Mexico Economic Weekly - December 4

UNCLAS SECTION 01 OF 04 MEXICO 003418 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 - December 4 ¶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. (SBU) Table of Contents: ECONOMY AND FINANCE: -------------- REMITTANCES DROP 35.8% - Mexico City TRADE AND INVESTMENT: -------------- MEXICO HOSTS CONGRESS ON COMBATING COUNTERFEITING AND PIRACY - Mexico City SUCCESSFUL SHRIMP INDUSTRY ATTRACTS BIOFUEL RESEARCH - Hermosillo (SBU)COSMETIC PACKAGING FIRMS RELOCATE TO NORTHEAST MEXICO - Matamoros (SBU) MATAMOROS MAQUILAS PRAISE MEXICAN CUSTOMS FLEXIBILITY - Matamoros HOTEL OCCUPANCY RATES DOWN 20% IN NUEVO LEON - Monterrey AMB PROPERTY ANNOUNCES INVESTMENT IN NUEVO LEON - Monterrey TRANSPORTATION AND INFRASTRUCTURE: -------------- VIVAAEROBUS ANNOUNCES EXPANSION PLANS - Monterrey ENERGY AND ENVIRONMENT: -------------- DECREASE IN DEMAND HIGHLIGHTS EXPO ELECTRICA 2009 - Monterrey GOM TO PROPOSE SECOND ENERGY REFORM - Mexico City MEXICO AND US ENHANCE COOPERATION ON WEATHER FORECASTING - Mexico City BISON RETURN TO MEXICO - Mexico City -------------- ECONOMY AND FINANCE -------------- ¶3. (U) REMITTANCES DROP 35.8%: Remittances in October stood at 1.69 billion dollars, a 35.8% drop from the previous year (when the inflow reached an all-time high of 2.64 billion dollars),according to the Bank of Mexico. The total accumulated over the previous twelve months stood at 21.65 billion dollars, the lowest level since December 2005. The most likely cause is higher unemployment among Mexicans working illegally in the United States, especially in sectors such as construction. Remittances are a main source of income for many families in Mexico. An estimated 80-90% of remittances received are spent on basic consumption such as food and clothing. On average, each remittance received during October totalled 299 USD, a significant fall from the 395 USD average in October 2008. While significant peso depreciation over the past year partially compensated for lower remittances, the drop still represents a major blow for many families. (Mexico City) -------------- MEXICO 00003418 002 OF 004 TRADE AND INVESTMENT -------------- ¶4. (U) MEXICO HOSTS CONGRESS ON COMBATING COUNTERFEITING AND PIRACY: The Mexican Institute for Industrial Property (IMPI) and INTERPOL co-hosted the 5th Global Congress on Combating Counterfeiting and Piracy in Cancun December 1-3. More than 800 international public and private sector IP experts attended from over 30 countries. US speakers included senior officials from CBP, USTR, FBI and PTO. Judge Ronald Lew, Senior U.S. District Court Judge in the U.S. Central District Court of California and a well known expert on IP cases, also participated. The Global Congress allowed global IP experts to present their views on what can and should be done about the menace of counterfeiting and piracy during the current economic crisis, and identify how to collaborate to make target scarce resources where they are most effective. Mexico used the opportunity to showcase its efforts to protect and enforce intellectual property. Following the conference, US Embassy Mexico (ECON and USAID) invited Judge Lew to come to Mexico City and meet with Mexican Supreme Court Justices, the President of the National College of Judges and Magistrates, and several other senior Mexican judges on December 4. (Mexico City) ¶5. (U) SUCCESSFUL SHRIMP INDUSTRY ATTRACTS BIOFUEL RESEARCH: Mexico is the 6th largest producer of farmed shrimp in the world, and the state of Sonora cultivates 65 percent of the country's product. Last year Sonora exported USD $400 million in farmed shrimp to the United States. Despite the economic crisis and price decreases of 15 percent last year, farms are expanding and industry leaders are optimistic about the future. On November 9th, econoff toured a 2,300 acre shrimp farm during the last week of the harvest. Farms are constructed on desert coastland by dredging canals to feed seawater to 10 acre ponds. In these ponds, shrimp larva are grown over six months to adulthood and harvested once a year. Seventy-percent of the harvest is exported to U.S. restaurants and households, and the remainder is for domestic consumption. Unlike traditional farmers and ranchers in the state, the government does not provide subsidies to the industry. The large enterprise in Sonora has attracted a unique biofuel project by Global Seawater Inc. (GSI) to use the residual waters from these farms as a fertilizer to adjacent Salicornia crops. This plant thrives in saltwater, is a cheaper competitor to corn ethanol and soy, and does not use freshwater resources. The crop yields a clean oil that can be used to produce jet fuel. In October, Airbus announced a USD $10 million project partnering with GSI, GE, and Interjet to develop the technology in hopes of using the fuel for test flights starting in 2010. In addition to fuel, the crop can also be used as feed for livestock. (Hermosillo) ¶6. (SBU) COSMETIC PACKAGING FIRMS RELOCATE TO NORTHEAST MEXICO: A majority of the top 12 players in the cosmetic and personal care packaging industry will relocate to northeast Mexico (in the Mexican state of Tamaulipas) in the next 5 years according to Carlos Rubio, General Manager of Alcan Packaging. Rubio says the industry is shifting production from China back to North America to be closer to their customers. The cost of labor in China is not the bargain it once was, and the close proximity of the U.S. and Mexico allows companies to keep inventory levels low. Rubio notes the risk of shipping damage is much lower and response time to market much faster than the 6-8 week norm from China. HCP packaging announced plans to open a 60,000-sq foot operation in Reynosa, Mexico. HCP is a Chinese firm under Taiwanese ownership with operations in China, the U.S., and now Mexico. The company focuses on packaging design, development and manufacture for the cosmetics, toiletries, skin care and fragrance industries. The plant will be located close to the soon to open Anzalduas