VZCZCXRO2683
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #0045/01 0082228
ZNR UUUUU ZZH
P 082228Z JAN 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 4574
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RHMFIUU/HQ USNORTHCOM
RHMFISS/CDR USSOUTHCOM MIAMI FL
RHEHAAA/NSC WASHINGTON DC

UNCLAS SECTION 01 OF 02 MEXICO 000045 
 
SENSITIVE, SIPDIS 
 
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA, AND DRL/AWH 
STATE FOR EB/ESC MCMANUS AND IZZO 
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GERI WORD 
USDOC FOR ITS/TD/ENERGY DIVISION 
TREASURY FOR IA (ALICE FAIBISHENKO) 
DOE FOR INTERNATIONAL AFFAIRS (KDEUTSCH AND ALOCKWOOD) 
NSC FOR DAN FISK 
STATE PASS TO USTR (EISSENSTAT/MELLE) 
STATE PASS TO FEDERAL RESERVE (CARLOS ARTETA) 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ENRG EINV PGOV MX
SUBJECT: CALDERON ANNOUNCES MORE MEASURES TO STIMULATE ECONOMY 
 
1)REF A:  Mexico 33 
2)REF B. 2008 Mexico 3752 
 
¶1. (SBU) SUMMARY.  President Calderon announced on January 7 a new 
set of measures to help offset the impact of the global financial 
and economic crisis and stimulate the economy.  "The National Accord 
in Favor of the Families' Economy and Employment" is the third 
economic program announced by the current administration. Previous 
proposals were announced in March and October 2008. Calderon's new 
proposal focuses on job creation, avoiding layoffs, pension 
protection, lowering electricity rates, freezing gasoline and gas 
prices and boosting investment in infrastructure. The announcement 
was hailed by private industry groups and includes commitments from 
the private sector, employers' confederations, local governments and 
lawmakers. In his announcement, Calderon said the nation faced a 
period of great difficulty and rising unemployment but that 
fundamentals were solid. The government now admits that Mexico will 
likely see little or no growth in 2009. END SUMMARY 
 
¶2. (SBU) In his televised address on January 7, Calderon noted that 
the Mexican economy faced a period of great difficulty and rising 
unemployment, but was better prepared to face the economic crisis 
thanks to its solid economic fundamentals, high foreign reserves, 
low foreign debt, and solid financial system.  Notwithstanding, he 
explained that given the deterioration of key economic variables and 
the deepening of the crisis, his cabinet decided to implement new 
actions to soften the effects of the expected economic recession. 
 
¶3. (SBU) This is the third economic program announced by the 
government.  The first one "Program to Support to the Economy" was 
announced on March 3, 2008, and the second one "Program to Stimulate 
Growth and Employment" was launched on October 8, 2008.  The first 
included a set of tax incentives, as well as social security and 
energy rates reductions; and the second was aimed at increasing 
spending in infrastructure, the construction of a refinery, support 
to small and medium-sized businesses, and finally the elimination 
and streamlining of import duties. 
 
¶4. (SBU) The plan includes five main pillars of action to be 
implemented by the government, as well as various commitments agreed 
to by the private sector, employers' confederations, local 
governments and lawmakers. Calderon has invited more sectors to join 
the pact. The actions to be implemented by the government are: 
 
SUPPORT FOR JOBS AND WORKERS 
 
¶5. (SBU) The government will promote new hiring and measures to 
protect existing jobs in vulnerable companies, such as in the auto 
industry and other export sectors. The government will channel US$ 
148 million to those companies that are forced to call for technical 
stoppages.  This measure is expected to protect around 500,000 jobs 
in those industries. The plan will also provide additional temporary 
unemployment insurance that includes training programs and 
healthcare services; expanding the current temporary public works 
employment program by 40% of what was initially planned to cover 
250,000 Mexicans, for jobs building and maintaining schools, 
hospitals, archaeological ruins, and roads.   Unemployed workers 
will be able to take money out of their pension funds before 
retirement without penalty. In order to protect pensions, the 
government will channel US$ 1 billion to these accounts.  Calderon 
also plans to expand social and health coverage for people who lose 
their jobs and will allocate US$ 193 million to pay for this 
coverage, and finally the national employment service will be 
strengthened with more resources. 
 
