R 292045Z JAN 09
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 4873
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 000262 
 
 
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 - January 30 
 
¶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: 
 
TRADE AND INVESTMENT: 
--------------------- 
 
FORMAL SECTOR UNEMPLOYMENT RISES IN TIJUANA - Tijuana 
 
SAN DIEGO CHAMBER OF COMMERCE CONTINUES TO PROMOTE "PROJECT SMART 
BORDER" - Tijuana 
 
TIJUANA AIRPORT RECORDS LOSSES IN 2008- Tijuana 
 
USED VEHICLE IMPORTS FALL- Mexico City 
 
HEADLINE INFLATION BEGINS TO RECEDE- Mexico City 
 
"NEW BRIDGE HOURS ACCOUNT FOR ONLY 1 PERCENT OF TOTAL CROSS-BORDER 
COMMERCIAL TRAFFIC" - Ciudad Juarez 
 
 
ENERGY: 
------- 
 
GAS PRICES REMAIN CONTROVERSIAL IN BORDER REGION - Tijuana 
 
CALDERON REGRETS LIMITED ENERGY REFORM - Mexico City 
 
DELAYS IN BIOFUELS PROJECT DEVELOPMENT - Jalisco 
 
 
¶3.  (U) FORMAL SECTOR UNEMPLOYMENT RISES IN TIJUANA: Figures from 
the National Institute of Statistics and Geography (INEGI) show 
Tijuana's unemployment rate reached 4.1%, up from lows of 1.5-2% in 
recent years.  Unemployment at the state level hovers around 3.5%. 
While twenty-four new industrial plants began operations in Tijuana 
in 2008, this was not enough to offset the closure of six plants and 
the slowdown in production in many other maquilas.  The state's 
Secretary of Economic Development estimates the city lost 25,000 
industrial jobs between November 2007 and November 2008, with the 
sharpest drop occurring in the months of October and November 2008. 
City and state officials are hopeful that two new openings expected 
this year, a Samsung plant which could employ 2,900 and a recycling 
plant which may hire 1,900, may help reverse this trend.  It is 
important to note that these figures reflect only formal sector 
employment.  Post will host an economic roundtable on the state of 
the maquila industry February 11.  (Tijuana) 
 
¶4.  (U) SAN DIEGO CHAMBER OF COMMERCE CONTINUES TO PROMOTE "PROJECT 
SMART BORDER": At the January monthly meeting of the Tijuana 
Economic and Industrial Association, Malin Burnham, an active member 
of the San Diego Chamber of Commerce again presented his "Project 
Smart Border" plan that the Chamber ambitiously claims will reduce 
border wait times at the San Ysidro POE to fifteen minutes by 2010. 
Burnham's plan has been presented at many local meetings before and 
during the Chamber-sponsored  2008 lobbying trip to Washington.  It 
includes vague ideas for a "smart" border crossing card, stacked 
lanes, and tolls.  Though some of these ideas are already 
incorporated in existing government plans for updates to the regions 
ports (GSA will add stacked booths to San Ysidro sometime in 2010, 
most lanes will shortly be using RFID technology to read 
machine-readable passports and Border Crossing Cards, and there are 
some plans afoot to use tolls at the Otay II port when it is 
eventually constructed), but the "Smart Border" plan's timeline does 
not match up with either the U.S. or Mexican governments current 
arrangements. (Tijuana) 
 
¶5.  (U) TIJUANA AIRPORT RECORDS LOSSES IN 2008: Due to the weakening 
economy, the closure of four national airlines, and the high price 
of diesel, the Tijuana International Airport recorded 16% fewer 
passengers and 15% fewer flights in 2008 than in 2007.  The slower 
economy has also impacted the San Diego Airport, which, though near 
capacity, recorded fewer passengers in 2008.  It is unclear if these 
numbers will impact the proposed cross-border air terminal intended 
to relieve congestion at the San Diego Airport.  A group of Mexican 
and U.S. investors has already purchased land on the U.S. side for 
this project. (Tijuana) 
 
¶6.  (U) USED VEHICLE IMPORTS FALL: IN 2008, more than 690,000 used 
cars were imported from the U.S. and Canada under the decree issued 
in 2005.  However, this number represents a decline of 36% compared 
to the more than one million cars imported in 2007.  From January 
thru March 2008, the number of imported vehicles rose 61%, but when 
the Executive issued a new decree in February, this number dropped 
by an average of 24%.  In December 2008, the Executive issued a new 
decree to comply with NAFTA's provisions.  One of the requirements 
to import or put an imported vehicle in order will be to present the 
certificate of origin.  From 2005 to date, 3.5 million cars have 
been imported.  According to automobile dealers, the importation of 
used units have altered the sales and prices of semi-new and new 
cars.  For every new vehicle, five used cars are being sold in 
Mexico.  (El Financiero, 19) 
 
