R 102328Z DEC 08
FM AMCONSUL TIJUANA
TO SECSTATE WASHDC 8056
INFO ALL US CONSULATES IN MEXICO COLLECTIVE
AMEMBASSY MEXICO 
AMCONSUL TIJUANA

UNCLAS TIJUANA 001203 
 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EINV
SUBJECT: THE PRD IN PARADISE: BAJA CALIFORNIA SUR 
 
SUMMARY 
------------- 
Located on the southern tip of the California peninsula over a 
thousand miles from the congested, sometimes violent border 
region, the Mexican state of Baja California Sur (BCS) is one of 
only a handful of Mexican states with no drug trafficking 
related murders in the past year.    This quiet atmosphere 
combined with its spectacular ocean views means the state 
continues attracting foreign investment in the tourism sector, 
despite the global economic slowdown.   Critics note BCS' 
economy is too dependent on the volatile tourist trade and the 
state government, which has close links to foreign investors, 
is doing nothing to diversify.   BCS' isolation means there is 
little political competition, with the Democratic Revolutionary 
Party (PRD) firmly ensconced and bickering internally.   END 
SUMMARY 
 
OVERPRICED MARGARITAS AND BEAUTIFUL BEACHES: A SOUND ECONOMIC 
PLAN? 
--------------------------------------------- -------------- 
------------------------------------------ 
 
¶2.      An estimated fifty percent of BCS' economy is either 
directly or indirectly linked to tourism, most of it centered in 
Cabo San Lucas and Los Cabos on the southernmost tip of the 
peninsula.   The state's quiet, pleasant capital of La Paz used 
to be a booming trade town when merchants on the peninsula were 
able to import goods tariff-free under Mexico's "Zona Libre" 
program and businessmen from other Mexican states would travel 
to La Paz to purchase goods.  With Mexico's accession to the 
GATT in 1987, the border region and the California peninsula 
lost its competitive advantage in importing, and the local 
government is turning to tourism to fill the gap.   The state is 
trying to expand tourism beyond the traditional Cabo resorts and 
claims to have thirty-eight hotel and condo projects worth USD 
30 billion lined up, many from Spanish investors.   The state's 
Minister of Tourism, Alberto Trevino admits, though, that the 
only projects that have actually left the drawing board are new 
resorts just north of Cabo on the eastern side of the peninsula 
and in Loreto, a small town three hundred miles to the north. 
Trevino says that investment continues, despite the global 
slowdown and a ten to fifteen percent drop in tourist numbers 
this year, but admits the rates of investment may slow and 
efforts to expand tourism to La Paz and other, poorer areas in 
the state could be hindered. 
 
¶3.      Carlos Lira, president of the local Mexican National 
Chamber of Commerce (CANACO) says the state economy is already 
feeling this decline in tourism.   Manuel Angeles Villa, an 
economist at the Autonomous University of Baja California in La 
Paz (UABC) contrasts BCS with Hawaii, another geographically 
isolated economy dependent on tourism, but which has more 
successfully diversified into other industries.  He states that 
the tourism industry leaves the state economy too dependent on 
the whims of foreign capital and believes  the profits of these 
investments do not stay in the state.   Angeles Villa probably 
underestimates the important impact of the jobs these types of 
investments create, but it was clear in poloff's meetings with 
both the municipal and state governments that local officials 
are pursuing tourism investment single-mindedly, without thought 
to diversifying the economy. 
 
¶4.      Lack of diversification is not the only risk in BCS' 
determined pursuit of more tourism  investment.   Even the mayor 
of La Paz, Rosa Delia Cota Montano, a strong proponent of 
tourism investment, concedes that issues of land tenure, as so 
often in Mexico, complicate this type of investment.   Most of 
the land purchased by foreign investors are purchased from 
"ejidos", Mexican farming communities set up during Mexico's 
agrarian reform.    What most investors (and "ejidatorios") 
don't know is that the strip of land closest to the coast is 
considered public land and that the federal government may have 
awarded that strip of land as a concession to a third party many 
years prior to the investment.   This means the investor, having 
purchased the land adjacent to the conceded strip must either 
negotiate with the holder of the concession or abandon the 
investment.    Investors and the government also have to contend 
with environmental groups, who oppose much of the development 
and claim the resorts limit the local population's access to the 
beaches. 
 
POLITICS BASED ON THE COTA FAMILY AND THE LOCAL PRD 
--------------------------------------------- -------------- 
------------------- 
 
¶5.      These concerns aside, the state's focus on tourism is not 
likely to change.   Almost all observers believe PRD State 
Governor Narciso Agundez is close to many of the foreign 
investors (though the nature of the relationship is murky), and 
there is not enough political competition in the state to 
suggest any change in the political scene in the near future. 
Ever since former Institutional Revolutionary Party (PRI) member 
Leonal Cota failed to receive the PRI nomination for governor in 
1999 and decided to switch to the PRD, the state's politics have 
been dominated by PRD (most southern Baja Californian 
"perredistas" are former "priistas"),  and the  opposition PAN 
and PRI parties are now divided and weak in the state.    The 
only political competition comes from internal party bickering, 
which is likely to increase when Cota returns to the state after 
serving as the PRD's national president.   Cota is known to be 
closer to the Lopez Obrador/Encinas faction of the PRD and is 
expected to promote the La Paz mayor, his sister, for the next 
governor.  Agundez, meanwhile, who is closer to the New Left 
faction of Jesus Ortega, will likely have his own candidate. 
Despite Cota's notoriety, political observers in the state do 
not see any other local politician with potential for emergence 
on the national scene, at least not in the short term.  This 
means the BCS "perredistas" will look to even further solidify 
their power locally. 
 
¶6.      COMMENT:   With insular politics and an overly specialized 
economy, some might see BCS' future as bleak, but  it appears to 
be weathering the global economic slowdown as well as any other 
part of Mexico, and even critics of the PRD government admit 
government services and transparency have improved since the 
ousting of the PRI.   Controversy over resort development will 
continue, but is unlikely to stop development.  BCS' insulation 
from the narco-violence and ability to attract tourism is a 
matter of geographic luck more than any local government policy, 
but it means it can offer its citizens a nicer way of life than 
many other Mexican states.    END COMMENT 
 
 
KRAMER