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UNCLAS SECTION 01 OF 03 MEXICO 000276 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR A/S SHANNON 
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA 
STATE FOR EB/ESC MCMANUS AND IZZO 
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/ARUDMAN 
USDOC FOR ITS/TD/ENERGY DIVISION 
TREASURY FOR IA (ALICE FAIBISHENKO) 
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND ALOCKWOOD 
STATE PASS TO USTR (EISSENSTAT/MELLE) 
STATE PASS TO FEDERAL RESERVE (CARLOS ARTETA) 
NSC FOR DAN FISK 
 
E.O. 12958: N/A 
TAGS: ECON ECPS EFIN ELAB MX PGOV PREL
SUBJECT: CORRECTED -- MEXICO ECONOMIC NOTES, JANUARY 6 - 
JANUARY 11, 2007 
 
REF: A. 06 MEXICO 7054 
 
     ¶B. 06 STATE 202978 
     ¶C. DECEMBER 20 
     ¶D. 2006 EB/CIP/BA E-MAIL 
     ¶E. MEXICO 113 
     ¶F. MEXICO 185 
 
Sensitive but Unclassified 
 
Summary 
------- 
 
¶1.  (SBU) GE/NBC asked the Embassy to continue pressing the 
Mexican Attorney General's Office (PGR) to drop frivolous 
criminal charges against the company, meanwhile GE Chairman 
Jeff Immelt made similar points to President Calderon.  The 
Mexican Telecom Regulator (Cofetel) will hold a 
teleconference with USTR to discuss U.S. industry complaints 
against Mexico's new "Calling Party Pays" system for cell 
phone charges.  The regulator is also updating rules to  spur 
competition in combined video, internet and phone services. 
Lower oil prices drove the peso to its lowest point against 
the dollar since December 1, while inflation closed slightly 
higher than expected for 2006. The Economy Secretariat tried 
to drive down corn and tortilla prices by relaxing import 
quotas for white corn. Economy Secretary Eduardo Sojo 
announced plans to combat an expected economic slowdown. 
Sugar workers are scheduled to strike on January 20. 
Preliminary numbers for 2006 show that foreign direct 
investment in Mexico was near last year's level, but below 
the government's target. End Summary. 
 
 
GE/NBC Seeks to End Legal Harassment by TV Azteca 
--------------------------------------------- ---- 
 
¶2.  (SBU) On January 10, GE/NBC Vice President Scott Seeley 
met with Emboffs.  He promised us a read-out on the August 9 
meeting between GE Chairman Jeff Immelt and President 
Calderon, saying that Immelt most likely made the point that 
after 127 years in Mexico, GE should not be being harassed by 
a competitor like TV Azteca trying to keep out competition. 
The harassment of greatest concern to GE/NBC is the frivolous 
criminal case filed by TV Azteca over a year ago.  GE/NBC 
would like the USG to encourage the Mexican Attorney 
General's office (PGR) to drop the case, or at least remove 
GE/NBC from it. TV Azteca has used the case to legally harass 
GE/NBC -- most recently by pushing a new PGR investigator to 
start a money laundering investigation.  In December 2006, 
the previous PGR investigator assured the Embassy that GE/NBC 
would likely soon be dropped from the case because there was 
no legal basis to the charges.  The Embassy will continue 
pressing Mexican officials about the case.  Seeley noted that 
previous Embassy discussions with PGR helped persuade PGR to 
control TV Azteca attempts to use the legal proceedings to 
harass GE/NBC.  Seeley said that the recent press harassment 
of GE/NBC and its Mexican partners (ref A) had been 
particularly hard on GE/NBC's Mexican partners who have 
requested permission to operate a third TV network in Mexico. 
 Seeley said GE/NBC has had no further physical threats or 
actions against its staff since the forcible closure of the 
studio filming a Telemundo program last fall, but GE 
executives remain sensitive to any possible recurrence of 
such action. Telemundo plans to begin filming a new 
telenovela in Mexico City some time in the fall /summer 
timeframe. 
 
