VZCZCXRO8269
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #1367/01 0752337
ZNR UUUUU ZZH
P 162337Z MAR 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 5878
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEHFR/AMEMBASSY PARIS PRIORITY 0362
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
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHMFIUU/CDR USSOUTHCOM MIAMI FL PRIORITY
RHMFIUU/CDR USNORTHCOM PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 MEXICO 001367 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR A/S SHANNON 
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA, INR/B 
STATE FOR EB/ESC MCMANUS AND IZZO 
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GWORD 
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 
PARIS FOR OECD 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ENRG MX PGOV PINR PREL
SUBJECT: MEXICO ECONOMIC NOTES, MARCH 9 - MARCH 16 
 
REF: A. MEXICO 589 
 
     ¶B. MEXICO 1256 
 
Summary 
------- 
 
¶1. (SBU) A senior Mexican Treasury (Hacienda) official told 
emboffs that pension reform introduced this week would pass 
before a general fiscal reform because it was less 
contentious.  The Mexican Senate nixed Carlos Hurtado as a 
new Deputy Governor of the Bank of Mexico (Central Bank). A 
judge released the man considered Mexico's "king of 
contraband" after declaring that the evidence presented 
against him by the Prosecutor General's Office, including 
documents provided by the USG, could not be corroborated. 
Pemex reported crude production in the fourth quarter of 2006 
fell 6 percent quarter on quarter from 2005.  The 
Inter-American Development Bank (IDB) and President Calderon 
signed a memorandum of understand for a USD 2.5 million 
credit line to be used for infrastructure projects.  Mexican 
Senators will travel to the OECD in Paris to learn about 
fiscal policy.  End summary. 
 
Hacienda Official on Reforms 
---------------------------- 
 
¶2. (SBU)  Econ Minister Counselor and Econoff on March 2 met 
with Miguel Messmacher Linartas, the new head of the Economic 
Planning Unit at the Finance Secretariat (Hacienda). 
Messmacher said that pension reform is at an advanced stage, 
and that he sees this reform being passed before fiscal 
reform because it is less contentious.  He noted that the 
government will discuss pension reform with legislators and 
did not rule out the possibility of modifying the reform 
proposal that is already with the Senate.  Regarding the 
Pemex reform being proposed by Senator Labastida (ref A, B), 
Messmacher said Hacienda wants to make sure the company will 
spend money efficiently before it allows the company to 
retain more taxes.  That is, Pemex needs internal reforms 
before Hacienda will decrease its tax burden.  Messmacher 
said that President Calderon and Finance Secretary Carstens 
work very long hours.  (Bionote: Messmacher attended the 
Instituto Tecnologico Autonomo de Mexico (ITAM) and got his 
Ph.D. from Harvard.  He told Econ Minister  Counselor and 
Econoff that he knows Carstens from his days of working at 
Hacienda.  Before assuming his current position, he was at 
the IMF for several years.  Messmacher speaks English well, 
but with an accent.) 
 
Senate Nixes Bank of Mexico Pick 
-------------------------------- 
 
¶3. (SBU)  Mexico's Senate officially rejected President 
Calderon's pick to fill a vacant seat on the Bank of Mexico's 
(BOM) board.  In a conversation with Econoff on March 6, a 
BOM official agreed with local pundits that the opposition's 
rejection of Hurtado was political payback from days when 
Hurtado was Under Secretary of Expenditures.  Opposition 
members maintain that Hurtado was an inappropriate candidate 
for the position.  Calderon will have to send another name to 
Congress.  Names being mentioned in the press include: 
Manuel Ramos Francia, the BOM's Director of Economic 
Research; Armando Baqueiro, the Director of Strategic 
Planning; and Lorenza Martinez, the Chief of Insurance, 
Securities, and Pensions at Hacienda. 
 
"King of Contraband" Released 
----------------------------- 
 
¶4. (SBU) A judge released the man considered Mexico's "king 
 
MEXICO 00001367  002 OF 002 
 
 
of contraband" after declaring that the evidence presented 
against him by the Prosecutor General's Office, including 
documents provided by the USG, could not be corroborated. 
Asa Barantz had been arrested in 2004 and sentenced to three 
years and three months in prison for having defrauded the 
Mexican government of USD 340,000 that he failed to pay on 
Chinese-origin clothing, much of it counterfeit, that he had 
imported into the country illegally.  He was also charged 
with trying to bribe federal police after his arrest. 
Magistrate Carlos Olea Penaflores of the 19th Circuit 
Tribunal in Matamoros wrote a letter to the Mexican newspaper 
"Reforma" outlining his reasons for ordering Barantz's 
release.  Among others, he claimed that a prosecution witness 
provided by the Embassy's DHS office later recanted his 
testimony against Barantz.  Prosecutor General Eduardo Medina 
Mora told press that, while he respected the judge's ruling, 
he did not agree with it.  Medina Mora said federal 
prosecutors would continue to investigate Barantz.  The head 
of a business coalition for the protection of trademarks 
criticized Medina Mora's office for mishandling the case. 
 
4th Quarter Crude Production Down 
--------------------------------- 
 
¶5. (U)  In their 4th quarter conference call March 6, Pemex 
announced crude production in the fourth quarter of 2006 fell 
6% quarter on quarter from 2005 to 3.1 million barrels per 
day, due both to bad weather which reduced shipments from 
offshore storage facilities and the decline of the Cantarell 
field.  Also in the fourth quarter 2006, Pemex drilled 41% 
fewer exploratory wells nationwide quarter on quarter.  In 
2007 current Pemex plans call for drilling 27 development 
wells and performing 44 workovers in Cantarell, as well as 
installing nitrogen separation, dehydration, and 
desalinization facilities.  Pemex will invest USD 13.9 
billion in 2007 of which USD 12.3 billion will be in 
exploration and production. 
 
IDB Credit Line for Infrastructure Projects 
------------------------------------------- 
 
¶6. (U) IDB and President Calderon signed a memorandum of 
understand for a USD 2.5 million credit line to be used for 
infrastructure projects.  This credit line will serve as 
leverage for an additional amount of USD 7.5 billion from 
public and private sources.  The credit line will be managed 
by the Mexican development bank, Banobras and channeled 
through the federal, state, and municipal levels. 
 
Legislators Learn Reform in Paris 
--------------------------------- 
 
¶7. (U) OECD Secretary General Jose Angel Gurria will meet 
with Mexican legislators, governors, and Hacienda officials 
in Paris March 26-29.  The objective is to get the Mexican 
officials speaking with OECD experts on simplifying the tax 
system, expanding the database of taxpayers, and lowering the 
value added tax. 
 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity 
GARZA