¶7.  (U) HEADLINE INFLATION BEGINS TO RECEDE: During the first half 
of January, annual inflation fell to 6.36% from 6.49% registered in 
the second half of December on lower energy and produce prices.  It 
is expected that the freeze in gasoline prices and the reduction of 
heating gas prices recently announced by President Calderon will 
reduce inflation, giving the central bank more room to relax its 
monetary policy.  Government-administered prices and processed food 
continue to put pressure on inflation. Another factor of concern on 
inflation for most analysts is the peso depreciation, since the 
private sector would likely pass the increased costs on to the 
consumer. (Mexico City) 
 
¶8.  (U) NEW BRIDGE HOURS ACCOUNT FOR ONLY 1 PERCENT OF TOTAL 
CROSS-BORDER COMMERCIAL TRAFFIC": Almost three months after the U.S. 
Customs and Border Protection (CBP) and Mexico's Servicio de 
Administracisn Tributaria (SAT) partnered to expand the hours of 
service for commercial traffic at the Ysleta International Bridge in 
El Paso/Ciudad Juarez, cross-border commercial traffic during the 
extra hours remains slow.  The new schedule, which began on November 
3, 2008, opens commercial cargo lanes to 24 hour traffic from Monday 
through Friday.  The pilot program has coincided with the sharp 
decline in economic activity in the US and Mexico, particularly in 
the manufacturing sector.  According to reports in the Juarez press 
made by Manuel Sotelo Suarez, the President of the Ciudad Juarez 
Commercial Transportation Association (Asociacisn de Transportistas 
de Ciudad Juarez), commercial shipments from the maquila sector in 
Juarez declined approximately 30 percent in 2008.  In a conversation 
with a Consulate Officer, the El Paso Assistant Port Director for 
CBP, Norman Bebon, concurred that northbound commercial traffic fell 
significantly in 2008, with the sharpest fall occurring late in the 
year.  For example, in November CBP officers processed 13,825 fewer 
trucks through El Paso ports of entry than the previous month 
(67,008 in October down to 53,183 in November).  With respect to the 
new hours of operation, Mr. Bebon commented that cargo traffic 
during the new expanded hours - i.e., in the late evening and early 
morning - has accounted for only 1 percent of the total commercial 
traffic flow.  The dearth in commercial traffic during off-peak 
hours may be attributed both to a poor macroeconomic environment and 
to limitations in local logistical services capacity, including lack 
of available storage warehouses in El Paso and Juarez, which have 
not yet adjusted their schedules to accommodate the 24 hour 
schedule. (Ciudad Juarez) 
 
 
ENERGY: 
------- 
 
¶9.  (U) GAS PRICES REMAIN CONTROVERSIAL IN BORDER REGION: The state 
government of Baja California felt compelled to take out full page 
ads in local newspapers to assuage public anger due to the January 
12 order by the Finance Ministry increasing the price of Premium and 
Magna gas in the state, despite President Calderon's earlier 
announcement that gas prices would be frozen as part of the economic 
recovery plan.  Baja Governor Millan is at pains to explain that the 
national "freeze" in prices included exceptions for the border 
region, where prices are still below those of the interior of the 
country, even after this week's increase.  He also explained that 
his administration would monitor prices to ensure they do not exceed 
prices on the international market. (Tijuana) 
 
¶10.  (U) CALDERON REGRETS ENERGY REFORM WAS LIMITED: In a speech 
delivered January 23 to inaugurate wind power parks developed by two 
companies -Iberdrola and Cemex- in Oaxaca, President Calderon 
regretted the limited scope of the energy reform approved by the 
Congress last year.  In particular, Calderon complained the denial 
to open the door to private investment to build refineries.  Had the 
Congress approved the participation of the private sector, many 
refineries could have been built at the same time.  Due to the 
lawmakers' denial, the government will only have money to build 
refineries on a one-by-one basis.  Back in October, Calderon had 
publicly praised the consensus achieved by the political parties to 
pass the reform.  During the inauguration of the Ecological Park, 
Calderon pledged to continue working on human development while 
protecting the environment.  Calderon also alerted by the oil 
decline and the importance renewable energy will have in the future. 
(Mexico City) 
 
¶11.  (U) DELAYS IN BIOFUELS PROJECT DEVELOPMENT: In Jalisco, which 
was to be the first state to use ethanol as an auto fuel in Mexico, 
construction of biofuels plants has now been delayed to the end of 
¶2010.  Construction was supposed to have begun in the first quarter 
of 2010.   Increases in the value of the dollar and the euro against 
the peso have impacted the cost of these plants in Mexico, as the 
machines needed for biofuels production are mostly sold in those 
currencies.  A lack of credit available to these projects has also 
slowed their progress.  The industry in Mexico is also waiting for 
the publication of a set of regulations within their Law of 
Bioenergies, which should set the reference price of ethanol in 
Mexico.  Despite these setbacks, the President of the Jalisco 
Agribusiness Council, Mauro Jimenez, still recommended that the 
authorities continue expanding biofuels project planning for the 
future, an indication of the enthusiasm in the state for this 
industry. 
 
 
BASSETT