VZCZCXRO9596
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #2746/01 2612234
ZNR UUUUU ZZH
R 182234Z SEP 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 8295
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
UNCLAS SECTION 01 OF 04 MEXICO 002746
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 - September 18
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:
TELECOMMUNICATIONS AND INFRASTRUCTURE
-------------------------------------
TELECOM GROWTH MODERATES BUT STAYS POSITIVE - Mexico City
ECONOMY AND FINANCE:
--------------------
GOVERNMENT ANNOUNCES 32 BILLION PESOS RAISED THROUGH BOND ISSUE -
Mexico City
COPARMEX IN JUAREZ OPPOSES CALDERON'S ECONOMIC PACKAGE - Ciudad
Juarez
REPORT EMPHASIZES POOR QUALITY OF NUEVO LEON'S FISCAL LEGISLATION -
Monterrey
NUEVO LEON'S GOVERNOR ELECT PROMISES AUSTERITY: DETAILS UNCLEAR -
Monterrey
TRADE AND INVESTMENT:
---------------------
CHIHUAHUA EXPORTS RISE 30% FROM MAY TO JUNE 2009 - Ciudad Juarez
SMALL AND MEDIUM ENTERPRISES CONTINUE TO STRUGGLE IN THE NORTHEAST:
AUTOMOTIVE SECTOR REMAINS IN CRISES - Monterrey
ENGLISH TRAINING GOES ONLINE IN REYNOSA - Matamoros
FAMSA CONTINUES RESTRUCTURING - MONTERREY
AMIDST ECONOMIC CRISES, NEW INVESTMENT ARRIVES IN THE NORTH EAST -
MONTERREY
ENVIRONMENT AND HEALTH
----------------------
NORTH EAST BRACES FOR INFLUENZA - MONTERREY
--------------------------------------
TELECOMMUNICATIONS AND INFRASTRUCTURE:
--------------------------------------
3. (U) TELECOM GROWTH MODERATES BUT STAYS POSITIVE: Mexico's
telecom sector recorded 11% annualized growth in 2009, according to
Federal Telecommunications Commission data published 7 September.
This continues a sharp drop in rate of growth from a 2008 peak of
37.6% and is the lowest figure since 2002. As during the 2001
downturn and mirroring this year's worldwide trend, while telecom
growth has slowed considerably it remains positive. Expansion of
mobile phone traffic measured by minutes of talk time dropped
sharply yet still grew 15.5% year-on-year. 1.25 million new users
turned on cell phones. Incoming international call traffic in
minutes declined 11.8%, a sign of decreased purchasing power in the
Mexican expatriate community. National long distance performed
better, registering a drop of 2%. Fixed phone lines bucked the
worldwide trend to increase Mexico's fixed line count slightly, by
2.4% against the same period year prior. This likely results from
Mexico's implementation of number portability and carriers'
introduction of triple play voice/data/video packages with
discounted voice components. June 2009 phone tariffs as measured by
Banxico's INPC consumer price index fell 6.99% in real terms against
June 2008, continuing a slow but long-term downward trend. Cable
and satellite TV recorded solid growth rates of 9.2% and 13.2%,
respectively; the technologies continue to expand from small bases
to fulfill unmet demand. (Mexico City)
-------------------
ECONOMY AND FINANCE:
MEXICO 00002746 002 OF 004
-------------------
4. (U) GOVERNMENT ANNOUNCES 32 BILLION PESOS RAISED THROUGH BOND
ISSUE: Finance Secretary Agustin Carstens Sept 14 announced that
the government had raised 32 billion pesos (2.4 billion dollars)
through a 13-year bond issue backed with Mexico's oil stabilization
fund, which local banks bought. Bonds were sold through a trust,
meaning that they will not widen this year's budget deficit, which
the GOM estimates at 2.1% of GDP. According to Carsten, the issue
exceeded the 26 billion pesos originally considered and will finance
state and local governments, which have been forced to cut spending
because of recession. The oil-backed bond issue will ease fiscal
pressure on state and local governments. This may help the GOM
negotiate its 2010 economic package with the main opposition, the
PRI, which has a working majority in the lower house of Congress.
