R 192326Z DEC 08
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 4472
DEPT OF COMMERCE WASHINGTON DC
DEPT OF ENERGY WASHINGTON DC
DEPT OF TREASURY WASHINGTON DC
NSC WASHINGTON DC
INFO ALL US CONSULATES IN MEXICO COLLECTIVE

UNCLAS MEXICO 003755 
 
 
STATE FOR WHA/MEX, WHA/EPSC 
STATE FOR EEB 
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GWORD 
TREASURY FOR IA 
ENERGY FOR WARD, LOCKWOOD AND DAVIS 
 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD ENRG ELTN EAIR PGOV SENV MX
SUBJECT: Mexico Economic Weekly - December 19 
 
¶1.  (U) The Mexico Economic Weekly supplements individual reporting 
from the Consulates and the Embassy Mexico Economic Section to 
provide a sense of ongoing trends.  Please contact Adam Shub 
(shubam@state.gov) or Sigrid Emrich (emrichs@state.gov) for 
questions or comments about this report. 
 
¶2. (U) Table of Contents: 
 
 
FINANCE/ECONOMY: 
---------------- 
 
BARCLAYS BANK: U.S. RECESSION HAS STRONG IMPACT ON MEXICO (Mexico 
City) 
 
MEXICAN DEPOSITS IN US BANKS CONTINUE TO INCREASE 
(Matamoros) 
 
OPORTUNIDADES TO INVEST IN 8,000 LOW-INCOME FAMILIES IN JUAREZ 
(Ciudad Juarez) 
 
 
TRADE AND INVESTMENT: 
--------------------- 
 
RECORD FDI IN 2008, DROP EXPECTED IN 2009 (Monterrey) 
 
 
LABOR: 
------ 
 
BUYOUTS VS. LAYOFFS (Matamoros) 
 
SEASONAL PAY CUTS (Monterrey) 
 
NOVEMBER JOB LOSSES FOR NUEVO LEON (Monterrey) 
 
 
ENERGY: 
------- 
 
GOVERNMENT RELEASES ENERGY OUTLOOK FOR 2008-2017 - PRIVATE EXPERTS 
QUESTION STATISTICS: 
(Mexico City) 
 
 
ENVIRONMENT: 
------- 
 
KANSAS DONATES TAPIR TO MEXICO CITY ZOO (Mexico City) 
 
INDONESIAN EXPERIENCE WITH AVIAN INFLUENZA RESONATES WITH MEXICAN 
OFFICIALS 
 
 
FINANCE/ECONOMY: 
---------------- 
 
¶3.  (U) BARCLAYS: U.S. RECESSION HAS STRONG IMPACT HERE: 
Mexican economic activity will fall significantly in 2009 despite 
the government's efforts to minimize the impact of the global 
financial and economic crisis.  Mexico's economy will expand 1.8% in 
2008 and 0.8% in 2009 according to Barclays.  The firm predicts that 
the central bank will relax its monetary policy accordingly during 
the first half of the year, but assumes Mexico's Congress will 
approve more structural reform projects after the mid-term elections 
in July.  The U.S. economic recession will have a strong impact on 
Mexico, according to Barclay's because although the government has 
tried to diversify its markets, 80% of its exports still go to the 
U.S.  Barclays foresees domestic demand falling and consumption 
remaining flat, but expects the peso to appreciate. 
 
Recently released figures already indicate that Mexico is 
approaching the trough of a recession.  On December 17, the National 
Institute of Statistics (INEGI) reported Industrial production 
contracted 2.7% year-on-year in October. All sectors contracted -- 
mining fell 5.2% year-on-year, manufacturing 2.2% and construction 
2.9%. Industrial production between January and October showed no 
growth from the same period last year. Mexican GDP is correlated 
closely with U.S. industrial production, which means that the U.S. 
economic slowdown has hit the country hard, causing GDP to 
decelerate since the start of this year. While jobs were still being 
created in the Mexican economy until recently, the latest data from 
the Mexican Institute of Social Security (IMSS) show that nearly 
50,000 formal sector jobs were lost last month. Comment:  Output 
will continue to decline, as will tourism and remittances from 
Mexicans living in the United States. This means that the IMF growth 
forecast of 0.9% next year and Barclay's 0.8% estimate appear overly 
optimistic, with the economy entering a recession and rising 
unemployment swelling the ranks of the informal sector. (Mexico 
City) 
 