International Bridge and will focus on injection molding, injection blow molding, UV lacquering, vacuum metalizing, as well as decoration and assembly. HCP Reynosa should be fully operational during the first quarter of 2010, and will employ approximately MEXICO 00003418 003 OF 004 130 people. Contacts at the McAllen Economic Development Corporation confirm a second packaging firm is in the final stages of real estate negotiations in the area and anticipate they will close negotiations before the end of the year. (Matamoros) ¶7. (SBU) MATAMOROS MAQUILAS PRAISE MEXICAN CUSTOMS FLEXIBILITY: The Matamoros maquila association's director and president both praised local and national customs authorities' flexibility in a recent conversation with ECONOFF. They said authorities at both levels understand the needs and concerns that local and national maquila associations have brought to their attention, such as requests for extended hours for call centers and north bound port staffing. They feel Mexican customs is more business oriented now than in the past. Our interlocutors noted custom's extended service hours are so valuable to their businesses that they offered to pay, but Hacienda indicated that it was not legal under current regulation. (Matamoros) ¶8. (U) HOTEL OCCUPANCY RATES DOWN 20% IN NUEVO LEON: The Association of Nuevo Leon Hotels reported that occupancy rates among its members fell 20% in 2009, despite the numerous offers and incentives such as lower room rates. The organization's president, Miguel Angel Cantu Gonzalez blamed the bad year on the economic crisis and the outbreak of H1N1 influenza, which he said had made life "complicated" for the tourism industry throughout the country. (Monterrey) ¶9. (U) AMB PROPERTY ANNOUNCES INVESTMENT IN NUEVO LEON: Maryland-based AMB Property announced on December 1st that it will begin construction of the AMB-Agua Fria Industrial Park in the Monterrey suburb of Apodaca. Although the company has not revealed the cost of the project, the media reported that AMB will invest about $110 million. The initial construction phase will include three buildings with a total of 44,000 square meters. Once completed, the park will have over 200,000 square meters of industrial space and cater to manufacturing distributors. AMB has already signed lease agreements with Raven Rubber, Energy Alloys, Ceva Freight Management, Span de Mexico, Johnson Controls, and Arauco for the new facility. (Monterrey) -------------- TRANSPORTATION AND INFRASTRUCTURE -------------- ¶10. (U) VIVAAEROBUS ANNOUNCES EXPANSION PLANS: On its third anniversary, Monterrey-based budget airline VivaAerobus announced plans to add four aircraft to its fleet and begin service on 12-15 new domestic and international routes in 2010. The company's CEO Donal Rogers said that, despite the economic crisis, his airline had 1.6 million passengers in 2009, an increase of 15% over 2008, with a load factor of 79%. VivaAerobus, a joint venture between the Mexican bus company IAMSA and the Ryan family (proprietors of Ryanair),began operations in 2006 and operates a fleet of seven Boeing 737 aircraft flying to 30 destinations in Mexico and to Las Vegas. It suspended service between Monterrey and Austin, TX, its other international route, earlier this year. (Monterrey) -------------- ENERGY AND ENVIRONMENT -------------- ¶11. (U) DECREASE IN DEMAND HIGHLIGHTS EXPO ELECTRICA 2009: Annual electricity demand nationwide had decreased by 4% through November, the largest reduction recorded since the founding of the Federal Electricity Commission in 1937. Speaking at the November 25 - 27 Expo Electrica 2009 in Monterrey, Gabriel Garza Herrera, President of the Mexican Chamber of Electrical Manufacturers, attributed lower demand to the economic crisis and increased conservation measures. He expected demand to rise during December due to the Christmas holidays. (Monterrey) MEXICO 00003418 004 OF 004 ¶12. (U) GOM TO PROPOSE SECOND ENERGY REFORM: The Energy Secretariat is drafting a new energy reform, which will include some of the issues that were cut excluded from the first reform, including private investment in downstream activities. According to Energy Secretary Georgina Kessel, a second generation reform is aimed at strengthening Mexico's public finances and significantly reducing reliance on oil revenues. (In October, budgetary and oil revenues fell 33.9% and 49.7%, respectively, the deepest decline since 1990.) Kessel said the Energy Secretariat also aims at transforming Pemex to a public company similar to Statoil and Petrobras, which were opened to private capital. According to Kessel the reform will be submitted to the Congress before the beginning of the congressional sessions in February. (Mexico City) ¶13. (U) MEXICO AND US ENHANCE COOPERATION ON WEATHER FORECASTING: Ambassador Pascual and Mexican Environment Minister Juan Elvira Quesada on December 3 signed a bilateral agreement between the U.S. National Weather Service (NOAA) and the Mexican Water Commission (CONAGUA, part of the Environment Ministry),renewing a 67-year- long collaboration on weather forecasting and hydrological (flooding) prediction. In his remarks, Ambassador Pascual stressed the impact of climate change on weather, and the importance that our respective presidents place on responding to these climate change impacts. The Director of the National Weather Service for the southern region of the United States and the Director of the Weather Service's Office of International Affairs attended the signing as well. (Mexico City) ¶14. (U) BISON RETURN TO MEXICO: As a part of a collaborative effort between Mexico and the US to restore bison to their historical range in Mexico, twenty-three bison from South Dakota's Wind Cave National Park were released into Mexico's high desert on November 27. The bison were released in the 44,000 acre Rancho El Uno reserve in Chihuahua. The ceremony was attended by Secretary of Environment Juan Elvira as part of the celebration of Mexico's National Conservation Day. (Mexico City) PASCUAL