Identifier
Created
Classification
Origin
10MEXICO630
2010-02-22 15:51:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Mexico
Cable title:  

Mexico Economic Weekly - February 19, 2010

Tags:  ECON EFIN ETRD ENRG ELTN EAIR PGOV SENV MX 
pdf how-to read a cable
VZCZCXYZ0000
RR RUEHWEB

DE RUEHME #0630/01 0531552
ZNR UUUUU ZZH
R 221551Z FEB 10
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 0543
INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHME/AMEMBASSY MEXICO
UNCLAS MEXICO 000630 

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 - February 19, 2010

UNCLAS MEXICO 000630

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 - February 19, 2010


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:

--------------



FINANCE MINISTRY REVISES GROWTH PROJECTION UPWARD - Mexico City



NUEVO LEON, FOURTH HIGHEST TOTAL UNEMPLOYMENT - Monterrey



SECURITY AFFECTING JOB CREATION - Monterrey



NUEVO LEON EXPENDITURES EXCEED 2009 BUDGET - Monterrey



FUNDS FOR PUBLIC SAFETY LEFT UNUSED - Monterrey





TRADE AND INVESTMENT:

--------------



WIDOWS AT PASTA DE CONCHOS SUE GRUPO MEXICO IN ARIZONA - Mexico
City



FDI FLOWING INTO NUEVO LEON - Monterrey





ENERGY AND ENVIRONMENT:

--------------



MEXICO TO STUDY REALIGNING TAX SYSTEM TO ENCOURAGE GREEN PURCHASES
- Mexico City





LABOR:

--------------



STAND-OFF IN CANANEA CONTINUES - Hermosillo

--------------

ECONOMY AND FINANCE

--------------




3. (U) FINANCE MINISTRY REVISES GROWTH PROJECTION UPWARD: The
Finance Secretariat raised its 2010 GDP growth forecast to 3.9%
from 3.0%, citing indications of recovery in domestic and
international demand, after the Bank of Mexico (Banxico) -- which
estimates that GDP contracted 6.8% last year -- last month
increased its growth forecast for this year to 3.2-4.2%. Deputy
Finance Secretary Alejandro Werner earlier this month signalled
that the growth forecast could be increased, depending on economic

data. Since then, the national statistics institute (INEGI) has
reported that industrial production rose 1.6% year-on-year in
December -- the first increase since April 2008 -- with
manufacturing growing 4.3% year-on-year. Automotive output in
particular is driving the rebound -- helped by peso weakness during
the recession -- rising 104.2% year-on-year in January, according
to the Mexican Automotive Industry Association (AMIA). The Economy
Secretariat official who oversees the automotive sector, Ana Ruth
Solano, recently stated that output in the sector could rise 20%
during 2010 as a whole. While growth may surpass the revised
Finance Secretariat forecast and could exceed 4% as manufacturing
drives demand recovery, the GOM is likely to seek to maintain
international and domestic credibility by remaining relatively
cautious in its outlook. (Mexico City)




4. (U) NUEVO LEON, FOURTH HIGHEST TOTAL UNEMPLOYMENT: According
to the National Institute of Statistics and Geography (INEGI),the
number of unemployed workers (145,547) seeking jobs in Nuevo Leon
in the fourth quarter of 2009 was 64 percent higher than the same
period in 2008. The National Survey of Occupation and Employment
(ENOE) noted that only Coahuila, Durango, and three other states
rank higher than Nuevo Leon in rate of unemployment. While Nuevo
Leon is 6th highest in unemployment rate, it is the 4th highest in
total number of unemployed job seekers, behind the State of Mexico,
the Federal District, and Jalisco. In 2008, Nuevo Leon gained a
net total of 14,147 jobs (a number deeply affected by the 32,391
jobs lost in December 2008). In 2009, the state lost a net total
of 25,396 jobs. (Monterrey)




5. (U) SECURITY AFFECTING JOB CREATION: Companies did not create
between 40,000 and 50,000 potential jobs in Nuevo Leon in 2009 due
to security concerns and now face the prospect of a loss of 70,000
more in 2010 according to Marcelo Canales Clariond, president of
the Mexican Employers Federation in Nuevo Leon (Coparmex). He
estimated that the cost of additional corporate security in Nuevo
Leon has cost the nation 2-3 percent in GDP gains. (Monterrey)