(Mexico City)
5. (U) COPARMEX IN JUAREZ OPPOSES CALDERON'S ECONOMIC PACKAGE: The
Juarez chapter of Coparmex, a PAN-sympathetic business association,
announced its opposition this week to President Calderon's September
9th tax proposal. The proposal aims to limit the widening of
Mexico's fiscal deficit by strengthening non-oil tax collections.
In a press release, Coparmex said it will lobby Chihuahua's federal
Representatives and Senators to block the passage of the proposal.
The President's plan calls for higher excise and income taxes, as
well as the introduction of a new tax that has been labeled the
"anti-poverty tax." According to a recent CreditSuisse report, GOM
estimates that as a result of the proposed taxes, non-oil tax
revenues could increase from 9.2% of GDP in 2009 to 10.8% of GDP
next year. The bulk of the increase would come from income taxes,
which would increase from 5.0% of GDP in 2009 to 5.6% of GDP next
year. In recent months, rating agencies have threatened to
downgrade Mexico's investment-grade debt rating if it does not
reduce its dependence on oil, which accounts for almost 37% of
federal revenue. In the Coparmex statement, the group specifically
argued against the plan's proposed hike in the maximum income tax
rate on individuals and corporations from 28% to 30% and the
increased tax on cash deposits from 2% to 3%. Raising taxes which
will impact investment and savings during a recession, the group
said, will deter investment and increase informality. (Ciudad
Juarez)
6. (U) REPORT EMPHASIZES POOR QUALITY OF NUEVO LEON'S FISCAL
LEGISLATION: Amid calls for fiscal reform at the national level,
according to a report prepared by the University of Guadalajara, the
State of Nuevo Leon has fallen from 16th to 31st position over the
last five years among Mexican states in terms of quality of fiscal
legislation. The report ranks the health of each state government's
fiscal legislation according to ten indicators such as transparency,
compliance, and the autonomy of supervisory bodies.Nuevo Leon's
legislature is currently debating the adoption of fiscal reform.
While state Governor Natividad Gonzlez Pars publicly supports
passage of the new fiscal regime, disagreement among parties in the
legislature has thus far prevented passage of reform necessary to
bring the state's fiscal legislation in line with national
standards. (Monterrey)
7. (U) NUEVO LEON'S GOVERNOR ELECT PROMISES AUSTERITY: DETAILS
UNCLEAR: Nuevo Leon's Governor Elect Rodrigo Medina expressed his
intention to pursue not stimulus, but austerity in the face of the
current economic and fiscal crises. Interviewed during the opening
of Nuevo Leon's most recently elected Congress, Medina noted that
his team is currently studying ways to reorganize state offices in
an attempt to streamline the bureaucracy. The depth of Medina's
commitment to austerity is not yet clear: he did not, for example,
express any intention to reduce personnel. Rather, Medina
emphasized the need to modernize Nuevo Leon's administration and
return more value to the citizenry. (Monterrey)
---------------------
TRADE AND INVESTMENT:
---------------------
8. (U) CHIHUAHUA EXPORTS RISE 30% FROM MAY TO JUNE 2009: Exports
increased by almost 30% from May to June 2009 (May: US$ 1.53
billion; June: US$ 1.9 billion) according to Chihuahua's Secretary
for Industrial Development. The June rise in exports coincides with
an 8% increase in foreign direct investment (FDI) to Chihuahua from
the first to second quarter of 2009 and the first increase in formal
sector job creation in a year from May to June. Despite the
positive month-over-month data, exports from January through June
MEXICO 00002746 003 OF 004
were down approximately 25% compared with the same period in 2008
(Jan - June 2009: US$ 9.9 billion; Jan - June 2008: US$ 13.3
billion). (Ciudad Juarez)
9. (U) SMALL AND MEDIUM ENTERPRISES CONTINUE TO STRUGGLE IN THE
NORTHEAST: AUTOMOTIVE SECTOR REMAINS IN CRISES: 2,163 enterprises,
each employing between 1 and 250 individuals, went bankrupt between
September 2008 and July 2009 according to information provided by
the Mexican Institute of Social Security (IMSS). Nuevo Leon saw the
most bankruptcies at 977, followed by 827 in Coahuila, and 359 in
Tamaulipas. These statistics represent a reduction of 1.8% of
registered enterprises in this category. Large firms have suffered
