R 132300Z MAR 09
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 5638
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 000771 
 
 
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 - March 13 
 
¶1.  (U) The Mexico Economic Weekly supplements reporting 
from Mission Mexico 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: 
--------------------- 
 
NEW POLICE FORCE TO SUPPORT TOURISM IN TAMAULIPAS - 
Matamoros 
 
BRITISH AMBASSADOR VISITS TAMAULIPAS - Matamoros 
 
CNIMME PRESIDENT VISITS RAMMAC - Matamoros 
 
IVA TAX REFUNDS FRUSTRATING MAQUILADORA MANAGERS - 
Matamoros 
 
CEMEX CONTINUES TO FACE DEBT PROBEMS - Monterrey 
 
AGRICULTURE EXPORTS - Monterrey 
 
WILL SECURITY CONCERNS IMPACT INVESTMENT IN CHIHUAHUA? 
Ciudad Juarez 
 
STATE POLICE INCREASES SECURITY FOR MAQUILA SECTOR; CRIME 
RATES DECLINE 60 PERCENT Q Ciudad Juarez 
 
U.S COMPANY WILL INVEST IN BAJA CALIFORNIA - Tijuana 
 
IN EARLY MARCH, MEXICAN PRESIDENT FELIPE CALDERON CAME TO 
BAJA CALIFORNIA, VISITING TWO OF THE STATE'S MOST 
IMPORTANT CITIES Q Tijuana 
 
 
TRANSPORTATION AND INFRASTRUCTURE: 
---------------------------------- 
 
CANACAR PLANNING PROTESTS ON MARCH 23 - Matamoros 
 
 
LABOR: 
------ 
 
HIRING CONCERNS ABOUT PUBLIC SAFETY OVERHAUL - Matamoros 
 
REDUCED WORKING CONDITIONS REMAIN HIGH - Matamoros 
 
 
ECONOMY AND FINANCE: 
-------------------- 
 
JOB LOSSES SLOW - Monterrey 
 
 
--------------------- 
TRADE AND INVESTMENT: 
--------------------- 
 
¶3.  (U) NEW POLICE FORCE TO SUPPORT TOURISM IN 
TAMAULIPAS:  Tamaulipas Secretary of Tourism, Javier 
Villarreal, revealed plans this week for a new state 
police force specifically aimed at protecting and helping 
tourists.  The force will consist of bilingual officers 
specifically trained to serve in tourist destinations. 
Villarreal also noted that a pilot program has already 
been successfully implemented in the southern Tamaulipas 
port city of Tampico.  (Matamoros) 
 
¶4.  (U) BRITISH AMBASSADOR VISITS TAMAULIPAS:  England's 
ambassador to Mexico, Giles Paxman, was invited by Gov. 
Eugenio Hernandez Flores to visit the state of Tamaulipas 
during the week of March 2.  According to Eduardo Manzur 
Manzur, the state Secretary of Economy's general director 
of industrial and commercial support, the Governor is 
reaching out to foreign embassies in Mexico City to seek 
direct promotion and support in attracting new 
investments by "showing them the advantages of the region 
and to take advantage of the businesses already operating 
here."  After visiting the southern port region of 
Tampico, Altamira and Madero with Manzur Manzur, the 
British ambassador met with the governor in Ciudad 
Victoria before traveling with the state Secretary of 
Economy's general director of investment promotion, Zonia 
Torres, to the border town of Matamoros.  In Matamoros, 
Amb. Paxman met with Matamoros Mayor Erick Silva Santos 
before visiting the Matamoros Maquiladora Association 
(AMMAC).  While public press reports noted that the visit 
was geared toward general familiarization with the 
regional economic conditions, as least part of the trip 
was tied to security concerns in regard to current and 
potential future British investments along the US/Mexico 
border.  According to AMMAC director Roberto Mattus, 
"Ambassador Paxman is a smart man and he knows that we 
are not like Juarez and Tijuana in regard to security 
concerns."  Mattus further noted that Q after meeting the 
Ambassador last week Q he believed the visit was, in 
part, to verify that Matamoros and the northeastern 
Mexico border, while not devoid of security issues, is 
not operating under the same security threats as other 
industrial cities along the border.  (Matamoros) 
 