ECONOMIC SUPPORT FOR FAMILIES 
 
¶6. (SBU) The government will freeze the price of gasoline and reduce 
the price of LPG by 10% during the year.  This measure will generate 
savings of US$ 3.3 billion.  The government will provide Mexican 
families with direct financing of around US$ 56 million to replace 
their house appliances. This measure will not only support families 
but also industry and the government's energy efficiency and cleaner 
energy goals.  The government will funnel US$ 548 million in direct 
supports for the acquisition of low-income housing. 
 
MEXICO 00000045  002 OF 002 
 
 
 
HELPING SMEs COMPETE 
 
¶7. (SBU) The government pledged to reduce electricity rates by 20%, 
17% and 9% depending on consumption levels. (NOTE:  Post previously 
reported in ref B that the private sector had possibly managed to 
extract a promise from the Calderon Administration to reduce energy 
costs in exchange for its support for a tariff reduction scheme. 
This electricity reduction pledge for SME's may be the fulfillment 
of that promise.  END NOTE)  The government also committed to 
procure at least 20% of its purchases from domestic companies and 
provide them with technical and economic support through the "Mexico 
Emprende" program. 
 
¶8. (SBU) A trust fund will be created with US$ 370 million to 
develop SMEs in the oil industry.  NAFIN and Bancomext will increase 
the amount to provide direct and indirect financing by 20% and 
Finrural will provide more financing, approximately 10% more, to the 
agricultural sector.  In total, the development bank will increase 
its financing to the productive sector by 26% in 2009.  The 
government will support and register the trademark "Made in Mexico" 
in order to stimulate the domestic industry. 
 
INVESTMENT IN INFRASTRUCTURE 
 
¶9. (SBU) The government will accelerate the implementation of the 
previously-announced National Infrastructure Plan (PNI) with a 
record public and private investment in 2009 of US$ 42 billions. 
Thanks to last year's increased tax collection and oil windfalls, 
Pemex and the states will have more resources this year for 
infrastructure projects.  Banobras and the Infrastructure Trust Fund 
created last year for the PNI will provide financing for 
infrastructure projects. 
 
MORE TRANSPARENT AND EFFICIENT PUBLIC SPENDING 
 
¶10. (SBU) Calderon pledged to expedite public spending in 
infrastructure.  He instructed his cabinet and signed 21 agreements 
with local governments to issue the operation rules in the Official 
Gazette since January 1, 2009 to begin spending in infrastructure 
projects.  Through this commitment, public spending during the first 
quarter of the year will be 51% more than what was spent during the 
same period of the previous year.  Calderon noted that the hedging 
of oil revenues will help the government spend more resources in 
infrastructure. 
 
 
¶11. (SBU) COMMENT.  With this plan, the Government of Mexico has 
positioned itself pro-actively to build on its solid economic 
fundamentals to implement actions that would help offset the impact 
of the crisis.  Facing the prospect of little or no growth in 2009, 
not to mention the July 2009 legislative elections, Calderon 
announced this new plan with great fanfare and purpose. One new 
element is the public support from the private sector and labor 
groups. Critics have called this plan yet another "band-aid". 
Observers say the plan will probably do less to avoid the 
contraction of real GDP and loss of jobs than help limit the adverse 
impact of the recession on workers and families. A Finance 
Secretariat contact told us that the government remained strongly 
committed to implementing a set of countercyclical measures and 
using all the available tools to stimulate the shrinking economy in 
the medium term.  Naturally, the government is also hopeful that the 
economic measures implemented by the incoming USG administration to 
stimulate the U.S. economy might in turn positively impact the 
Mexican economy, which still relies heavily on its neighbor's 
strengths. 
 
GARZA