6. (U) NUEVO LEON EXPENDITURES EXCEED 2009 BUDGET: Nuevo Leon
exceeded its State Expenditures Budget for 2009 by US$631 million
according to the Fourth Quarter Public Account of 2009. The state
government overshot its US$3.3 billion budget in 2009 in every
expense category. Public administration funds, which include
government salary increases, were US$116 million (108 percent) over
budget. In contrast, public security funds were only allowed to
spend US$1.2 million (1 percent) more than allocated despite the
deteriorating security situation. (Monterrey)




7. (U) FUNDS FOR PUBLIC SAFETY LEFT UNUSED: The Nuevo Leon State
Government was allotted US$20.5 million in federal funds in 2009 by
the Contribution Fund for Public Safety (FASP) according to the

National Public Security System, but only spent US$12.2 million.
Similarly, the municipalities of Monterrey, San Nicolas, Apodaca,
Escobedo, and Santa Catarina did not use any of the federal funds
allotted in 2009 for public security, while Guadalupe used 0.22
percent and San Pedro used 50 percent. On February 11, in response
to criticism, the mayors of the Monterrey metropolitan area blamed
the federal and state governments for delaying the delivery of the
Grants for Municipal Public Security (Subsemun) for 2009.
(Monterrey)



--------------

TRADE AND INVESTMENT

--------------




8. (U) WIDOWS AT PASTA DE CONCHOS SUE GRUPO MEXICO IN ARIZONA: On
February 19, three of the widows of 65 miners killed in a mine
explosion at the Pasta de Conchos mine in 2006 have brought a
lawsuit against Grupo Mexico and two of its wholly-owned
subsidiaries in Phoenix, Arizona. The explosion that collapsed the
mine and trapped the workers occurred on February 19, 2006. The
miners' widows cited their failure to get the Mexican courts to
take their case seriously for four years and also claimed to fear
for their lives for their protest. (Mexico City)




9. (U) FDI FLOWING INTO NUEVO LEON: On February 10, the
U.S.-based HEB supermarket chain announced a US$41.6 million
investment in four new stores in San Pedro, Juarez, and Zuazua,
Nuevo Leon. Construction began on the first of four stores in
December 2009. Meanwhile on February 12, Othon Ruiz Montemayor,
Nuevo Leon's Secretary of Economic Development, announced that
Japan's NGK Insulators will continue in its plans to invest US$244
million on a manufacturing plant for diesel particle filters in
Monterrey in 2010. The company purchased land and built a
warehouse before construction was postponed in 2009 due to the
economic crisis. Work on the plant will continue in the
second-half of 2010 and will ultimately create 650 jobs.
(Monterrey)



--------------

ENERGY AND ENVIRONMENT

--------------




10. (U) MEXICO TO STUDY REALIGNING TAX SYSTEM TO ENCOURAGE GREEN
PURCHASES: Green taxes, in conjunction with fiscal environmental
reforms, can help reduce unemployment according to a study on green
taxes done by the Public Finances Research Center of the lower
house. Finland, Sweden and Denmark, where the reduction of labor
taxes and social security contributions helped with income
redistribution of companies committed to the environment, and
Brazil and Colombia where tax incentives have been created to
support green energy use, can serve as models for Mexico during its
green tax policy development phase. In Mexico, such policy is just
developing. Currently Mexico's excise tax on gasoline (IEPS),tax
on new vehicles (ISAN),and tax for owning a vehicle (Tenecia) are
detrimental to environmental policy. The Finance Secretariat
announced that the government of France lent Mexico 185 million
euros to support Mexico in its climate change efforts. (Mexico
City)



--------------

LABOR



--------------




11. (U) STAND-OFF IN CANANEA CONTINUES: Despite the Mexican
court's February 11 ruling against striking miners in Cananea, an
estimated 250 of the union's (National Mine and Metal Workers Union
- SNTMMSRM) 1,200 members continue to occupy the site. Grupo
Mexico has offered severance pay to miners in order to end the
stand-off and re-start operations at the mine, but until now only
200 have accepted. Local political support, specifically from PRI,
PRD, and PT, for the miners appears to remain strong, and residents
fear violence might result from any use of force to displace the
miners. The Sonora State Congress and Governor Padres have
appealed to the Federal government to intervene but rule out the
use of force to resolve the matter. The ruling dissolved Section
65 of the National Mine and Metalworkers Union that had been
striking at Cananea for 31 months over health and safety concerns.
The situation is complicated by the union's support for Napoleon
Gomez Urrutia, in exile in Canada, avoiding arrest in Mexico on
corruption charges. Many believe the Mexican Workers Confederation
(CTM) will replace the National Mine and Metalworkers Union. As of
February 18, the strikers have not been officially informed by
Grupo Mexico of the dissolution of the contract. (Hermosillo)
FEELEY