Cablegate: Calderon Names Economic Cabinet

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UNCLAS SECTION 01 OF 06 MEXICO 006571

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STATE PASS TO USTR FOR MELLE AND EIESSENSTAT
STATE FOR A/S SHANNON
STATE/INR/B
NSC DAN FISK
STATE FOR WHA/MEX, WHA/EPSC, EB/ESC
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND SLADISLAW
DOC FOR ITS/TD/ENERGY DIVISION
FEDERAL RESERVE (CARLOS ARTETA)

SENSITIVE, SIPDIS

E.O. 12958: N/A
TAGS: ECON ELAB PGOV PREL ETRD PINR MX
SUBJECT: CALDERON NAMES ECONOMIC CABINET

REF A. Mexico 6516
B. Mexico 6424
C. Mexico 6065
D. Monterrey 1361
E. Mexico 6413
E. Mexico 5810
G. Mexico 6542
H. Mexico 6067

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SUMMARY
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1. Mexican stocks jumped 1.6 percent on November 21 after
President Elect-Calderon announced his Economic Cabinet.
Many of the members were expected, having worked on the
transition team, and/or for the Fox Administration. The new
Secretary for Telecommunications and Transport Luis Tellez,

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however, was a member of the PRI who worked for past PRI
governments. The only somewhat surprising choice is
Secretary of Energy Georgina Kessel Q but she served as

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head of the Mexican Federal Regulatory Commission on
Energy. Together, the new cabinet represents a consistent
message that Calderon intends to continue the policies that
have led to Mexico's macro-economic success and stability.
The cabinet includes some U.S.-educated members, including
former Fulbrighter (Kessel) and at least one participant in
a U.S. Embassy International Visitor Program (Tourism
Minister Elizondo). Since being officially named winner of
the Presidential election in September 2006, Calderon has
consistently called for economic reforms to create jobs by
promoting public and private investment in infrastructure
and undertaking fiscal, labor, energy, education and other
economic reforms to improve Mexico's competitiveness (REFS
A-D). The key for the new cabinet will be to move beyond
rhetoric and actually implement reform. This would require
tackling the monopolies, oligopolies and other special
interests that have blocked reform in the past (REF E).
Specific challenges facing each Minister are described
below. END SUMMARY

2. On November 20, President-elect Calderon announced his
Economic Cabinet:
Secretary of Finance, Agustin Carstens

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Secretary of Energy, Georgina Kessel

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Secretary of Economy, Eduardo Sojo Garza Aldape

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Secretary of Communications and Transport, Luis Tellez

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Kuenzler
Secretary of Labor, Javier Lozano Alarcon

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Secretary of Tourism, Rodolfo Elizondo

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Agustin Carstens, Secretary of Finance
--------------------------------------

3. (SBU) Agustin Carstens' expected appointment as
Secretary of Finance (Hacienda) will undoubtedly be well-

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received in the financial community, as he is known to be a
solid economist and a skillful negotiator. Carstens, who
was the head of Calderon's economic transition team, has
already begun work on his initial tasks of developing the
new government's economic program and the 2007 federal
budget. When announcing Carstens' appointment to his
transition team in October, Calderon noted that Carstens
was charged with designing an economic program that would
maintain macroeconomic stability and strengthen public
finances in order to improve Mexico's competitiveness and
generate jobs. In accepting his appointment, Carstens
pledged to work to boost employment and combat poverty.
Carstens had earlier been quoted saying that in order to
achieve faster growth and poverty reduction, successful
integration needs to be accompanied by prudent
macroeconomic policies and a deepening of structural
reforms.