Calling Party Pays 
------------------ 
 
¶3.  (SBU) The Mexican Press featured stories this week 
 
MEXICO 00000276  002 OF 003 
 
 
claiming that U.S. telecom firms are pushing USTR to start a 
trade case against Mexico in the WTO based on the high 
interconnection fees and other controversy surrounding 
Mexico's implementation of an international Calling Party 
Pays (CPP) system for cell phone charges.  The papers drew 
their information from the public letters submitted to USTR 
as part of its 1377 process, though they did not explain this 
in their articles.  As requested in refs B and C, Post 
provided these letters to Mexico's telecom regulator, 
Cofetel, and the Secretariat of Communications and Transport 
(SCT) in December for comment. Cofetel will hold a 
teleconference with USTR before submitting their reply.  The 
SCT has also expressed interest in learning more about the 
USG's opposition to Mexico's implementation of CPP, possibly 
in a separate telecon (ref D). 
 
Peso Falls to Five-Week Low 
--------------------------- 
 
¶4.   (U) The Peso fell to 11.03 to the dollar, its weakest 
since December 1.  The decline was largely driven by lower 
oil prices, since oil accounts for more than one-third of 
government revenue.  Mexico's crude export mixed dropped to 
USD 44.09 per barrel, lowest in a year as a result of 
decreased demand for heating fuel brought on by warmer 
weather in the United States.  Mexico's 2007 budget is based 
on an average export price of USD 42.80 per barrel, so a 
continued oil price drop could spur spending cuts and slow 
Mexican growth. 
 
Inflation Slightly Above Expectations 
------------------------------------- 
 
¶5.  (U) Annual consumer price inflation for 2006 closed at 
4.05 percent, slightly above the Central Bank's comfort zone 
and market expectations.  The Central Bank's inflation target 
was 3 percent, plus or minus one percent.  Inflation was at 
the upper end of this range during the final months of 2006, 
largely due to sharp increases in the price of fruits and 
vegetables. Most recently, however, prices for other items 
particularly tortillas, have also fueled inflation. 
 
Economy Secretariat to Increase Corn Import Quotas 
--------------------------------------------- ----- 
 
¶6.  (U) The Economy Secretariat announced it would open white 
corn import quotas and give smaller tortilla businesses 
access to the foreign-grown version of Mexico's staple food 
grain to reduce domestic tortilla prices.  The Secretariat is 
already working with the Agriculture Secretariat to gauge 
local demand and determine if additional quotas should be 
provided for U.S. and Canadian imports.  Mexico currently 
imports 9 million tons of corn annually (mostly yellow corn 
for animal feed.)  Domestic demand for all types of corn is 
about 28 million tons.  Post is looking into the details of 
rising tortilla prices, and will report further. 
 
Telecom Regulator to Issue Convergence Regulations 
--------------------------------------------- ----- 
 
¶7.  (U) Mexico's Telecom Regulator, Cofetel, will update 
secondary regulations that now serve as an impediment to full 
convergence in telecom services for combined video, internet 
and phone services.  Cofetel Commissioner Eduardo Ruiz Vega 
said that with the adjustments, the regulator would spur 
competition and reduce bureaucracy.  He added that even the 
telecom monopoly Telmex could be required to pay for the 
right to offer additional telecommunication services. 
 
Sugar Workers Strike Scheduled for January 20 
--------------------------------------------- 
 
MEXICO 00000276  003 OF 003 
 
 
 
¶8.  (U)  Mexican Sugar Producers are likely to strike January 
¶20.  Rene Martinez, Chairman of the National Sugar and 
Alcohol Chamber, reported that the union is unwilling to 
negotiate.  According to Martinez, speaking on behalf of the 
sugar producers, the 36,000-member union is demanding a 
pension of 170% of a workers final salary upon retirement. 
 
Sojo Introduces Plans to Face Economic Slowdown 
--------------------------------------------- -- 
 
¶9.  (U) Economy Secretary Eduardo Sojo told the press the 
Calderon Administration would work more proactively to 
address the expected future economic slowdown by stimulating 
the domestic market, diversifying, and supporting small- and 
medium-sized businesses (SMEs). Efforts include creating more 
programs to promote business start-ups, 150 programs to 
support SMEs, and coordinating the efforts of government 
agencies to promote exports. 
 
FDI a Disappointment Again 
-------------------------- 
 
¶10.  (U) Preliminary 2006 numbers from the United Nations 
Conference for Trade and Development (UNCTAD), show that 
foreign direct investment (FDI) flows to Mexico have stalled 
for yet another year.   FDI flows to Mexico reached USD 18.9 
billion, below the government's goal of USD 20 billion, and 
comparable to last years USD 18.93 billion.   President 
Calderon recently addressed the issue during a speech to 
Mexico's Ambassadors and Consuls, where he beseeched them to 
work to attract foreign investors to the country (ref F). 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity 
GARZA