¶4.  (U) MEXICAN DEPOSITS IN US BANKS CONTINUE TO INCREASE: 
Mexican clients continue to boost their deposits in US banks in the 
border region, according to Lupe Zuniga, branch manager of First 
National Bank in La Feria, Texas. "We're seeing more Mexican clients 
boosting their savings accounts in our banks, and they're telling us 
they're withdrawing from Mexican banks to do so," said Zuniga. The 
bank is also moving forward with branch expansion efforts in 
Monterrey and other Northern Mexico locations, taking advantage of 
the growing perception that investments are safer in US banks. 
Zuniga also noted that new Banamex locations in the Rio Grande 
Valley and other border locations (REFTEL: Matamoros 214) are 
expected to be less competitive with existing banks due to the same 
perceptions about the security of US banks. (Matamoros) 
 
¶5.  (U) OPORTUNIDADES TO INVEST IN 8,000 LOW-INCOME FAMILIES IN 
JUAREZ: 
Oportunidades, the Mexican government's principal anti-poverty 
program, will invest in 8,000 additional families in Ciudad Juarez 
in 2009.  This increase in participation will triple the number of 
families that currently participate in the program in Juarez 
according to Sergio Barraza Pak, the Director of Oportunidades in 
Chihuahua.  Oportunidades helps low-income families invest in their 
children's education, health and nutrition by providing cash 
transfers conditioned on the children's school attendance and 
regular health assessments.  The program's design seeks to break 
poverty traps, which are often multi-generational.  Many parents 
cannot afford to send their children to school, and pull them out to 
work at an early age.  The program attempts break the cycle by 
providing parents an income equivalent to what their children may 
earn.  Mr. Barraza Pak reported that the new families selected to 
participate in the program will receive 230 to 840 pesos a month, 
per child.  The new participants are primarily migrants from 
southern Mexico.  The program's increased coverage seeks to 
ameliorate the negative impact of the current economic crisis. 
(Ciudad Juarez) 
 
¶6.  (U) MONTERREY TECH TO FUND START UPS: 
Monterrey's leading University, the Tecnolsgico de Monterrey or 
Monterrey Tech, announced a new US $12 million fund to help finance 
new companies December 14.  Both Mexican and U.S. investors 
contributed to the fund which is  managed by the university.  The 
project is also receiving technical guidance from Mexico's national 
"Fondo Pyme" (SME Fund).   The fund hopes to make its first 
investments in January. (Monterrey) 
 
TRADE AND INVESTMENT: 
--------------------- 
 
¶7.  (U) NUEVO LEAN GETS RECORD INVESTMENT IN 2008, DROP EXPECTED IN 
2009: 
Nuevo Leon received $5.5 billion USD in foreign direct investment 
(FDI) in 2008, far more than the $1.8 billion received in 2007, 
according to preliminary figures from the Nuevo Leon Secretary of 
Economic Development.  Nuevo Leon's FDI also generated 210,000 jobs 
over 2008, although employers are now cutting employment.  The 2008 
FDI statistics were inflated by a one time purchase of the IMSA 
steel company, but generally FDI was spread between metal mechanics 
(32%), automotive (23%), services (16%), and electronics and 
domestic appliances (8% each).  Despite the rosy results in 2008, a 
Nuevo Leon official privately told Econoff that considering the 
current condition of the economy, the state will need to work hard 
to receive $1 billion in FDI in 2009.  (Monterrey) 
 
 
LABOR: 
------ 
 
¶8.  (U) MAQUILADORAS TURN TO BUYOUTS RATHER THAN   LAYOFFS 
A number of maquiladora managers are reducing workforces via buyouts 
rather than layoffs to reduce costs.  Under Mexican labor law, 
laying off employees can be an expensive venture.  Mike Myers, 
manager of Metal Industries, Inc., in Reynosa recently reduced his 
workforce of 300 employees 10 percent by offering a buyout. "I made 
an offer to the workforce that anyone who was considering leaving 
the company could earn a bonus by resigning within a certain 
timeframe," said Myers. Financially, the buyout cost Metal 
Industries significantly less than formal layoffs due to Mexican 
labor laws. Members of the Reynosa Maquiladora Association (RAMMAC) 
report that other firms are using similar workforce reduction 
tactics.  The result of such employee separation policies could be 
discrepancies between official layoff and workforce reduction 
statistics and total labor force statistics. Employees bought out 
will appear to have left via attrition, though their decision to 
resign was encouraged by management to reduce payroll expenses. 
(Matamoros) 
 