4. (U) Carstens was Deputy Managing Director at the IMF
from August 1, 2003 to October 16, 2006 and an Executive
Director at the IMF from 1999 to 2000. Prior to taking his
position as the Fund's Deputy Managing Director, Carstens

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was Mexico's Deputy Secretary of Finance. He also held
senior positions at the Bank of Mexico, including those of
head of operations and chief economist, and he was an
Alternate Governor for Mexico at the Inter-American
Development Bank and the World Bank. Born in 1958, Mr.
Carstens received his BA in Economics from the Autonomous
Technological Institute of Mexico (ITAM) in 1982, and his
MA and Ph.D. in Economics from the University of Chicago in
1983 and 1985, respectively. Mr. Carstens has published
many articles in leading journals in Mexico and abroad. He
is fluent in English. (See REF H for additional information
on Carstens.)

------------------------------------
Georgina Kessel, Secretary of Energy
------------------------------------

5. (U) In the press conference announcing her appointment
as Mexico's first female Secretary of Energy, Georgina
Kessel Martinez underscored the importance of the petroleum
sector for public finances and said she world work for a
significant modernization of the sector, preserve the
national patrimony, and seek more autonomy for Pemex, the
national monopoly, as well as improve the firm's
operational capacity.

6. (SBU) Kessel's greatest challenge will be reversing
Mexico's declining oil production (REF E) and addressing
massive inefficiencies in Pemex. The Mexican constitution
forbids private or foreign investment in oil production.
Absent fiscal reform to reduce the amount of Pemex revenue
going to support the state budget, it is difficult to see
how the firm can obtain the funds it needs for required
investment to prevent significant production declines over
the next five to eight years. Finding policy options
(including possibly joint ventures and some foreign
investment) that will bring in needed investments will be a
key preoccupation.

7. (U) Kessel's most recent position, before being named
Energy Secretary was as director of the Mexican Mint (Casa
de Monedas). She also served as the first President of
Mexico's Energy Regulatory Commission, the CRE. She has
also served in the Mexican Secretariat of Finance/Treasury
(Hacienda) as an Assistant Secretary for Investment and
Privatization and at the Secretariat of Trade and
Industrial Promotion, a precursor to today's Secretariat of
the Economy.

8. (U) As an academic, Kessel taught for nine years at the
prestigious Instituto Tecnologico Autonomo de Mexico
(ITAM). Starting her career as an office secretary in the
travel industry, later she earned a bachelor's degree in
economics at ITAM and won a 1980 Fulbright scholarship to
Columbia University where she earned a Masters and PhD,
also in economics. The Fulbright panel considering her
candidacy singled her out for leadership potential.

9. (SBU) Kessel worked with leading Mexican economists
Enrique Davila and Santiago Levy to develop Mexico's "Plan
Puebla Panama" that supports development of Southern Mexico
and Central America. This could suggest that the Calderon
administration may retain the Fox team's Mesoamerican
Energy Integration Plan (PIEM), an outgrowth of the Plan
Puebla Panama. Earlier key Calderon staffers had suggested
that the incoming Calderon team would scrap the PIEM.

--------------------------------------------- --
Eduardo Sojo Garza Aldape, Secretary of Economy
--------------------------------------------- --

10. (U) In accepting his appointment as Secretary for the
Economy, Eduardo Sojo Garza Aldape promised to promote
foreign investment and strengthen international trade in
order to make Mexico one of the most attractive investment
destinations in the world. He also pledged to work with
the Mexican Congress and other sectors of the country.

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During the recent presidential campaign, Sojo worked in the
Calderon war room on economic policy issues. Since the
election, he has been Calderon's transition coordinator.
Sojo is well-regarded in Mexico and brings with him a
considerable amount of policy and academic experience in
economic affairs.

11. (SBU) Sojo has pointed with great pride to the
economic (and political) stability that the Fox
Administration is bequeathing to its successor but has
lamented its inability to gain congressional support for
the sort of structural reforms necessary for a higher
growth rate. As Secretary of Economy, Sojo will be
responsible for international trade, foreign investment,
industry and commerce, small and medium-sized enterprises,
and intellectual property rights. Key challenges that Sojo
will face include the implementation of Mexico's final and
most painful NAFTA obligations (including corn and beans).
Other challenges are strengthening the international
competitiveness of Mexican industry, and diversifying
Mexico's exports (at present, the U.S. takes approximately
85 percent of Mexico's exports).