¶5.  (U) CNIMME PRESIDENT VISITS RAMMAC:  Cesar Castro, 
president of the National Maquiladora Association 
(CNIMME) visited Reynosa this week to meet Reynosa 
Maquiladora Association (RAMMAC) managers regarding the 
national organization's 2009 agenda.  Castro told 
managers that security concerns are the number one issue 
for the national organization, assuring RAMMAC members at 
its monthly meeting that the national organization is 
working closely with federal entities to help create a 
more secure operating environment for manufacturers. 
Castro also noted efforts to assist managers with tax 
concerns.  RAMMAC President Dan McGrew commented on 
managers' fears that decreasing oil revenues will put 
added pressure on industry, particularly in regard to the 
IETU tax, to fill the revenue gap for the federal 
government.  (Matamoros) 
 
¶6.  (U) IVA TAX REFUNDS FRUSTRATING MAQUILADORA MANAGERS: 
Processes surrounding IVA tax refunds were prominent 
topics of discussion at both the Matamoros Maquiladora 
Association (AMMAC) and Reynosa Maquiladora Association 
(RAMMAC) monthly meetings this week.  Inconsistencies and 
unclear deadlines of "opening and closing and opening and 
closing windows" with the filing process Q according to 
Vicente Dardenas, plant manager of Mervis in Lucio 
Blanco, Tamaulipas Q have many managers upset about the 
process.  According to AMMAC President Monica Gonzalez 
Greer, there is a great deal of frustration with the 
process; so much so that AMMAC's guest speaker this month 
was a representative of the Secretary of Hacienda who was 
berated with questions about the process. AMMAC also 
planned two working sessions in the upcoming week to help 
managers work through the process.  "ItQs not a local 
problem . . . ItQs national," said AMMAC Director Roberto 
Mattus.  (Matamoros) 
 
¶7.  (U) CEMEX CONTINUES TO FACE DEBT PROBLEMS: 
International building materials supplier and cement 
producer Cemex is facing nearly US$17 billion of expiring 
debt in the next five years and a possibility of default 
because of the economic slowdown.  On March 9, Cemex 
announced that it has temporarily shelved plans to issue 
US$500 million of new debt.  According to press reports, 
potential investors were asking for an interest rate of 
near 20% for the company's bond issue to reflect the 
increased risk based on falling domestic and 
international demand -- even though Cemex had a 'BB' bond 
rating from Standard & Poor's.  About 25% of Cemex's 
revenues come from the United States, 33% from Mexico and 
the rest from other parts of the world.  Cemex stock is 
down over 80% compared to the same time last year.  Now 
that a bond issue has, for the time being, been ruled 
out, Cemex must negotiate a line of credit with its 
creditors.  A Deutsche Bank analyst suspects the Mexican 
government will be forced to intervene by providing loan 
guarantees if Cemex cannot renegotiate its debt soon. 
After the failed bond offering, Standard & Poor's further 
downgraded Cemex's rating to 'B'.  (Monterrey) 
 
¶8.  (U) AGRICULTURE EXPORTS:  According to recently 
published USDA figures, the United States agriculture 
exports to Mexico totaled nearly US$16.1 billion in 2008, 
a 26% increase over 2007, and nearly beat out exports to 
Canada for the first time ever.  Overall, agriculture 
trade with Mexico represents a US$5.2 billion trade 
surplus for the United States.  The largest gains came 
from bulk agriculture products such as wheat, coarse 
grains, rice and soybeans.  Trade exports from the United 
States to Mexico have increased every year since the 
implementation of NAFTA but exports are expected to 
decline this year due to the economic crisis and the 
possibility of retaliatory tariffs against the United 
States for halting the Cross Border Trucking Program. 
The FAS attache met with companies exporting near the 
border the week of March 2; they reported that US food 
exports already appear to be off 20% due to the 
depreciation of the peso.  (Monterrey) 
 
