VZCZCXRO2814
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #3165/01 1592304
ZNR UUUUU ZZH
R 082304Z JUN 06
FM AMEMBASSY MEXICO
TO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/SECSTATE WASHDC 1521
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 MEXICO 003165 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/MEX, WHA/EPSC 
STATE PASS USAID FOR ROBERT KAHN 
TREASURY FOR IA MEXICO DESK - JASPER HOEK 
COMMERCE FOR ITA/MAC/NAFTA ANDREW RUDMAN 
 
E.O. 12958: N/A 
TAGS: ECON EIND EINV ETRD MX
SUBJECT: SONORA PROVIDES SOFT LANDING TO NEW FOREIGN 
INVESTMENT 
 
REF: A. MEXICO 864 
     ¶B. MEXICO 1884 
 
¶1.  SUMMARY.  The State of Sonora, often one of Mexico's 
largest FDI destinations due to its proximity to the U.S. 
border, has boosted its success in business and capital 
attraction with its Soft Landing Program.  Created as part of 
the state's incentive package to attract Ford to Hermosillo, 
the program provides state of the art office space, including 
all infrastructure and support services, as well as 
relocation and consulting assistance to businesses free of 
charge while they establish their permanent facilities in the 
state.  Soft Landing currently operates in Hermosillo and 
Nogales.  A highly educated work force and modern 
infrastructure coupled with Soft Landing give Sonora a 
competitive edge in FDI attraction.  END SUMMARY. 
 
OPEN FOR BUSINESS - IMMEDIATELY 
------------------------------- 
 
¶2.  Hermosillo PO and Embassy Econoff met with Hector 
Sanabria, Promotion Director of the Economic Development 
Council for Sonora, and Martha Campa, Foreign Trade Promotion 
Director of the Economic Development Council for Sonora. 
According to Sanabria, Soft Landing was created by the State 
of Sonora as part of the incentive program to convince Ford 
to locate in Hermosillo.  The creation of the program was 
mandated in the state's economic development law.  Soft 
Landing makes available modern office space, including all 
infrastructure such as internet and telecommunications as 
well as support services from business experts including 
secretarial services, free of charge to companies who are 
 
SIPDIS 
relocating or opening a new facility in Sonora.  It also 
provides facilities to host meetings (including food service) 
and assistance with relocation such as the location of 
housing and business properties.  Soft Landing can even be 
used as a physical address during the transition stage. 
Companies may also consult with a dedicated staff of 
individuals who research all federal programs and funds to 
determine all available incentives. The program currently has 
16 office spaces available in Nogales and Hermosillo.  Four 
companies are currently working out of the Soft Landing 
facilities. 
 
AN ECONOMIC TRANSFORMATION 
-------------------------- 
 
¶3.  Sonora, according to Campa, has undergone an economic 
transformation in the 20 years since Ford arrived in 
Hermosillo in 1986. The state is home to 43 industrial parks. 
 The State's overall development vision is to move its 
economy towards cutting edge industries such as metal 
mechanics, software development and aerospace, with one third 
of all aerospace companies in Mexico having a presence in 
Sonora.  These companies supply such companies as GE, Airbus 
and Honeywell. 
 
A COMPETENT WORK FORCE 
---------------------- 
 
¶4.  Sanabria explained that Sonora has 31 universities and 
eight technical universities which produce 9,000 graduates a 
year.  Sonora, he said, is dedicated to attracting industries 
with competitive salaries to employ this work force.  Over 50 
percent of the state's budget is dedicated to education. 
Nearly 80 percent of the state's population is native to 
Sonora and the state, he claimed, has the lowest personnel 
turnover and absenteeism rates in the country.  Campa 
indicated that the state is working with companies  to match 
CONACYT (federal science and technology program that provides 
scholarships) scholarships in key sectors. 
 
QUALITY INFRASTRUCTURE 
--------------------- 
 
¶5.  Campa and Sanabria view the state's highly developed 
infrastructure as one of its best assets when promoting the 
State.  The port of Guaymas is more cost effective than 
either Long Beach or Manzanillo and is connected via rail 
through a free trade corridor to the U.S.  The Puerto 
Libertad Gas Terminal is scheduled for completion in 2009. 50 
percent of its production will be sold to El Paso Energy. 
The pair also outlined current infrastructure projects and 
future goals of the pro-business governor, Eduardo Bours.  An 
alliance exists with Baylor University to construct new 
 
MEXICO 00003165  002 OF 003 
 
 
hospital facilities in Hermosillo.  The Governor has created 
the IMPULSOR project which will create a coastal highway 
systems, develop the marina in Guaymas and improve tourism 
infrastructure. 
 