12. (U) Sojo served as Coordinator of Public Policy in the
Office of the President during much of the Fox
Administration, and had worked on Fox's transition team in
2000. Prior to that, he had been Coordinator of then-
Governor Fox's Economic Cabinet for the state of
Guanajuato. Even earlier, he had been Technical Director
and Short-Term Statistics Director of INEGI (National
Geography and Statistics Institute). From 1979 to 1982 he
performed a variety of activities as an analyst in the
General Economic and Social Policy Bureau. He has been a
researcher and professor at the Monterrey Institute of
Technology and Advanced Studies, and has authored numerous
economic articles in various periodicals and reviews.
Together with Nobel Prize winner Lawrence Klein, he
published research on combined time series and econometric
modeling. Born January 9, 1956 in Leon, Guanujuato, Sojo
earned his Bachelors in Economics from the Monterrey
Institute of Technology and Advanced Studies, and a Masters
and PhD from the University of Pennsylvania.

--------------------------------------------- ---------
Luiz Tellez Kuenzler, Secretary of Communications and
Transport
--------------------------------------------- --------

13. (SBU) In accepting his appointment as Secretary of
Communications and Transport, Luis Tellez Kuenzler pledged
to make infrastructure a priority. He said that providing
adequate infrastructure to the most vulnerable regions of
Mexico was the only way to close the economic gap between
Mexico's regions. He said the way to help the poorer
regions was to expand coverage of infrastructure and
telecommunications, and increase competitiveness.

14. (SBU) Besides Mexico's underdeveloped infrastructure,
especially in the southern part of the country, Tellez's
greatest challenge will be to encourage competition in the
monopoly/oligopoly-dominated telecom and transportation
sectors, and encourage the roles of regulators such as the
Federal Telecommunications Commission (Cofetel) and the
Federal Competition Commission (Cofeco). The current
Secretariat Telecommunications has favored dominant firm,

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Telmex, but Cofetel and Cofeco did limit his most recent
attempts at favoritism (SEE REF G) While Telemex remains a
near monopoly in fixed telephone service, it is starting to
face some challengers. Fixed-line competition will deepen
now that the merged company Axtel/Avantel has laid 8,000
kilometers of cable and has a readily available internet
protocol (IP) based solution for calls. Tellez comes into
office in a time of great technological development in the
world, though the benefits of this technology are not
available to many Mexicans. He faces the challenge of
bringing technology "to the last mile" in Mexico,
encouraging the spread of broadband and WiMax access while

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at the same time making sure that such simple technology as
telephone lines are also available to underserved
populations of Mexico.

15. (U) Tellez has been a member of the PRI, but may not
currently be an official PRI member since he endorsed
Calderon in the Presidential campaign. (Comment: PRI
members tell Emboffs they do not consider people like
Tellez to be PRI members of Calderon's government because
they had endorsed Calderon. End Comment) Tellez is
currently the Mexico City Managing Director of The Carlyle
Group, one of the world's largest private equity firms.
Before joining the Carlyle group, he was Executive Vice
President and CEO of DESC, SA de CV (DESC is a firm working
in Mexico with activities in auto parts, chemicals, food
and real estate.) In addition to his strong connections
with the finance and business community, he has solid
government experience. Tellez served as Secretary of
Energy from 1997 to 2000, previous to which he served as
President Ernesto Zedillo's Chief of Staff. In 1998 and
1999, Mr. Tellez headed Mexico's oil diplomacy efforts and
played a key role in restoring stability in international
oil markets and oil prices.

16. (U) Tellez earned his B.S. in economics from the
Instituto Tecnologico Autonomo de Mexico and his Ph.D. in
economics from MIT. From 1987 to 1993, Tellez served in
several senior positions in the Mexican government,
including Head Economist at the Ministry of Treasury and
Undersecretary of Planning ant the Ministry of Agriculture.
After the Mexican peso crisis of 1995, Tellez helped secure
the financial rescue package of USD 50 billion granted to
Mexico by the US and other major financial institutions.

