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UNCLAS SECTION 01 OF 03 MEXICO 002334 
 
SIPDIS 
 
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 SLADISLAW 
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 ELAB EFIN PGOV ETRD PREL MX
SUBJECT: MEXICO ECONOMIC WEEKLY, MAY 4-11, 2007 
 
REFL (A) 06 Mexico 3905; (B) 06 Mexico 1080 
 
¶1.  (SBU) Summary: Inflation fell in April, despite 
price increases for some commodities. President 
Calderon is exploring how to proceed with fiscal 
reform. The United States and Mexico held the inaugural 
meeting of the U.S.-Mexico Consultative Committee on 
Agriculture, and discussed implementing the final NAFTA 
provisions on agricultural products.  A planned 
teachers? strike failed to gain the support it had 
hoped for.  A major bond sale by the state of Hidalgo 
went off successfully. On May 21, the Supreme Court 
will publicly broadcast one of its sessions considering 
changes to the controversial April 2006 
telecommunications and broadcasting law, dubbed the 
?Televisa Law? because it favored Mexico?s powerful 
telecom and broadcasting oligopolies. End Summary. 
 
Inflation Falls in April 
------------------------ 
 
¶2.  (U) Consumer price inflation fell 0.06% in April, 
lowering the annual inflation rate to 3.99% from 4.21% 
in March.  The drop, which was in line with market 
expectations, brought inflation below the upper limit 
of what the central bank considers acceptable.  A Bank 
of Mexico (BOM) report said that lower electricity 
prices in two northern states as well as lower prices 
for onions and tourist services pulled consumer prices 
down, despite an increase in the price of tomatoes and 
rent.  Core inflation fell from 3.83% in March to 
3.66%. 
 
Political Maneuvering Over Fiscal Reform 
---------------------------------------- 
 
¶3. (U) President Calderon and members of his 
administration in recent weeks have been meeting with 
Congress to build support for fiscal reform.  As the 
PAN lacks a majority in Congress, it will need PRI 
support to pass the initiative.  PRI representatives 
have suggested to the press that they would only 
support the reform if more funds are released to the 
states (the PRI controls 53% of Mexican states).  PRI 
officials also have said they want the Agriculture, 
Development, and Environment Secretariats at the state 
level decentralized.  The PAN is likely to balk at both 
proposals.  Meanwhile, PAN Senator Gustavo Madero, the 
head of the Senate Finance Committee, called for 
levying the VAT on food and medicine -- a move that the 
PRI has said publicly it will not support.  Movement in 
the debate is unlikely to come before State of Yucatan 
elections on May 20. 
 
Opening Final NAFTA Chapters on Agriculture 
------------------------------------------- 
 
¶4.  (U) The United States and Mexico held the inaugural 
meeting of the U.S.-Mexico Consultative Committee on 
Agriculture (CCA) May 8, following renewal of the 
bilateral forum by the two governments in March 2007. 
Mark E. Keenum, Under Secretary for Farm and Foreign 
Agricultural Services of the U.S. Department of 
Agriculture, and Ambassador Richard T. Crowder, Chief 
Agricultural Trade Negotiator of the Office of the U.S. 
Trade Representative, led the U.S. delegation.  Under 
Secretary Beatriz Leycegui of the Ministry of the 
 
SIPDIS 
Economy (Economia) and Under Secretary Francisco Lopez 
Tostado of the Ministry of Agriculture, Livestock, 
Rural Development, Fisheries, and Food Supply (SAGARPA) 
led the delegation from Mexico.  Key among the issues 
discussed was full implementation of the remaining 
NAFTA provisions on opening trade in North America?s 
corn, bean, milk, and sugar sectors.  Among other 
 
MEXICO 00002334  002 OF 003 
 
 
outcomes, the parties agreed to conduct several 
technical assistance projects in Mexico in the corn and 
dry bean areas to help prepare Mexican producers for 
NAFTA implementation.  Officials also discussed pending 
U.S. and Mexican farm legislation, biotechnology, and a 
number of sanitary and phytosanitary issues. 
 
