VZCZCXRO0289
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #0691/01 0701236
ZNR UUUUU ZZH
P 101236Z MAR 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 0820
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC PRIORITY
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEHC/DEPT OF LABOR WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHMFIUU/CDR USSOUTHCOM MIAMI FL PRIORITY
RHMFIUU/CDR USNORTHCOM PRIORITY
RHEHNSC/NSC WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 03 MEXICO 000691 
 
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 (ANA JEWEL/LUYEN TRAN) 
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND ALOCKWOOD 
STATE PASS TO USTR (EISSENSTAT/MELLE) 
STATE PASS TO FEDERAL RESERVE (ANDREA RAFFO) 
NSC FOR DAN FISK 
 
E.O. 12958: N/A 
TAGS: ECON ECPS EFIN ELAB MX PGOV PREL
SUBJECT: MEXICO ECONOMIC NOTES, FEBRUARY 29 - MARCH 7, 2008 
 
------- 
Summary 
------- 
 
¶1. (SBU) President Calderon on March 3 announced a series of 
measures aimed at helping the Mexican economy weather the 
U.S. economic slowdown.  The package includes reductions in 
provisional income tax payments between March and June 2008, 
reductions in corporate payments to the social security 
institute, and the lowering of electricity tariffs. 
Separately, consumer prices rose slightly more than expected 
in February to an annual rate of 3.72%.  Two key themes 
emerging from the Institutional Revolutionary Party,s (PRI) 
79th anniversary celebration on March 4 were improved party 
unification and continued electoral gains.  Legislatures are 
supposed to meet early next week discuss a watered down 
antitrust bill that was taken off the agenda this week.  End 
Summary. 
 
------------------------------------------- 
Government Unveils Economic Support Package 
------------------------------------------- 
 
¶2. (U) President Calderon on March 3 announced a series of 
measures aimed at helping the Mexican economy weather the 
U.S. economic slowdown.  Finance Secretary Carstens said 
publicly that the government is in a strong fiscal position 
following the approval of tax reform last year, so it has 
decided to approve ten initiatives worth USD 5.6 billion to 
support economic growth.  Calderon remarked that the measures 
will not affect the government's plans to maintain a balanced 
budget this year.  The support package includes the following 
measures: 
 
-- A 3% corporate tax break for the next five months 
 
-- A 10% discount on commercial electricity fees and a 20% 
discount on peak electricity rates (on top of cuts announced 
last year) 
 
-- A 5% reduction in company contributions to the Mexican 
Social Security Institute this year 
 
-- A USD 935-million increase in Pemex expenditures to 
upgrade and expand its pipeline network 
 
-- A USD 93 credit to individuals with entrepreneurial 
activities who file their taxes online 
 
-- Tax incentives and financing for companies that decide to 
operate in the poorest parts of the country 
 
-- Simplification of administrative requirements for 
exporters and importers 
 
-- Approximately USD 60 million of additional funds for the 
National Employment System 
 
-- The acceleration of Fiscal Year 2008 funding to 
development banks in order to promote economic activity and 
extend more credit to small- and medium-sized companies (SMEs) 
 
-- The establishment of a government-run webpage to 
consolidate all job openings in the country. 
 
¶3. (SBU) Calderon used a speech to the National Chamber of 
Manufacturers (CANACINTRA) on March 4 to highlight the new 
initiatives, and received applause for the measures reducing 
social security taxes and electricity rates.  He remarked 
that the program includes concrete measures that will help 
boost the productive sector and benefit SMEs.  Business 
leaders and market analysts viewed the program as a positive 
 
MEXICO 00000691  002 OF 003 
 
 
step, but underscored the need for the plan to be implemented 
quickly and efficiently and for additional measures to 
improve Mexico's competitiveness.  (Comment:  These measures, 
which can be expected to provide only a limited boost to the 
economy, are largely political in nature.  Calderon needs to 
be seen as doing something to protect Mexico from a potential 
U.S. recession.  That said, it is noteworthy that the 
government is giving money back to the private sector to 
stimulate growth rather than simply boosting public spending 
as it has often done in the past.  End Comment.) 
 
------------------------------------------ 
Inflation Rose Slightly More Than Expected 
------------------------------------------ 
 
¶4. (U) Consumer price inflation climbed 0.3% to an annual 
rate of 3.72% in February -- up slightly from 3.70% at the 
end of January.  The increase exceeded the 0.24% median 
estimate of 23 economists surveyed by Bloomberg.  Core 
inflation, which excludes food and energy costs, rose 0.47% 
to an annual 4.14% on higher costs for processed foods and 
housing.  While inflation figures have been slightly better 
than expected this year, these numbers show that inflationary 
pressures persist.  The reading also may dampen expectations 
that the Bank of Mexico will trim rates in the first half of 
the year. 
 
---------------- 
The PRI Turns 79 
---------------- 
 
¶5. (SBU) On March 4, Labor Counselor attended the 79th 
Anniversary celebration of the PRI, Mexico's former ruling 
political party.  The event played to a packed house at the 
National Auditorium, and repeatedly stressed the theme that 
the party was becoming more unified and would continue to 
gain electoral victories ultimately culminating in the PRI 
retaking the presidency in 2012.  Most of Mexico's larger 
national labor federations are officially affiliated with the 
PRI and most of the heads of these organizations were invited 
to the event.  However, the top leaders of these national 
federations were the only ones invited.  According to one of 
Labor Counselor's contacts, union officials below the level 
of the number one spot were specifically not invited and 
those who called the party asking for invitations were told 
the event was already full.  The event was full, but there 
appeared to be an inordinate amount of people there whose 
only function was to cheer on cue for Enrique Pena Nieto, the 
governor of Mexico State.  Pena Nieto is one of the PRI 
hopefuls who is trying to become his party's next 
presidential nominee.  He has been working to establish a 
close relationship with the party's national leader Beatriz 
Paredes.  Reportedly Paredes' office directly supervised the 
list of invitees for this event and it appears that a 
decision was made to admit Pena Nieto's cheering section at 
the expense of a large number of important labor officials 
from a broad variety of union organizations. 
 
-------------------------------- 
Marked Up Antitrust Bill Delayed 
-------------------------------- 
 
¶6. (U) A watered down antitrust bill was taken off the 
legislative agenda this week.  Legislators had proposed 
changes to a bill that the Economy Committee in the Chamber 
of Deputies approved last October.  The modifications, which 
include changing the way fines are imposed on offending 
companies, clearly favor monopolies.  This marked up bill was 
pulled from the agenda after the head of Mexico's Federal 
Competition Commission complained that the "counter proposal" 
would have made it impossible for authorities to impose any 
fines and reverse a lack of competition that has hurt the 
 
MEXICO 00000691  003 OF 003 
 
 
economy.  The Economy Committee is supposed to meet with 
officials from the antitrust commission and the Finance 
Secretariat on March 10 to discuss the future of the bill. 
 
SIPDIS 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity and the North American 
Partnership Blog at http://www.intelink.gov/communities/state/nap / 
GARZA