-----------------------------------------
Javier Lozano Alarcon, Secretary of Labor
-----------------------------------------

17. (U) In accepting his appointment as Secretary of
Labor, Javier Lozano Alarcon promised to work for a
competitive economy in Mexico, so that people would not
have to emigrate; changing the dynamic so that labor would
not leave the country and investment would come in. He
pledged to work with the unions and workers, without
discrimination by acting as an intermediary to promote
negotiation and agreement. He also pledged to comply with
Article 123 of the Constitution, the Federal Labor Law.

18. (U) Incoming President Felipe Calderon has repeatedly
said that job creation will be one of the highest
priorities of his administration. In order to help
Calderon accomplish this job creation, Mexico's Secretary
of Labor designate, Javier Lozano Alarcon, will face many
challenges. In post's view four of the more significant
challenges will be as follows:

19. (U) One of the very first things Lozano will have to
do is familiarize himself with Mexico's organized labor
movement. Lozano is not a new player on Mexico's
economic/political scene but up until now he has not been
known for his expertise on labor or labor related issues.

20. (U) Next, in order to help with job creation Lozano
will have to address the problem of competitiveness. This
will be a significant task since there appears to be little
concurrence in Mexico on exactly what is meant by
competitiveness and even less agreement on how
competitiveness should be measured.

21. (U) The third item on Lozano's to do list, should be
to promote a major reform of Mexico's labor laws. There is
widespread agreement among all the relevant sectors of
Mexico's economy that the country's labor laws are
inflexible, unrealistically slanted in favor of the worker
and nearly impossible to comply with even for those
employers who might be inclined to do so. Unfortunately,
there is almost no agreement on how to strike a balance

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between changes that could foster competitiveness and
maintaining the correct level of worker rights.

22. (U) Finally, as Labor Secretary, Lozano should be
willing to help the incoming Calderon administration to
take on the task of regulating or in some way organizing
the informal sector of Mexico's economy. This is another
area of disagreement where some say that the informal
economy makes up a minimum of 23 percent and others
(including the OECD) say a maximum of 43 percent of
Mexico's workforce.

23. (U) Lozano, an attorney, was most recently working as
a private consultant on policy and telecommunications,
having left government to work on the Calderon campaign
since its early days. He is also a weekly contributor to
the El Universal newspaper, and the Magazine Vertigo,
Publishing Advisor for the magazine El Seminario, and
commentator for the radio program "Financial Forumula" and
TV Azteca program, "Puebla." Lozano also served as
Academic Coordinator for Personnel Management for the
National Public Administration Institute, and is a law
professor at the Escuela Libre (Free University) of Mexico
City, and at the University of Anahuac del Sur.

24. (U) In March 2003, Lozano was appointed Representative
of the State of Puebla in Mexico City, and later became
Puebla's General Coordinator of the Commission for
Transparency in Public Sector Lending, whose main
objectives were to promote transparency and prevent
corruption in provision of public services. He resigned
these positions in January 2005 to join the Calderon
campaign.

25. (U) In March 2001, Lozano founded the firm Javier
Lozano and Associates as "strategic consulting firm for
projects and companies."

26. (U) In May 1999, Lozano was appointed Under Secretary
for Social Communication for the Ministry of the Interior
(Secretaria de Gobernacion), acting as liaison between the
federal government and the electronic and printed media, in
addition to establishing broadcasting and publicizing
criteria for Ministries and federal state-owned entities.
Lozano was also Chairman of the Governing Board for the
Mexican Radio Institute and Chairman of the Notimex Board
of Directors.

27. (U) In April 1998, Lozano was appointed President of
the Federal Telecommunications Commission (Cofetel). In
August 1996, he had been appointed Communications under
Secretary for the Ministry of Telecommunications and

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Transport. There, he coordinated the division in charge of
procedures for granting concessions and permits for radio
and television, and initiated the Rural Telephony Program.

