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ZNR UUUUU ZZH
P 252132Z JAN 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 0240
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
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UNCLAS SECTION 01 OF 02 MEXICO 000206 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR WHA/MEX, WHA/ESPC, EB/IFD/OIA 
STATE FOR EB/ESC MCMANUS IZZO 
STATE PLEASE PASS TO USTR (EINSSENSTATE/MELLE) 
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GERI WORD 
USDOC FOR ITS/TD/ENERGY DIVISION 
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND ALOCKWOOD 
 
E.O. 12958: N/A 
TAGS: ECON ENRG ETRD PGOV MX
SUBJECT: AMBASSADOR DISCUSSES ECONOMY WITH MEXICAN-BASED U.S. 
EXECUTIVES 
 
REF: MEXICO 146 
 
¶1. (U) Summary.  The Ambassador met with a group of Mexico based 
executives for U.S. companies to discuss the economic situation in 
Mexico.  The leaders were pleased with the Calderon Administration's 
performance.  They believed energy reform would be less extensive 
than needed to stem Mexico's declining production.  They strongly 
supported NAFTA and were not concerned that Mexican street protests 
would lead to its renegotiation.  They suggested that the USG help 
citizens understand how Mexican immigration benefits the U.S. 
economically. End Summary. 
 
2.(U) On January 23, 2008, the Ambassador met with executives from 
various Mexican based U.S. companies to get their perceptions of the 
Mexican economy and key issues that affect the overall business 
climate. Attendees included representatives from Chevron Energia de 
Mexico, American Express Company Mexico, Lexmark International 
Mexicana, Halliburton Energy Services Group, Oracle de Mexico, 
Colgate Palmolive, Sun Microsystems de Mexico, MetLife, and 
Kimberly-Clark de Mexico. 
 
3.(U) The executives began with a discussion of the possible affect 
to the Mexican economy of the current U.S. economic slowdown and 
whether Mexico would be able to weather a U.S. recession.  They 
agreed that the Government of Mexico (GOM) has taken the steps to 
shore up their macroeconomic position and that the country has 
enough economic stability to survive a U.S. recession.  The 
executive from Kimberly-Clark made the point, however, that despite 
Mexico's economic strengths, the country will still suffer since it 
is so highly dependent on the U.S. 
 
4.(U) The executives noted that, during this sensitive political 
time, the Calderon Administration is "funding its way through a 
mid-term election" with strong levels of government spending.  The 
representative from Sun Microsystems noted that the government has 
made many large purchases in the Information Technology (I.T.) 
sector, particularly to develop software to improve social services 
(e.g. medical data software).  The conversation then moved to the 
global I.T. competition and India.  Specifically, the executives 
discussed how Indian companies are hiring workers in Mexico. (Indian 
company Tata Consulting Services has set up a deliver center in 
Guadalajara Mexico and plans to hire 5,000 in staff over the next 
five years).  The Indian executives have said that Indian labor 
costs have risen to the point that Mexico is a viable alternative 
for servicing the North American market. 
 
5.(U) The executives were pleased with the Calderon administration 
and agreed that Andres Manual Lopez Obrador (AMLO) plays an 
important part in Calderon's approval because in his politically 
weakened state he is a constant reminder of what could happen in the 
absence of a more market friendly president. 
 
6.(U)  The executives suggested that the next big reform would be in 
energy although justice reform was needed as well.  The 
representative from Halliburton noted that Mexico is the only 
country in the world that does not allow private investment in the 
oil sector and even Venezuela, "with all of Hugo Chavez's rhetoric" 
still allows some private participation.   He said that Pemex, the 
oil parastatal, will have a difficult time maintaining a three 
million barrel per day output since it does not have the 
capabilities for needed deep water exploration and production 
(upstream).   Mexican oil production declined 10% over the last year 
and subsequent declines will eventually have an effect on the 
national budget which is heavily oil dependent. 
 
7.(U) The GOM has signed agreements whereby technology and personnel 
are shared between Pemex and private companies, but constitutional 
changes would be necessary to allow upstream investment.  The 
representative from Kimberly-Clark said that there would be reforms 
passed, possibly in the March-April 2008 timeframe, but it would not 
be enough.  The reform could allow limited partnerships for upstream 
under severe constitutional restrictions, but only with other state 
owned oil companies.  Any constitutional changes were very unlikely 
as key lawmakers have publicly denounced opening the sector to 
private investment. 
 
8.(U) The executive from Chevron noted that, despite the important 
of energy reform and the private sector's desire to invest in the 
Mexican oil industry, she was not allowed to lobby the Mexican 
congress for changes to the constitution.  The Halliburton 
 
MEXICO 00000206  002 OF 002 
 
 
representative concluded, however, that they were happy with the 
amount of business they did in Mexico and were still able to win 
many contracts for oilfield services. 
 
9.(U) The Ambassador then steered the discussion to trade and 
agriculture.  He asked if the executives had an opinion of the 
current agricultural debate (reftel), specifically what the 
executives thought of the job Mexican Agricultural Secretary Alberto 
Cardenas Jimenez was doing.  The executives believed that Cardenas 
was not doing a good job, adding that it was hard to tell whether it 
was because he was trying to shut down the discussion on NAFTA or if 
he was simply a bad politician.   They agreed that the real test 
would be on January 31st when a series of large anti-NAFTA protests 
are scheduled, though they didn't believe that there would be enough 
force behind the protests to cause a redressing of the Agreement. 
They further agreed that any redressing of NAFTA would be a bad idea 
and would be almost impossible to pass either the U.S. or the 
Mexican congress with current political sensitivities. 
 
10.(U)The Ambassador noted that free trade agreements are not always 
looked upon as beneficial by the American public and NAFTA in 
particular is linked to immigration in the public perception.  The 
executives wondered whether the American public understood the 
importance of immigration to the general economic health of the 
United States.  They said that the U.S. is capital heavy, Mexico 
abundant in labor, and the free flow of those factors benefit both 
countries.  The executives agreed that the American public does not 
fully grasp the U.S. and Mexican population pyramids and the 
positive effects of the labor flow. They also discussed the 
possibility of discussing immigration reform in conjunction with the 
social security debate in that the overwhelmingly young Mexican 
immigrants could be used to fund benefits for the ageing native-born 
population. 
 
11.(U) The executives noted that the flow of U.S. citizen retirees 
to Mexico is important as well.  They said that these retirees are 
very important economically to Mexico and the GOM needs to encourage 
them.   The executive from Oracle suggested U.S. laws be changed to 
allow Medicare to be used in Mexico.  The group said that Mexico 
should change their laws to allow for easier permanent residency, 
thereby leading to an increase in the number of permanent U.S. 
retiree expatriates. 
 
12.(U) Comment:  While the executives are, for the most part, 
resident in Mexico, they still maintain a strong understanding of 
the current U.S. situation.  They understand that 2008 will be a 
very difficult year on both the political and economic fronts, and 
did not appear to expect major changes from either government. 
Despite a few complaints about problems they have faced in running 
their businesses, they seem confident in Mexico's economic stability 
and pleased with the overall business climate. 
 
GARZA