National Teachers? Strike Fizzles 
--------------------------------- 
 
¶4.  (SBU) For some time the CNTE, a non-conformist 
faction within the National Teachers? Union (SNTE), has 
been organizing a national strike to protest the 
Mexican government?s late March approval of a pension 
(and health care) reform law for federal civil 
servants.  The strike, which finally took place on May 
7, was supposed to shut down schools all over Mexico 
and CNTE reportedly told the media that the labor 
action could go on indefinitely.  PRD politicians in 
the lower house of the Mexican Congress predicted that 
violence could breakout if the reform law was not 
changed. When the strike actually took place it was far 
from the national work stoppage the CNTE had advertised 
and in fact was only noticeable in 6 states.  The 
starkly limited results of this ?national? strike is 
both a commentary on the mixed feelings Mexicans have 
about the pension reform law (ISSSTE) and the poor 
state of inter-union relations in Mexico?s organized 
labor movement. 
 
State Public Finance Success 
---------------------------- 
 
¶5.  (U) The upcoming bond sale reported in Mexico 2202 
occurred as expected on May 10, and was a major 
success.  The total amount of the sale was Mexican 
pesos 2,450,000,000 (USD $226,851,851).  The state 
revolving fund for the state of Hidalgo received offers 
from over 20 institutions for Mexican pesos 6.8 
billion, demand exceeding supply by roughly 2.7 times. 
The spread is 14 basis points lower than the previous 
record rate for a bond issuance by the state of 
Chihuahua.  The Hidalgo state treasurer?s office told 
USAID that they are thrilled with the result, and very 
appreciative of the support they received through the 
US Embassy for this effort to provide states and 
municipalities with greater sources of financing. 
Thanks to USAID technical assistance provided through 
Evensen Dodge, the bond issuance was rated at AAA.Mx, 
Mexico?s highest rating.  Since the bond rating for the 
state of Hidalgo is only A.Mx, the state of Hidalgo, 
its municipalities and parastatal enterprises can now 
obtain financing under more favorable terms through 
this new state revolving fund. 
 
Supreme Court Considers Changes to Televisa Law 
--------------------------------------------- -- 
 
¶6. (U) Last year, 47 Senators filed a constitutional 
challenge to the so-called Televisa Law, changes to the 
Federal Radio and Television Law passed by the Mexican 
Senate in April 2006 (Refs A and B).  The Supreme Court 
will finally hear the case behind closed doors on May 
14-18. On May 21, the judges will meet with experts 
from several universities and organizations. This 
session will be broadcast on television.  The judges? 
considerations will be based on a 500-page draft 
decision currently available on the web at 
http://200.38.86.53/NR/rdonlyres/86289019-526 E-4A3E- 
89F4-15BDC8F0FECF/0/AccionInconstitucional262 006v1.pdf. 
This draft proposes elimination of five articles. Among 
them is article 28, which favors the current 
oligopolies by stating that broadcasting companies that 
currently have spectrum (granted by the government to 
 
MEXICO 00002334  003 OF 003 
 
 
transfer from analogue to digital) can keep it without 
being obliged to pay any fee for the privilege. 
Another proposed change would eliminate the article 
that gives the Senate the power to reject Cofetel 
commissioners. That article was a partial 
implementation of an OECD recommendation to require a 
Congressional confirmation process for COFETEL 
commissioners. At the time it was passed, the bill was 
seen by some experts as making some progress toward 
modernizing telecommunications, such as allowing for 
public auctions of frequencies.  Others expressed 
concern that community stations unable to bid on 
frequencies would be pushed off the air. Many experts 
criticized the bill for failing to eliminate unfair 
practices, and leaving power with the oligopolies that 
dominate telecom and broadcasting in Mexico.  (See 
Septel for additional reporting.) 
 
Garza