Mexico Economic Weekly - January 22

UNCLAS MEXICO 000230

SENSITIVE
SIPDIS
SIPDIS
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 22


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:

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EMPLOYMENT CONTINUES DOWNWARD TREND - Mexico City



OVER ONE THOUSAND COMPANIES CLOSE IN NUEVO LEON IN 2009 - Monterrey



NUEVO LEON RECOVERS LOST JOBS IN 2009 - Monterrey



ECONOMIC SLOWDOWN LOWERS UNIVERSITY ENROLLMENT, THREATENS HUMAN
CAPITAL DEVELOPMENT - Ciudad Juarez





TRADE AND INVESTMENT:

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ACCELERATED OIL DECLINE IN CANTARELL - Mexico City



MATAMOROS MAQUILA EXPANSION STATISTICS FOR 2009 AND FORECAST FOR
2010 - Matamoros



FDI FOR 2009 FALLS IN NUEVO LEON - Monterrey



CEMEX CONTINUES TO OFFER BONDS - Monterrey



ALFA REPORTS BEST EBITA IN ITS HISTORY - Monterrey



HEINEKEN BUYS FEMSA FOR US$7.64 BILLION - Monterrey





TRANSPORTATION AND INFRASTRUCTURE:

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US CONSULATE SUPPORTS AEROSPACE FORUM IN TIJUANA - Tijuana

ENERGY AND ENVIRONMENT:

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NSC OFFICIALS VISIT MEXICO CITY - Mexico City



NUEVO LEON RECEIVES USD 3.2 MILLION FOR GREEN INITIATIVES -
Monterrey





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ECONOMY AND FINANCE

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3. (U) EMPLOYMENT CONTINUES DOWNWARD TREND: Mexico's national
statistics agency (INEGI) released an employment report for
December that indicates a continued downward trend. The
unemployment rate was 4.8 percent in December, somewhat lower than
market expectations of about 5.5 percent. In seasonally-adjusted
terms, Mexico's ratio of unemployed individuals to total workforce
declined to 5.4 percent in December, from 5.6 percent a month
earlier. Men's jobless rate declined to 5.4 percent, from 5.7
percent in November, while the proportion of unemployed women to
the country's economically-active female population shrunk to 5.3
from 5.4 percent. (Mexico City)




4. (U) OVER ONE THOUSAND COMPANIES CLOSE IN NUEVO LEON IN 2009:
According to the Mexican Social Security Institute (IMSS),the
number of employers in Nuevo Leon fell from 58,071 in 2008 to
56,947 in 2009, a loss of 1,124 companies, marking the largest drop
in employers in nine years. The hardest hit sectors included
manufacturing industry, construction, commercial services and
transportation and communications. (Monterrey)




5. (U) NUEVO LEON RECOVERS LOST JOBS IN 2009: Despite a nine-year
record loss of employers, since May 2009 Nuevo Leon has recovered
around 50 percent of the 80,000 jobs the state lost from October
2008 to May 2009, according to a Nuevo Leon Secretariat of
Employment and Social Security (STPS) official. According to Banco
de Mexico figures, in 2009 Nuevo Leon lost 45,452 jobs, fourth
worst among Mexican states. Overall, the Mexican Social Security
Institute (IMSS) reported that Nuevo Leon began 2010 with 150,000
unemployed. (Note: Nuevo Leon has a sizeable informal sector not
covered by IMSS statistics. The actual number of unemployed may be
significantly higher. End note.) (Monterrey)