¶9.  (U) U.S. AUTO MAKERS FACE SEASONAL PAY CUTS: 
GM and Chrysler announced December 16 that during their regular 
season plant shutdown 20,000 employees in Saltillo will receive only 
50% of their normal salary.   The companies blamed falling sales and 
the lack of liquidity as the primary reason for not being able to 
offer full compensation.  (Monterrey) 
 
¶10.  (U) NOVEMBER JOB LOSSES FOR NUEVO LEON: 
The heavily industrial state of Nuevo Leon reported a loss of nearly 
8,000 jobs for November compared to a gain of nearly 7,000 jobs in 
¶2007.  The hardest hit sectors were manufacturing and construction. 
Local economist Abel Hibert cited the economic crisis and especially 
the uncertainty in the automotive sector as the primary reason for 
the layoffs. (Monterrey) 
 
 
ENERGY: 
------- 
 
¶11.  (SBU) GOVERNMENT RELEASES ENERGY OUTLOOK FOR 2008-2017 - 
PRIVATE EXPERTS QUESTION OPTIMISTIC PRODUCTION FIGURES: 
The government expects to increase oil production from the current 
2.8 million barrels a day to 3 million barrels a day by 2012 
according to the 2008-2027 Energy Outlook presented by Secretary 
Kessel December 10.  With the construction of two new refineries, 
said Kessel, Mexico will be able to reduce its imports of gasoline 
and generate more jobs and income.  The government will invest US$ 
24 billion to the energy sector in 2009.  Private sector experts 
question whether Pemex can raise production to 3 billion barrels a 
day by 2012 given a minimal level of deepwater exploration and the 
technical challenges involved with the Chicontepec field.  (Mexico 
City) 
 
 
ENVIRONMENT: 
------- 
 
¶12.  (U) KANSAS DONATES TAPIR TO MEXICO CITY ZOO: 
The Sedgwick County Zoo's December 8 donation of a baird's tapir 
(Tapirus bairdii) to the Chapultepec Zoo marks the beginning of the 
Mexico City zoo's tapir reproduction program.   According to 
Chapultepec Zoo Director Dr. Jose Bernal Stoppen only 1,400 to 4,000 
baird's tapir's remain in the wild in Mexico due to encroachments on 
the tapir's habitat and poaching.  Mexico City environment 
secretary, Martha Delgado Peralta, said that bringing the tapir to 
Mexico City is part of the city's Green Agenda.  Chapultepec Zoo has 
over 6 million visitors annually, and has been successful with 
Mexican wolf and California condor conservation programs. (Mexico 
City) 
 
¶13.  (U) INDONESIAN EXPERIENCE WITH AVIAN INFLUENZA RESONATES WITH 
MEXICAN OFFICIALS:  Lingga Setawian, Economic Counselor, Embassy of 
Indonesia shared Indonesia's experience managing the pandemic. The 
Mexico City Avian Influenza working group December 17, , established 
under the Security and Prosperity Partnership is chaired by the U.S. 
Embassy and brings together experts to discuss strategies for 
addressing avian influenza. In light of the MOU signed between 
Indonesia's and Mexico's agricultural ministers on 17 Nov 2008, 
SAGARPA director Dr. Igor Romero extended  his organization's offer 
of cooperation in the area of chicken vaccinations, use of 
surveillance labs and scientific exchanges.  Dr. Ietza Bojorquez, 
SALUD director of edipemiolgy and Dr. Ethel Palacios, project 
director, expressed interest in continuing discussions with 
Indonesia around the issue WTO vaccination benefit sharing. 
Lingga's story resonated with  Mexican government officials who 
noted shared challenges with backyard farmers, industry 
communication programs, and managing international aid and 
perceptions.  While Lingga noted that backyard chickens were banned 
from Jakarta, the government is concerned the H5N1 virus is 
spreading to song birds (Mexico City) 
 
Bassett