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PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #0306/01 0231448
ZNR UUUUU ZZH
P 231448Z JAN 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 5025
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0386
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RULSDMK/DEPT OF TRANSPORTATION WASHDC PRIORITY
RUEAHLA/DEPT OF HOMELAND SECURITY PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 MEXICO 000306 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/FO/SHANNON AND EB/FO/SULLIVAN 
STATE PASS USTR FOR VERONEAU AND EISSENSTAT 
COMMERCE FOR ITA/MAC/NAFTA/WORD/BASTIAN 
USDA FOR OCRA AND ONI 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR ECON BEXP WTRO MX CH
SUBJECT: MEXICO'S NEW ECONOMY SECRETARY MEETS WITH 
AMBASSADOR 
 
Summary 
--------- 
 
¶1. (SBU) Mexico's top trade and industry official wants to 
deepen North American economic integration and improve the 
country's investment climate to counter growing competition 
from China and elsewhere.  After a short briefing on the 
Mexican government's (GOM) approach to dealing with the 
recent spike in tortilla prices, Secretary Sojo and the 
Ambassador exchanged ideas on how best to work together to 
achieve the Calderon Administration's longer-term strategic 
goals, in particular by taking advantage of the Security and 
Prosperity Partnership.  Three areas they agreed to look at 
more closely were: 1) increasing the number and capacity of 
border bridges; 2) looking at industrial sectors that might 
be ripe for cumulation agreements or other rule of origin 
adjustments to keep more manufacturing supply chains in the 
Americas; and 3) comparing ideas for facilitating passage of 
legitimate goods across the border.  Outstanding bilateral 
trade issues like trucking, chicken, conformity assessment 
bodies, and investment disputes were also discussed.  End 
summary. 
 
Setting 
------- 
 
¶2. (U) Ambassador Garza hosted breakfast for Eduardo Sojo, 
Mexico's new Economy Secretary, and his five top deputies 
January 19.  The DCM and officers from ECON, FAS, and FCS 
also attended.  Over the course of a very candid 
conversation, the Mexicans expressed enthusiasm about working 
with the USG on the whole range of bilateral, regional, and 
global trade issues. 
 
Dodging the Tortilla Fastball 
----------------------------- 
 
¶3. (SBU) By permitting more corn imports and reaching 
agreement with a number of important corn merchants and 
tortilla producers on temporary price restraints, Sojo and 
his team believe they have largely defused the tortilla 
"crisis" that has grabbed headlines and prompted protests 
here the past two weeks.  Post will send septel a more 
detailed read-out and analysis of this issue, but so far, the 
GOM seems to have dodged a bullet. 
 
 
Looking to Continental Trade Integration... 
------------------------------------------- 
 
¶4. (SBU) With this crisis hopefully on the wane, Sojo said he 
wants to focus on the Calderon Administration's strategic 
goals.  Foremost among these are building a more competitive 
North American economy and improving Mexico's investment 
climate.  On the former, his team made clear their 
understanding that NAFTA, while a great success, cannot be 
relied on by itself to face the challenges of an increasingly 
globalized world economy.  Sojo applauded the textiles 
cumulation agreement between the U.S. and Mexico that will 
allow Central American countries to ship duty-free to the 
U.S. garments made with Mexican inputs, and vice versa.  He 
wants to expand such agreements (or use other mechanisms that 
can loosen rules of origin) to new sectors (like electronics) 
and new free trade partners we have, or hope to have, in 
common (such as Colombia).  The Ambassador indicated that we 
would be willing to hear out the GOM's ideas on what other 
sectors might be ripe for such arrangements, but noted that 
we could expect opposition from vested interest groups with 
strong lobbies in Washington. 
 
¶5. (SBU) Another area Sojo emphasized as key to improving 
trade flows in North America was the harmonization of the 
three countries' regulatory regimes.  The Ambassador agreed, 
and added that improving the functioning of our border system 
was also critical.  He agreed to share with Sojo's team a 
list of simple ideas for facilitating the cross-border flow 
of legitimate goods, and to look jointly at the issue of 
border bridges, many of which are becoming ever-more 
 
MEXICO 00000306  002 OF 002 
 
 
congested bottlenecks.  The two agreed to tee up these issues 
for Secretary Gutierrez's February 1 visit to Mexico City and 
the SPP ministerial in Toronto later in the same month. 
While professing Mexico's strong commitment to the SPP, Sojo 
admitted that no one has yet been identified as the overall 
GOM lead coordinator, a position crucial to ensuring that the 
work of the Security and Prosperity pillars meshes 
coherently.  He attributed this to the fact that the 
transition process is still not complete.  Sojo has 
personally urged Juan Camilo Mourino Terazo, the policy chief 
in the Office of the Presidency, to take up this role, at 
least through the February ministerial, but Camilo has made 
no commitment. 
 
And an Improved Investment Climate 
---------------------------------- 
 
¶6. (SBU) Sojo predicted that President Calderon will use his 
attendance at the World Economic Forum in Davos to project 
one principal theme -- Mexico, unlike some of its Latin 
American neighbors (e.g., Venezuela, Bolivia, and Ecuador), 
is not interested in turning back the clock to state-run 
economies.  To the contrary, Mexico's doors are wide open to 
foreign investment, and the GOM will work hard to improve 
further the country's investment climate, particularly given 
the challenge posed by China, which in recent years has 
attracted more and more money and manufacturing capacity. 
The Ambassador and DCM noted that most U.S. investors paid 
close attention to the following two areas: 1) security and 
the rule of law and 2) competition in crucial sectors like 
telecoms.  Sojo took both these points onboard, and with 
regard to opening up key sectors to more competition, said 
that President Calderon would "no doubt" take on some of 
Mexico's more egregious monopolies and oligopolies within his 
first three years in office, even though these would be tough 
political fights.  The Ambassador suggested that Calderon 
could also use his time in Davos to plug for re-engaging on 
the stalled Doha trade negotiations, one of President Bush's 
priorities. 
 
Bilat Issues - Trucking, Corn, Poultry, Standards Bodies 
--------------------------------------------- ----------- 
 
¶7. (SBU) Sojo was enthusiastic about the planned upcoming 
announcement of the U.S. cross-border trucking pilot program, 
noting compliance with this long overdue NAFTA commitment 
would provide a boost to President Calderon's political 
standing, but acknowledged that similar plans had been 
scuppered at the last minute before.  With regard to Mexico's 
obligation to open its corn and bean markets at the start of 
2008, he said it would be fully honored, but would require 
delicate handling due to the almost religious significance of 
corn to Mexico's cultural identity.  There was also 
discussion of the steps that agricultural officials from both 
sides need to take to ensure that Mexican chicken breasts 
meet U.S. health standards and can be exported north -- 
currently, the ball is in the court of the Mexican poultry 
industry, which still needs to pass muster with its own 
regulators.  The U.S. side raised the pending applications of 
two U.S. standards certification organizations that still 
have not been approved to operate in Mexico, despite having 
complied with all the requirements.  Finally, referring back 
to how Mexico can attract more investment, the Ambassador 
noted that quick resolution of outstanding disputes with U.S. 
investors would send a clear signal that the GOM is indeed 
serious about improving the climate here for foreign business. 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity 
GARZA