6. (U) ECONOMIC SLOWDOWN LOWERS UNIVERSITY ENROLLMENT, THREATENS
HUMAN CAPITAL DEVELOPMENT: The economic slowdown in Ciudad Juarez
has led to a decline in university student enrollment and a spike
in late or unpaid tuition payments. "Juarez students are
increasingly abandoning their studies because of economic
difficulties," said Dr. Diana Natalicio, President of the
University of Texas at El Paso. From 2008 to 2009, Mexican student
enrollment at UTEP fell from 1,700 to 1,415. According to
Natalicio, these students are largely lower middle class residents
of Juarez, who are unable to pay tuition because their family
business closed or their parents were laid off. Since 2007, as

many as 3,000 small and medium enterprises (SMEs) have closed in
Ciudad Juarez and nearly a third of the city's maquila workforce
has been fired. The Juarez Technological Institute (ITCJ),one of
the three largest universities in the city, reported a 300%
year-over-year increase (200 to 800 students) in students
requesting tuition payment extensions for 2009. University
administrators from ITCJ, and two other major universities in the
city told local media they are working to expand scholarship
programs to keep talented students in school. Despite these
efforts, they expressed concern that the current crisis may have a
long term impact on local human capital development. (Ciudada
Juarez)



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TRADE AND INVESTMENT

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7. (U) ACCELERATED OIL DECLINE IN CANTARELL: The decline in
Cantarell's oil output has accelerated from a decline of 100,000
bpd in 2005 to 400,000 in 2008 and 2009. Oil output in Cantarell
grew until 2004, when it reached a record production of 2.13
million bpd, but Pemex extracted only 633,000 bpd from January
through November of 2009, a decline of 405,000 bpd only partially
offset by production in KMX. Total oil output in Mexico dropped by
310,000 bpd during the same period. In 2009, KMZ surpassed
Cantarell as Mexico's main oil field. In 2008, Mexico registered
the worse oil output decline in the world. According to Pemex and
the Energy Secretariat, Cantarell's decline has been controlled.
However, if the outlook does not improve, Mexico could become a net
oil importer in 2020. (Mexico City)




8. (U) MATAMOROS MAQUILA EXPANSION STATISTICS FOR 2009 AND
FORECAST FOR 2010: On January 21st, the Matamoros Economic
Development Committee (CODEM) reported expansion statistics for
maquilas in the Matamoros area during 2009. Ten maquilas added an
additional 287,000 square feet (sq ft),which represents 5 percent
of the available industrial square footage in Matamoros. The
maquilas, which employ over 600 people, come from a variety of
industries, including automotive, plastics, medical,
petrochemicals, general manufacturing, and industrial services.
Rodolfo Saucedo, director of CODEM also said nine additional
prospects for 2010 from the US, Mexico and Russia have the
potential to add 400,000 sq ft of industrial square footage. They
represent industries such as automotive, plastics, petrochemicals,
wind energy, and electronics. (Matamoros)




9. (U) FDI FOR 2009 FALLS IN NUEVO LEON: Foreign direct
investment (FDI) in Nuevo Leon fell four percent in the past year
according to the state's Secretary of Economic Development Othon
Ruiz Montemayor. In 2009, FDI dropped to USD 1.39 billion in
contrast to the 2008 total of USD 1.44 billion. Ruiz attributed
the drop to the worldwide economic downturn rather than investor
security concerns about Mexico's rising crime problems. For 2010,
an official at the Secretariat of Economic Development predicted
FDI inflows would remain relatively constant at USD 1.4 billion and
generate 7,500 jobs. (Monterrey)




10. (U) CEMEX CONTINUES TO OFFER BONDS: On January 13, the
multinational building materials company Cemex returned to the
securities market with a USD 500 million bond offering, the
company's second international issue in as many months. In
December, Cemex sold USD 1.25 billion in bonds, which marked the
company's return to international bond markets. The December
offering came nine months after Cemex failed to sell USD 500
million of securities, forcing it to extend payments on bank debt.
Cemex reached a USD 15 billion refinancing agreement with its banks
in August to avoid default after the weak economy in the U.S.

eroded revenue. (Monterrey)




