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FM AMEMBASSY MEXICO
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INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY
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UNCLAS SECTION 01 OF 03 MEXICO 000640 
 
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: MEXICO ECONOMIC NOTES, FEBRUARY 2 - FEBRUARY 9 
 
Sensitive but unclassified, entire text. 
 
Summary 
------- 
 
¶1.  (SBU)  Although the new Mexican Undersecretary for 
Hydrocarbons told the Embassy he would continue working on 
the Mesoamerican Energy Initiative, he has not yet assigned 
staff to the task.  Finance Secretariat Undersecretary Werner 
explained how Mexico could use its oil stabilization fund to 
temporarily stave off a financial shortfall stemming from a 
drop in oil prices.  Bank of Mexico Governor Ortiz expects 
inflation to ease by the end of 2007. Secretary of Economy 
Sojo publicly noted that Mexico was loosing ground to other 
countries in attracting foreign investment. The Chairman of 
Mexico's Competition Commission called for the opening of a 
third television network.  The dispute between the 
Secretariat of Communications and the telecom regulator 
 
SIPDIS 
Cofetel is getting increasing attention from the press. The 
head of the teachers' union denied that the union was 
blocking needed educational reforms.  Meanwhile, the federal 
government provided funds for the Puebla state government to 
avert a threatened teacher's strike.  In one step to improve 
competitiveness, the NAFTA working group on rules of origin 
(U.S., Mexico, and Canada) finalized the third tranche of 
products on which rules will be liberalized. End summary. 
 
 
Hydrocarbon U/S on Mesoamerica Initiative 
----------------------------------------- 
 
¶2.  (SBU) The new Mexican Undersecretary for Hydrocarbons, 
Mariano Budebo, confirmed to ECON and FCS that he is still 
responsible for the gas and refining aspects of the 
Mesoamerican Energy Initiative.  Economic Minister Counselor 
stressed to Budebo that the PIEM project is of interest to 
the United States, and that the USG stands ready to consider 
any assistance/coordination requests from Mexico -- 
especially on energy savings and renewables.  Budebo 
suggested that the Embassy speak to Jordy Herrera, 
Undersecretary for Energy Planning regarding renewables and 
energy saving technologies. Budebo added that no meetings at 
the Secretarial or Head of State level of the PIEM are 
currently foreseen. One Secretariat of Energy (SENER) 
Director General told econoff after the meeting that Budebo 
had not assigned any staff to the project. 
 
Hacienda: Mexico Can Weather Low Oil Prices 
------------------------------------------- 
 
¶3.  (SBU) During a conference call on February 1, 
Undersecretary of Finance Alejandro Werner estimated that 
real GDP growth in 2006 was 4.8 percent.  Mexico registered a 
fiscal surplus of 0.23 percent of GDP in 2006.  He reiterated 
that the government is able to deal with low oil prices in 
¶2007.  The government can tap up to half of the 34 billion 
pesos in the Oil Stabilization Fund, and there are 35 billion 
pesos available from one of the taxes in the new Pemex fiscal 
regime.  He noted, however, that these mechanisms are only 
meant to be a cushion and cannot last forever.  Werner added 
that if there is a large, sustained drop in oil prices, the 
government would have to cut spending if non-oil income 
failed to make up for the lost revenue. 
 
BOM: Inflation to Drop Later in the Year 
---------------------------------------- 
 
¶4.  (SBU) Bank of Mexico's (BOM) Governor Guillermo Ortiz 
said that although inflation will likely remain high in the 
first part of 2007, he expects it to come down toward the end 
of the year.  The BOM notes that consumer price inflation and 
core inflation should end the year between 3.5 percent and 
 
MEXICO 00000640  002 OF 003 
 
 
4.0 percent -- down from between 4.0 percent and 4.5 percent 
in the first half of the year.  Ortiz said that the recent 
increase in inflation was caused by specific shocks to 
certain products and that so far there are no signs of 
contamination. 
 
Sojo on Mexican Competitiveness 
------------------------------- 
 
¶5.  (SBU) Economy Secretary Eduardo Sojo told the press that 
Mexico as well-regarded by foreign investors, but more 
competitive countries such as Malaysia were seen as superior 
sites for foreign direct investment.  He added that Mexico's 
proximity to the U.S. was no longer a significant advantage. 
Sojo is meeting with investors to learn their concerns about 
the Mexican economy. 
 
