The Tamaulipas Special Police (PET) were stationed in Reynosa's industrial parks to protect the plants from these and other thefts and reports of significant thefts stopped almost immediately. New incidents have again spread fear among plant managers and many are considering removing ATMs from their facilities despite the service and convenience they offer to employees. Approximately two weeks ago, "armed commandos," according to the manager of a neighboring plant, allegedly entered a General Motors facility in Reynosa and held employees at gunpoint, forcing them to make withdrawals from their accounts one-by-one before making off with the cash. Similarly, rumors in the Reynosa and Matamoros maquiladora communities that the kidnapping of the manager of Lear Jet in Ciudad Juarez last week was tied to a similar ATM theft have increased concerns of kidnappings, as well. In a meeting with the Reynosa Maquiladora Association (RAMMAC) on January 19, Tamaulipas Secretary of Public Security, Jose Ives Soberon, promised to increase PET forces in Reynosa's industrial parks if managers' concerns continue to rise. Additionally, maquiladora managers continue to strongly consider the value of maintaining ATMs in their plants as a service to their employees in light of the incidents. (Matamoros; Reftel 08 Matamoros 294) ENERGY: -------------- ¶6. (U) OIL PRODUCTION FALLS TO 13 YEAR LOW: Mexican oil production fell to an average of 2.8 million barrels a day in 2008, its lowest level since 1995. Pemex estimates that oil production will begin to increase again by 2011 reaching 3 million barrels a day by 2015. Industry experts discount this forecast as overly optimistic given the decline of the Cantarell field, the challenges PEMEX faces in Chicontepec and Ku Maloop Zap and the lack of investment in exploration in the deep waters of the Gulf of Mexico. Oil exports are Mexico's largest source of foreign exchange and oil revenues account for almost 40% of the federal budget. Declining oil production coupled by low energy prices will create fiscal problems for Mexico unless the government takes action soon. (Mexico City) ¶7. (U) CEMEX SHIFTING TO RENEWABLE ENERGY SOURCES: On January 22, the Monterrey-based multinational Cemex announced the opening of a new wind farm in La Ventosa, Oaxaca. The wind farm administered by a Spanish company, Iberdrola, will supply energy to Cemex plants located in various parts of the country. The US$ 100 million project is able to generate 80 megawatts of energy and, according to press reports, will also supply energy to other companies such as Barcel, Bimbo, Cerveceria Cuauhtemoc-Moctezuma, Conductores Monterrey, and Kimberly Clark. Cement production is an energy intensive industry and Cemex considers the use of renewable energy an important part of its growth strategy. The company plans to invest an additional US$ 420 million over the next two years to increase the wind farm's capacity. (Monterrey) ¶8. (U) CROSS-BORDER ENERGY SHARING CATCHING ON SLOWLY: In late 2007, Sharyland Utilities in McAllen, Texas, announced an agreement with CFE to allow cross-border commercial energy sharing - one of only two such agreements allowing commercial energy trade along the Texas border. Despite claims of up to 15 percent energy cost savings annually due to "peak" hour differences between the US and Mexico (US "peak" rates occur between 5:00pm and 7:00pm, with Mexico's "peak" hours falling between 6:00pm and 10:00pm),only six companies in Reynosa have taken advantage of the "natural arbitrage" situation and obtained the required permits, according to Michael Landgraf of energy consultancy Crosspoint Global which helps market Sharyland's services in Reynosa. According to Landgraf, a 600,000 square foot plant in Reynosa saved more than 300,000 USD in 2008 (a 12.6 percent annual saving) due to the agreement. Despite continued complaints from the maquiladora sector about rising energy costs - up roughly 30 to 40 percent in 2008, according to Reynosa Maquiladora Association (RAMMAC) members - the international energy sharing opportunity remains virtually untouched. Industry leaders report that the potential savings for many companies are not significant enough to overcome the perceived hassle and upfront costs of obtaining the required permits, especially those required from CFE. (Matamoros) ENVIRONMENT: -------------- MEXICO AS A LEADER ON CLIMATE CHANGE: The Center of Dialogue and Analysis on North America (CEDAN) workshop on Regional Climate Governance January 19- 20 focused on future paths of collaboration, including a possible a carbon emissions trading regime for North America. Dr. Fernando Tudela, Undersecretary of Planning and Environmental Policy of the Secretariat of Environment and Natural Resources (SEMARNAT) pointed out that Mexico has been the most proactive developing country on climate change. At the UNFCC-COP 14 in Poznan, Mexico announced its goal of reducing green house gas emissions fifty percent from 2000 to 2050 - if there are financial and cooperation mechanisms to facilitate this goal. Tudela said that Mexico's per capita emissions are one fifth of the U.S. and Canada and that a cap and trade system could be feasible in the North American region if regional U.S. initiatives and President Obama's proposal is implemented. Tudela commented that the European Union has the most developed experiment on cap and trade and it would be very useful to use its lessons learned. The trilateral Commission for Environmental Cooperation (CEC) could be the organization to help the three countries coordinate positions. (Mexico City) Bassett