TARGETING SPECIFIC COMPANIES 
---------------------------- 
 
¶6.  A study by the state revealed that 85 percent of support 
companies and suppliers are tied to one anchor company. 
Campa highlighted this as a weakness and said that the state 
is working to develop new markets so that suppliers are not 
dependent on one client.  The goal is to link Tier 1 with 
Tier 2 and Tier 3 companies (Tier 1 companies produce the 
final product while Tiers 2 and 3 produce parts of the final 
product) more effectively.  This goal is being achieved 
through courses at five regional offices that teach Mexican 
companies how to establish business relationships in the U.S. 
 Campa indicated that Sonora is also focusing on attracting 
business that can meet all of their supply chain needs in 
Mexico with inputs from local support services. 
 
 
ECONOMIC DEVELOPMENT LAW 
------------------------ 
 
¶7.  The Soft Landing Program was formed as part of the 2002 
Sonoran Economic Development law.  The law in Sanabria's 
words provided fiscal and non fiscal incentives and legal 
certainty to investors in the state.  Some incentives are 
specifically tied to projects.  A major goal of the law, he 
continued, is to provide prompt and reliable assistance with 
all permitting, licensing and other government procedures. 
Soft Landing creates linkages to all three levels of 
government.  The program originally began with half of its 
funding from the private sector and half from the public 
sector.  In 2002, 15 percent of its funding came from a two 
percent State payroll tax.  All Soft Landing projects must be 
approved by a state economic development council comprised of 
government authorities, union leaders and businessman.  Both 
Sanabria and Campa noted that Governor Bours is the first 
businessman turned politician in Sonora and that he has 
become very active in Soft Landing and the economic 
development process. 
 
DEVELOPMENT CHALLENGES 
------------------------ 
 
¶8.  Hermosillo PO and Embassy Econoff met with Ricardo Platt, 
Secretary of the Economy for the state of Sonora on April 4. 
 
SIPDIS 
Platt recently left the private sector to take this position 
at the request of the Governor.  He explained that some 
issues, such as some of the world's highest telephone and 
internet rates that are charged by Telmex (according to the 
OECD), frustrated him in the private sector and are now an 
impediment in his work to attract foreign investment. 
According to Platt, while the state will do everything it can 
to get Telmex to lower its rates, it must find other 
incentives that outweigh this disincentive in the interim. 
Platt agreed with other industry groups (REF A) that it is 
difficult to attract foreign investment when there is not one 
voice representing Mexico to potential investors.  He alluded 
to a Sonora delegation that was in Texas and how the state is 
determining where and how it should market itself in the U.S. 
in relation to other Mexican government trade promotion 
efforts in the U.S. 
 
¶9.  Platt mentioned that Sonora has been contacted by other 
states who would like to use the Soft Landing program as a 
model for how to improve their own economic development. 
Platt does not foresee drastic changes in economic 
development in Sonora, or the Soft Landing Program, 
regardless of the outcome of the upcoming presidential 
election.   He noted that the program has continued during 
two gubernatorial administrations and is working now with a 
Mexican President from one party, a Governor from a second 
and the mayor from Hermosillo a third.  This experience, in 
Platt's view, has prepared the state to work with all 
political parties. 
 
COMMENT 
------- 
 
¶10.  Sonora's Soft Landing program has been a success for 
nearly five years during which industry groups and other 
 
MEXICO 00003165  003 OF 003 
 
 
states have publicly and privately complained about the 
difficulties of attracting investment due to the lack of 
incentives they can offer at the state and local level  (REFS 
A and B).  This issue has been discussed by the economic 
advisors of all of the leading candidates in the upcoming 
presidential election.  The Sonoran model has demonstrated 
that it can be effective even when different government 
authorities come from opposing parties.  The Soft Landing 
program should be considered as a model for other states to 
consider in their attempts to attract FDI and for the new 
federal government as it reviews its investment and trade 
promotion strategy. 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity 
 
GARZA