Perez Motta on Third TV Network 
------------------------------- 
 
¶6.  (SBU) One common concern is the lack of competition 
throughout Mexico's economy. Eduardo Perez Motta, Chairman of 
Mexico's Federal Competition Commission discussed competition 
in television.  Motta told the press that Mexico needs a 
third television network that would compete on an equal 
footing with the existing networks (Televisa and TV Azteca). 
He added that the now unused spectrum favors existing 
broadcasters, creating an artificial shortage.  He also told 
a Senate committee it was necessary to review the radio and 
television law to create more competitive conditions. 
 
Cofetel/SCT Rift Grows 
---------------------- 
 
¶7.  (SBU) Over the past week, the rift Secretariat for 
Communications and Transport (SCT) and the independent 
telecommunications regulator Cofetel has become increasingly 
public.  At a telecom conference last week, industry insiders 
referred to the "war" between the regulator and the 
Secretariat as threatening prospects for progress in the 
 
SIPDIS 
telecommunications sector.  Media reported that the SCT  has 
attempted to interfere in issues that are exclusively under 
Cofetel's scope such as inter-connection rates and 
technological convergence.  Eduardo Ruiz Vega, one of 
Cofetel's commissioners, accused SCT of violating the 
organization's autonomy. Ruiz acknowledged that the current 
relationship and communication between both agencies is weak 
due to the legal cases filed by the current SCT Under 
Secretary Rafael del Villar and by Gonazalo Martinez Pous, 
 
SIPDIS 
current Legal Director of the SCT. According to the 
commissioner, SCT is using the courts to make Cofetel more 
vulnerable. In 2006, then-president Fox appointed del Villar 
and Martinez Pous to become Cofetel commissioners, but 
Congress rejected them.  Del Villar and Martinez Pous filed 
injunctions against the Senate's rejection, and the 
injunctions are still pending.   Ruiz also complained that 
SCT has yet to approve Cofetel's internal regulations, which 
has left Cofetel unable to issue pending AM and FM 
concessions and permits. 
 
Teachers' Union Denies that It Blocks Reforms 
--------------------------------------------- 
 
¶8. (SBU) Following a meeting with President Calderon, 
Teachers' Union (SNTE) President Ester Gordillo denied that 
the union rejected needed changes in the Mexican educational 
system.  A 2006 Inter American Development Bank (IDB) study 
faulted Gordillo's union as the principal obstacle to 
improving Mexican education. 
 
Government Avoids Teachers Strike in Puebla 
------------------------------------------- 
 
MEXICO 00000640  003 OF 003 
 
 
 
¶9.  (SBU) On February 5, the state government of Puebla 
averted a threatened strike by reaching agreement with the 
local chapter of the National Teachers' Union (SNTE) on 
salary benefits. The chapter had insisted on receiving the 
traditional bonus paid every six years at the end of a 
gubernatorial or presidential administration.   Technically 
this bonus is the responsibility of state governments, but 
actual funds often come from the federal government.  When 
the Puebla state government said it lacked funds to pay the 
bonus, the 25,000 teachers in the local SNTE chapter 
threatened to strike.  Puebla's state authorities turned to 
the federal Secretariats of Education and Government 
(Interior Ministry) for help.  Ultimately, the Secretariat of 
Government promised to provide the money (2,500 pesos per 
teacher, roughly USD 230).  No doubt the federal government's 
decision to pay was influenced by the fact that the on-going 
and occasionally violent, civil unrest in the state of Oaxaca 
began when the teachers there were denied their six-year 
bonus payment. 
 
NAFTA Group Liberalizes Rules of Origin 
--------------------------------------- 
 
¶10.  (SBU) The Embassy attended the NAFTA Working Group on 
Rules of Origin meeting in San Francisco February 5-6.  The 
United States, Mexico and Canada finalized the third tranche 
of products for which the rules of origin will be liberalized 
(previous liberalizations took place in 2004 and 2006), and 
discussed products that could be included in a fourth 
tranche.  Mexico will need approval from its Senate for these 
changes, but expects they will pass easily. The group also 
worked on simplifying NAFTA rules of origin in light of the 
revised 2007 Harmonized System for goods nomenclature. 
Finally, the group discussed the merits of re-invigorating 
the NAFTA Customs sub-group. 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity 
GARZA