VZCZCXRO2439
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #1298/01 1321924
ZNR UUUUU ZZH
P 121924Z MAY 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 6445
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RUEIGE/FEDERAL RESERVE BOARD WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHOT/AMEMBASSY OTTAWA 2605

UNCLAS SECTION 01 OF 02 MEXICO 001298 
 
SENSITIVE, SIPDIS 
 
FED FOR DURDU 
TREAS FOR JARPE 
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GWORD 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD KFLU TBIO PINR PGOV PREL MX
SUBJECT: MORE HELP FOR MEXICO'S SME'S HIT HARD BY H1N1 
 
REF: Mexico 1260 
 
¶1. This is the second in a series of cables reporting on the 
economic impact of the influenza outbreak in Mexico. 
 
¶2. (SBU) Summary:  In response to criticism of last week's economic 
rescue package (see reftel) for businesses hurt by the influenza 
outbreak was met with mixed reviews, with many businesses and 
analysts saying that it was insufficient.  In response to this 
criticism, Finance Secretary Carstens announced May 11 an additional 
11 billion pesos (USD 837 million) program to finance SMEs hurt by 
the influenza outbreak.  The program, the biggest emergency 
financing this decade, will target businesses in the tourism, 
airline and pork industries.  Private sector response has been 
positive.   End Summary. 
 
¶3. (U) So far, Mexico has confirmed a total of 2,059 cases of H1N1 
influenza, including 56 deaths, Health Secretary Cordova told the 
press on May 11.  While Mexico has been praised domestically and 
internationally for its shutdown of commercial activity to slow the 
spread of the H1N1 virus, Finance Secretary Carstens admitted that 
the outbreak has had a significant impact on Mexico's already 
weakened economy, and that it will shave as much as 0.5 percent from 
Mexico's GDP this year (although recently he has retreated from this 
dire prediction to a more palatable 0.3 percent negative impact). 
To help the economy recover, last week Carstens unveiled a stimulus 
package of 18.8 billion pesos (USD 1.4 billion), including 2.2 
billion pesos (USD 167 million) in loans and loan guarantees for 
SMEs in the tourism, airline and pork industries. 
 
¶4.  (U) Facing increasing criticism that this rescue program was 
insufficient, on May 11 Carstens announced a second financial 
package to extend liquidity further for these hard-hit SMEs.  Two 
funds will be established through Mexico's public development 
lenders Nacional Financiera (Nafinsa) and Bancomext, which will 
guarantee: 
-- 5 billion pesos (USD 380 million) of financing to SMEs; 
-- 2 billion pesos (USD 152 million) of financing to tourism, 
dining, and entertainment providers; 
-- 3 billion pesos (USD 228 million) of financing to the domestic 
airline industry; and, 
-- 1 billion pesos (USD 76 million) to Mexico's pork producers. 
 
¶5.  (U) At least 11 banks will participate in these funds and 
finance the loans.  According to Carstens, in most cases the loans 
will not require real collateral.  The loans, which will be 
available starting May 15, will range from USD 11,406 to USD 
152,000, and will carry a fixed annual rate of 12 percent with a 
grace period of three months to begin repayment.  The government may 
also postpone or extend the payment due dates should the business be 
unable to comply.  Development banks will also make available 4 
billion pesos to restructure existing loans.  Ignacio Deschamps 
Gonzlez, president of the Mexican Banking Association, believes the 
program "could benefit about 12,000 micro-companies and almost 5,000 
small and medium-size businesses."   Most of these businesses, said 
Deschamps, are in Mexico City, the State of Mexico and San Luis 
Potosi, the states which had the most influenza cases and 
consequently the states whose businesses suffered the most. 
 
¶6.  (U) In a separate press conference, Tourism Secretary Elizondo 
announced a series of measures to revitalize tourism in Mexico. 
Through an interagency effort involving the Secretariats of Tourism, 
Finance, Economy, Labor, Social Development and Foreign Affairs, the 
Mexican government will work to keep the air connectivity to tourist 
destinations, provide additional liquidity to tourist businesses, 
protect employment, and revitalize Mexico's image as a popular 
tourist destination.  On the last point, the Tourism Secretariat 
will create a 1 billion peso (USD 760 million) fund to promote 
domestic and international tourism in Mexico.  Additionally, the Tax 
Administration Service will expedite tax returns for businesses in 
the tourism sector. 
 
PRIVATE SECTOR RESPONSE POSITIVE 
-------------------------------- 
 
¶7.  (U) Unlike the first package, businesses and analysts have 
responded positively.  Arturo Mendicuti, Chairman of the National 
Commerce Chamber (Canaco) in Mexico City, called the initiative 
"encouraging."  Andres Conesa, the Director General of Aeromexico, 
told the press that the government's support for the airline sector 
 
MEXICO 00001298  002 OF 002 
 
 
was "positive."  However, Miguel Torruco, Chairman of Mexico's 
National Tourist Confederation, opined that the government should 
analyze the long-term impact of the program.   While the loans give 
badly-needed liquidity to businesses now, he said, they also mean 
more debt. 
 
¶8.  (U) Comment:  These additional measures will be welcome news for 
Mexico's SMEs in the hard-hit tourism, airline and pork industries, 
many of whom incurred such losses because of the mandated closure 
that they have been unable to reopen their doors.  The government 
appears to be doing as much as possible to implement public policies 
conducive to a vigorous economic recovery.  There are also some 
potential positive externalities to consider.  This program may help 
stimulate credit in Mexico, where businesses usually obtain 
financing from their suppliers rather than from Mexico's financial 
institutions.  Banks have historically been very demanding when 
extending loans to SMEs, but perhaps with government-backed 
guarantees, banks will be more flexible and less usurious.  In 
addition, this may force Mexico's financial institutions to 
restructure some of its past due loans, which despite the recession 
many have not done.  End Comment. 
BASSETT