as well: among those employing more than 1,000 workers, 44 have
failed in these three states. Luis Cuerda, Director of Economic
Development for the State of Coahuila, attributes these numbers to a
drop in economic activity in the automotive sector. While Gabriela
Dib, the Secretary of Industry and Commerce of Nuevo Leon, voices
cautious optimism for a speedy recovery in this sector, signs of
such a recovery are not yet evident. August 2009 registered a 34.3%
decline in production and a 31.6% decline in sales compared to 2008,
as consumers postponed purchases in the face of uncertain economic
conditions. Demand has fallen dramatically among markets to which
manufacturers operating in Mexico export: purchases in the US fell
37.5%, Asia 70.6%, Europe 48.5% Latin America 33.1%, and Canada
8.2%. (Monterrey)
10. (U) ENGLISH TRAINING GOES ONLINE IN REYNOSA: At the September
Reynosa Maquila Association Meeting, Derly Rivas, Reynosa Director
of Industry, promoted the local roll out of a national program to
assist Mexicans in learning English. The Mexican Secretary of
Public Education (SEP in Spanish) program "Tell Me More Campus
Online," is available to citizens at home via the internet. Reynosa
is supplementing the national effort with local computer labs to
make the program available to residents without internet access or
computers at home. Mr. Rivas promoted the program to local maquila
managers as an option to assist their employees in learning English,
and a way to save corporate training funds. (Matamoros)
11. (U) FAMSA CONTINUES RESTRUCTURING: Monterrey based
manufacturing, retail, and banking conglomerate FAMSA recently
completed its third and final step in its planned restructure.
After having consolidated its financial operations, and later
issuing $200,000,000 MEX worth of stock - bringing it to a market
capitalization of $721,600,000 USD - FAMSA has now issued
$1,000,000,000 MEX in debt. FAMSA intends to use the proceeds to
cover commercial paper expiring within 12 months. (Monterrey)
12. (U) AMIDST ECONOMIC CRISES, NEW INVESTMENT ARRIVES IN THE
NORTH EAST: John Deere recently announced an investment of
approximately $70M USD in plants located in Ramos Arizpe, Coahuila,
and San Pedro Garza Garcia, Nuevo Leon. According to Regional
Director Recardo Lozano, the additional capacity would increase the
plants' steel consumption by 40% to 100K tons by 2012. Lozano
estimated that these investments in capacity could result in as many
as 400 new agricultural equipment manufacturing jobs.
Meanwhile, the truck assembly plant established this year by the US
firm Daimler in Saltillo, N.L. has begun to attract more investment
to the area. Grupo Avante, Desarrollos Globales Alianza has
invested approximately $19M USD in a local industrial park
established for Daimler's suppliers, and Buro Inmobiliario National
has built a nearby hotel for $5M USD. (Monterrey)
----------------------
ENVIRONMENT AND HEALTH
----------------------
THE NORTH EAST BRACES FOR INFLUENZA: As Mexico prepares for a second
wave of the H1N1 virus, Nuevo Leon's Secretary of Health reported
Sunday, September 13, that the number of confirmed infections had
risen in that state to 1,024, nearly doubling within two weeks.
Mexico's Secretary of Health, Jose Angel Cordova, noted the increase
in North East of Mexico, warned that affected states should expect
more infections within the next 7 weeks, and asked them to make
preparations accordingly. In Nuevo Leon, several schools cancelled
sessions for entire classes in which cases had been registered,
drugs are being stockpiled, and local area hospitals are attempting
to accelerate scheduled surgeries in order to maximize available
beds. Meanwhile, in a presentation held at the Monterrey Tec --
EGADE, Nuevo Leon's leading business school, representatives of the
accounting and consulting firm Deloitte reported to local business
leaders that it's surveys indicated that few local business were
prepared for the likely consequences of a second wave of influenza.
MEXICO 00002746 004 OF 004
By Deloitte's estimate, the second wave could impact up to 30% of
business employees. According to Deloitte, 4/5 of local firms would
have difficulty maintaining operations if workers were to be out for
more than 2 weeks. Few businesses are really prepared, with cross
trained workers and a contingency plan for scaled-down operations.
(Monterrey)
PASCUAL