28. (U) In January 1995, Lozano was designated Chief of
Staff (Oficial Mayor) for the Ministry of
Telecommunications and Transport in charge of general
management of human, financial and material resources, and
coordinating the legal commissions that prepared the drafts
for amending article 28 of the Constitution to allow
private investment in satellites and railroads; as well as
for preparation of the Regulations for Railway Services,
the Federal Telecommunications Law, the Airport Law and the
Civil Aviation.

29. (U) From December 1994, Lorenzo had served as
Corporate Comptroller General for Pemex. Thereafter, he
was designated Director General for Standards and
Administrative Development in the Under Secretariat for
Spending of the Ministry of Finance and Public Credit,
where he worked on civil service policies of the federal
public administration, and norms applicable to public
acquisitions and works. At that time, he coordinated
preparation of the draft Law on Public Acquisitions and
Works, which was enacted in 1994.

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30. (U) In 1989, Lorenzo had started working for the
Mexican Ministry of Finance as Director for Private
External Credit. At the same time, he worked as Minutes
Secretary (Secretario de Actas) for the Banking Divestiture

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Committee and participated in the commissions in charge of
drafting the Credit Institutions Law, and the Law to
Regulate Finance Groups. He took the position as Advisor
Coordinator for the Under Secretary of Standards and Budget
Control within this Ministry, where he participated in the
first work teams that created Mexico's Retirement Savings
System. From May 1987 to October 1989, Lozano was Legal
Manager of the Petrochemical Sector for Grupo Industrial
Alfa. From December 1984 to May 1987, he worked as a law
clerk at the Bank of Mexico (Mexico's Central Bank) Legal
Orders Directorate. Lozano is a graduate of the Escuela
Libre de Derecho (Law) in Mexico City in 1986, and was born
in Puebla on November 21, 1962. He is married to Silvana
Ponzanelli, and has four children.
-------------------------------------
Secretary of Tourism Rodolfo Elizondo

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31. (U) Rodolfo Elizondo was unable to attend the ceremony
announcing his re-appointment as Secretary of Tourism,
since he is on a working visit to Japan. Elizondo has held
the position of Secretary of Tourism since August 1, 2003
when he replaced Fox's first tourism secretary Leticia
Navarro after the PAN lost ground in mid-term elections of
that year.

32. (SBU) Elizondo has supported what were sometimes
considered radical changes to transform the tourism sector.
During his time as Senator, he served on the Commission for
Tourism and was a strong proponent for installing casinos.
He has publicly stated that the new government will have to
greatly increase investment in the sector and modify the
Tourism law if it plans to achieve Calderon's goal of
making Mexico the fifth world tourism power during the next
sexenio.

33. (SBU) Politically, Elizondo has been known for being
more pro-Fox than pro-PAN and is known for being blunt in
speaking his mind. This has not endeared him to the
traditional PAN elite but has appeared to have little
effect on his work as Tourism Secretary.

34. (U) Prior to his promotion to the cabinet level
position, he served as Fox's communications
director/spokesperson from Janurary 1, 2002 and, before
that, was Fox's Coordinator for the President's Office of
Civic Alliance. He also served as Political Coordinator
for Fox's presidential campaign where he was in charge of
bolstering support outside of PAN.

35. (U) Elizondo is a 23 year member of PAN hailing from
the Duango province. Since his win as Mayor of Durango, he
has also served 2 terms as a federal deputy and has been a
Senator. In 1990, during his time as Federal Deputy
Coordinator for PAN he was the recipient of an individual
International Visitor grant. He has served as manager and
director of numerous businesses in his home state.
Elizondo was born in Durango, Durango on July 18, 1946. he
holds a Bachelor's in Business Management from the
Monterrey Institute of Advanced Studies and a degree from
the University of Kansas.

BASSETT

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