¶9.  (U) WILL SECURITY CONCERNS IMPACT INVESTMENT IN 
CHIHUAHUA?:  This past year, economic and security 
conditions in Chihuahua deteriorated considerably.  Total 
foreign direct investment in 2008 fell by almost 40 
percent compared to 2007, while homicides in Ciudad 
Juarez increased by more than 500 percent.  Still, 
business organizations continue to insist that no 
investors have decided against doing business in 
Chihuahua because of the security environment.  Rather, 
they say, and other indicators seem to confirm, that the 
fall in FDI has been principally driven by the economic 
downturn in the US, especially in the US manufacturing 
sector.  According to the spokesperson for Grupo 
Chihuahua de Cementos (GCC), Mexico's second largest 
cement company after CEMEX, "the collapse in U.S. demand 
has impacted sales more than the rising costs associated 
with security."  He explained that "security costs are 
only one percent higher for the firm's operations in 
Chihuahua than in the United States."  Nonetheless, a 
U.S. private equity investor with exposure in EPIC 
Technologies, a U.S. electronic manufacturing firm with 
two plants in Juarez, told Post that many of the firm's 
current and potential customers refuse to visit their 
plants in Juarez due to security concerns.  These visits, 
he stated, "are an essential step to winning business and 
important to retaining it."  Similar concerns are also 
reflected by the rising number of requests by U.S. 
investors for security briefings from Post's Regional 
Security Officer (RSO).  Many potential investors told 
the RSO that they will delay investment until security 
conditions improve.  Yet for other firms, investment in 
Chihuahua continues to make financial sense despite the 
high crime rates, due to its proximity to US markets, low 
labor costs and the declining value of the peso.  (Ciudad 
Juarez) 
 
¶10.  (U) STATE POLICE INCREASES SECURITY FOR MAQUILA 
SECTOR; CRIME RATES DECLINE 60 PERCENT:  In recent 
months, Maquila employees have been the victims of 
numerous armed assaults, kidnappings and extortion in 
Ciudad Juarez.  In response, on January 20, Chihuahua's 
Industrial Police Division (CIPOL Industrial) increased 
patrols and personnel dedicated to providing security for 
the city's 19 industrial parks.  Preliminary results 
announced on March 6 by the President of the Maquila 
Association in Ciudad Juarez (AMAC), Soledad Maynez 
Bribiesca, show that the increased security presence has 
led to a 60 percent decline in crime on Maquila 
employees.  She added, however, that crime rates remain 
too high.  Beginning this week, the number of police 
assigned to protect the Maquila industry will increase 
even further when 40 additional police join the 60 
existing "CIPOL Industrial" officers currently 
responsible for patrolling industrial parks.  (Ciudad 
Juarez) 
 
¶11.  (U) U.S COMPANY WILL INVEST IN BAJA CALIFORNIA:  On 
March 4, the Governor Osuna Millan of Baja California had 
an appointment with the Company Kristal Enterprises, one 
of the largest (OIM) manufacturers of stretch limousines 
and luxury vehicles in the Unites States.  This company 
will establish a new plant in Mexicali, investing US$ 40 
million and creating an estimated 500 jobs.  (Tijuana) 
 
¶12.  (U) IN EARLY MARCH, MEXICAN PRESIDENT FELIPE 
CALDERON CAME TO BAJA CALIFORNIA, VISITING TWO OF THE 
STATE'S MOST IMPORTANT CITIES:  On March 5, the President 
toured the 'Punta Brava' real estate project in Ensenada, 
where construction of a world-class golf course with 
Tiger Woods' backing will soon begin.  The following day, 
the President visited Japanese enterprise "Kyocera 
Mexicana" in Tijuana, where he made a commitment to build 
an energy plant with solar panels.  The President 
emphasized that local companies enjoy a great advantage 
due to their Baja California location.  He took the 
opportunity of his visit to also talk about Tijuana's 
security issues.  (Tijuana) 
 