11. (U) ALFA REPORTS BEST EBITA IN ITS HISTORY: Alfa, the
Monterrey-based conglomerate, reported fourth-quarter earnings
before interest, taxes, depreciation and amortization (Ebitda) at
USD 290 million on January 11. For all of 2009, Ebitda, a measure
of cash flow, is estimated to have grown 9 percent in 2009 to USD
1.06 billion. "We can confirm that last year's Ebitda was the best
we've had in our history, which is even more relevant considering
that in 2009 we passed through the worst global economic crisis of
the past 80 years," said Mario Paez, the company's director of
planning and finance in a press release. Alfa expects to report
2009 revenues of US$8.54 billion. Alfa's businesses include a
petrochemicals company (Alpek),auto parts manufacturer (Nemak),
telecommunications unit (Alestra),and refrigerated foods producer
(Sigma). The company's local shares recently traded 1.2 percent
higher at 86.60 pesos (USD 6.84). (Monterrey)




12. (U) HEINEKEN BUYS FEMSA FOR US$7.64 BILLION: Dutch Heineken
NV announced its purchase of drinks-and-retail giant Femsa's beer
unit for US$7.64 billion on January 11. The all-stock transaction
will place Heineken as the second largest brewer in Mexico.
Heineken, which triumphed over rival bidder SABMiller PLC, will
assume USD 2.1 billion of Femsa's debt. Monterrey-based Femsa will
get a 20 percent stake in Heineken and Femsa representatives will
get two seats on Heineken's supervisory board. Femsa's beer
business in Mexico has a 43 percent market share by volume, but has
lost ground to Corona producer Grupo Modelo SAB. Heineken, the
world's third largest brewer by sales volume, secured a 10-year
exclusivity agreement with Femsa that enables it to sell beer in
Oxxo, Femsa's convenience-store chain. (Monterrey)



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TRANSPORTATION AND INFRASTRUCTURE

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13. (U) US CONSULATE SUPPORTS AEROSPACE FORUM IN TIJUANA: The
American Consulate in Tijuana and the U.S. Commercial Service's
Northwest office are supporting the 1st Aerospace Supplier's Forum
to be held in Tijuana on March 17 -18. The event is sponsored by
the Tijuana Secretariat of Economic Development and the Ministry of
Economy. The forum will consist of morning conferences and midday
one-on-one business matchmaking meetings. Baja California has over
40 firms that manufacture, assemble, repair and design aircraft
parts and components. Most of these companies are located in the
Mexicali-Tecate-Tijuana corridor. The aerospace industry employs
more than 12,000 people in Baja California, which represents 50% of
the Aerospace employment in Mexico. Buyers planning to attend the
event include Eaton, Zodiac Aerospace, Lockheed Martin, Parker,
Delphi, Suntron. (Tijuana)



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ENERGY AND ENVIRONMENT

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14. (U) NSC OFFICIALS VISIT MEXICO CITY: Senior officials from
the National Security Council (NSC) attended G20 meetings hosted by
the GOM on January 13 and 14. They also met with the new Governor
of the Bank of Mexico, Augustin Carstens, and the Hacienda
Secretary Ernesto Cordero to discuss bilateral economic issues.
NSC representatives then met with counterparts at the Ministry of
Foreign Affairs (SRE) to discuss the outcome of the COP 15 climate
change meetings and how to move forward with the Copenhagen Accord.

Officials from the SRE confirmed that the GOM plans to host COP 16
in Cancun, rather than Mexico City, from November 29 to December 10
of this year. (Mexico City)




15. (U) NUEVO LEON RECEIVES USD 3.2 MILLION FOR GREEN INITIATIVES:
The 2010 Mexico Federal Expenditures Budget has designated US 3.2
million for environmental and natural resource projects in Nuevo
Leon, the only state to receive federal funding for "green
projects". These projects include USD 284,500 for the purchase of
a new environmental monitoring station, US 103,000 for reducing
health risks in landfills, and USD 1.1 million for research into
clean development mechanisms. (Monterrey)
FEELEY