SAN LUIS POTOSI TRAVELOGUE; SECURITY GOOD; ECONOMY IN

UNCLAS SECTION 01 OF 02 MONTERREY 000046

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON ETRD KCRM SNAR CASC MX
SUBJECT: SAN LUIS POTOSI TRAVELOGUE; SECURITY GOOD; ECONOMY IN
TROUBLE

REF: MEXICO 146

MONTERREY 00000046 001.2 OF 002



1. (U) Summary. We expect the 2009 governor's race in
San Luis Potosi to focus on economic issues, since the state's
security situation is relatively safe. San Luis Potosi has had
success in developing manufacturing industries, but export
demand is down due to the U.S. recession. The PAN and PRI will
strongly compete in the upcoming July 5 election, which is
likely to turn on local issues such as the economy and economic
development in depressed areas. On the bright side, while the
capital is subject to intermittent spasms of drug-related
violence, the security situation in both the city and the state
of San Luis Potosi is generally good. State officials have
built a high tech C4 communications and command center that will
allow them to further reduce common crime. End Summary.




2. (U) San Luis Potosi is located in a strategic area of
central Mexico, near important highway and railroad links
between Mexico City and the U.S. San Luis Potosi, about the
size of West Virginia and with a population of 2.4 million, has
attracted important manufacturing plants such as General Motors
to the capital city of San Luis Potosi and the city of
Matehuala, but economic development has lagged in other parts of
the state. This state has been a PAN bastion, and while locals
appear to approve of current PAN Governor Jesus Marcelo de los
Santos, both PAN and PRI are expected to be competitive in the
2009 Governor's race. The PRD party is negligible in San Luis
Potosi.



Security Situation Relatively Good




3. (SBU) Government officials proudly describe San Luis
Potosi (SLP) as a relatively safe state. According to press
report, there were 33 drug related executions in SLP in 2008, a
big increase from 11 killings in 2007 but still low by Mexican
standards. Governor de los Santos lauded the San Luis Potosi
C-4 facility, which features a sophisticated system of cameras
to watch key roads, provides analysis of common crime patterns
and promotes intelligence sharing (see reftel). The Governor
maintains that the C-4 facility facilitated a significant
reduction in crime. De los Santos also praised the federal
program Plataforma Mexico, which has provided training and
helped clean up the state police force. Moreover, de los Santos
maintained that there have only been two important kidnappings
for ransom in the last five years (in 2004). The Governor
admitted that there have been `levantones', or drug cartels
kidnapping people who owe them money or members of the rival
cartels, but he was dismissive of these cases.




4. (SBU) Although San Luis Potosi is not quite as safe as
the Governor claims, it is a relatively safe. There have been
several important drug executions, including high level police
officials and a total of five police cadets were killed leaving
the national police academy in SLP in two separate incidents in
August 2008. IN addition, there have two separate attempts to
kill the head of the San Luis Potosi Security Council Cesareo
Carvajal since he took office in November 2007. Post has also
heard reports of top level cartel officials meeting or traveling
through SLP, and the state continues to be a transit point for
drug shipments. Nevertheless, Econoff spoke to three prominent
businessmen, and they all agreed that the security situation is
good in SLP, and that the Governor has been effective in this
area. Carvajal told the press that the C-4 facility has
significantly reduced common crime, with robberies down 18% and
homicide falling by 29%. Note. Econoff was not able to locate
state crime statistics to verify these claims. End Note. A
leading newspaper reported four kidnapping complaints in San
Luis Potosi in 2008, but the official number usually grossly
underestimates the actual number of kidnappings. Note:
Consulate Monterrey is aware of other cases of kidnapping for
ransom, particularly in the `Ciudad Valles' region of the state,
which were not reported to the authorities. End Note.
Nevertheless, the private businessmen did not reflect the same
fear of kidnapping as seen in neighboring states.



2009 Governor's Race Likely to Focus on Economy; Poverty
Reduction


MONTERREY 00000046 002.2 OF 002





5. (SBU) Although San Luis Potosi has been a PAN
stronghold, there could be a close Governor's race in 2009.
Several business leaders praised Governor de los Santos for his
work attracting foreign investment and building infrastructure,
such as roads. De los Santos was confident that the PAN
candidate Alejandro Zapata Perogordo would win, and he cited the
economy, security and poverty reduction as key issues, although
he later retracted that to add that the economy and security
were in good shape. Three local businessmen thought that both
the PAN and PRI candidates were capable, but that Zapata
Perogordo (a former PAN federal senator) could do more for SLP,
since he is a reportedly a close friend of President Calderon.
In contrast, PRI Candidate Fernando Toranzo Fernandez is a
doctor who formerly served as a senior health official in the de
los Santos Administration. Toranzo expects that his PRI
campaign will be heavily outspent by the PAN, and he lamented
that the compressed election schedule (limiting the campaign to
a few months) will only allow him to visit some communities
once. Toranzo still expects to win. Our Consular Agent, who
has lived in San Luis Potosi for decades, commented that Toranzo
is popular, and she expects a close race. Our contacts
generally agreed that the race would focus on local issues
rather than serve as a referendum on President Calderon. Note.
Econoff was unable to meet with the PAN candidate during the
trip. End Note.




6. (SBU) One challenging issue will be how to extend the
economic development in San Luis Potosi and Matehuala to the
other 50% of the population, particularly in the indigenous area
of la Huasteca. PRI candidate Toranzo thought that the primary
campaign issue will be how to provide government services, such
as water, electricity and health care, to the indigenous people
of la Huasteca. SLP Secretary for Economic Development Carlos
Barcena commented that areas such as la Huasteca always ask for
manufacturing plants, the same development strategy SLP pursues
for the cities. However, Barcena questioned whether these
underdeveloped areas have the trained talent to run
sophisticated manufacturing operations. Instead, he thought
that they should focus on developing their own competencies,
including sugar cane or raising cattle, and the state is
facilitating their development by building good roads to these
areas. A business man also thought that la Huasteca has
potential for tourism, but first industry must build hotels and
restaurants to support the tourist trade.



US Economic Recession Hitting SLP Hard




7. (SBU) San Luis Potosi is already feeling the effects
of the U.S. recession, due to its dependence on manufacturing
goods for export to the United States. Governor de los Santos
boasted how SLP had used incentives and good infrastructure to
attract and retain 1,500 foreign companies, develop large
industrial parks, and GM plans to open a transmission factory in
the near future. However, SLP Economic Secretary Barcena
allowed that manufacturing in SLP is down 20-30% in late 2008,
including a 25% drop in General Motors' production line since
November. Moreover, although state employment normally grows by
5% annually, he projects that it will decline by 10% in 2008 and
does not expect any further growth in 2009. Meanwhile, the
private businessmen, who own General Motors dealerships and
local construction companies, were more pessimistic, claiming
that SLP has been hit much harder than most states. The
businessmen reported that bank credit was very tight and
expensive, particularly for purchasing housing or cars. They
noted that remittances, although only 3.4% of the state GDP,
have declined, making it harder for ordinary people to pay for
consumer purchases.




8. (U) Comment. Since the state economy is likely to
continue to be battered by weak export demand for manufacturing
goods, we expect local economy issues to predominate in the
campaign for Governor. Although this is PAN country, this year
could be different. The PRI candidate for Governor is well
known and appears to have a sincere interest in the
underdeveloped parts of the state. Post will continue to
monitor the Governor's race closely. End Comment.
WILLIAMSON