---------------------------------- 
TRANSPORTATION AND INFRASTRUCTURE: 
---------------------------------- 
 
¶13.  (U) CANACAR PLANNING PROTESTS ON MARCH 23: 
Transportation union CANACAR notified the Reynosa 
Maquiladora Association (RAMMAC) that it is planning a 
protest against rising diesel fuel costs on March 23. 
The local arm of the union plans to block commercial 
traffic at the Reynosa-Pharr International Bridge, though 
does not plan to disrupt passenger vehicle traffic. 
While RAMMAC members are concerned about the potential 
effects on their processes Q especially those employing 
"just in time" manufacturing Q RAMMAC President Dan 
McGrew said: "To their credit, they gave us two week's 
notice."  Both the mayor of Reynosa and the governor of 
Tamaulipas have publicly stated that they were determined 
to keep the bridges open following a rash of other 
bridge-blocking protests in January and February. 
According to Reynosa's Secretary of Economy Armando 
Zertuche Zuani, the governor and the mayor are raising 
the issue of the threatened CANACAR protest at the 
highest levels Q with President Calderon Q in efforts to 
help manufacturers keep goods flowing across the border. 
(Matamoros) 
 
------ 
LABOR: 
------ 
 
¶14.  (U) HIRING CONCERNS ABOUT PUBLIC SAFETY OVERHAUL: 
The federal Secretary of Public Safety Genaro Garcia Luna 
was in Tamaulipas this week in regard to a federal 
program to overhaul corrupt and ineffective public safety 
systems.  Reynosa Secretary of Economic Development and 
Employment Armando Zertuche Zuani met with Garcia Luna on 
March 10 to discuss hiring needs in the region. 
According to Zertuche Zuani, the federal plan calls for 
6,000 new hires in Tamaulipas as entire public security 
sectors Q including public security forces in Reynosa 
are overhauled up to 100 percent, from police on the 
street to administrative positions.  While optimistic, 
Zertuche Zuani said he recognizes a large challenge in 
identifying enough qualified candidates.  He even spoke 
with South Texas economic development leaders about the 
possibility of advertising available positions in Texas, 
hoping to attract potentially eligible workers 
especially dual nationals living in South Texas Q to work 
in Reynosa.  (Matamoros) 
 
¶15.  (U) REDUCED WORKING CONDITIONS REMAIN HIGH:  Working 
conditions in Matamoros maquiladoras remain strained as 
the number of workers affected by reduce working 
conditions remain roughly three times those affected in 
November and December 2008 Q themselves the months with 
the highest number of effected workers for 2008. 
Matamoros Maquiladora Association (AMMAC) members 
reported 4,511 and 5,156 workers affected by reduced 
working conditions in the last two months of 2008, 
respectively, but 22,982 and 15,057 in the first two 
months of 2009, respectively.  "There are still a lot of 
people Q though they still have jobs Q who are working 
fewer hours and making less money," said Angelica Gomez, 
director of AMMAC's labor committee.  However, AMMAC 
President Monica Gonzalez Greer commented that "at least 
the trend is in the right direction" as February saw a 
marked improvement versus January, though still 
significantly higher than any other month in recent 
history.  (Matamoros) 
 
-------------------- 
ECONOMY AND FINANCE: 
-------------------- 
 
¶16.  (U) JOB LOSSES SLOW:  Nuevo Leon lost 9,057 jobs in 
February compared to losses of 15,859 in January and 
32,391 in December.  The employment report by the 
Instituto Mexicano del Seguro Social (IMSS) also showed a 
small increase of 500 part time employees.   This uptick 
in part time employment is the first increase since 
September 2008 and was seen by an analyst as a sign that 
job losses may be near its peak.  A quarter of Nuevo 
Leon's economy depends on manufacturing exports so the 
state remains at risk of a further weakening of the U.S. 
economy.  Final trade numbers are not available for the 
first two months of the year but exports fell over 20% 
the last three months of 2008.  (Monterrey) 
 
BASSETT