VZCZCXRO2444
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #1306/01 1321928
ZNR UUUUU ZZH
R 121928Z MAY 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 6454
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE

UNCLAS SECTION 01 OF 04 MEXICO 001306 
 
SIPDIS 
SENSITIVE 
 
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 - May 12 
 
¶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: 
 
 
ECONOMY AND FINANCE: 
-------------------- 
 
SECOND FINANCIAL PACKAGE FOR SMES AND TOURISM AFFECTED BY THE H1N1 
FLU - Mexico City 
 
SUPPORT FOR TOURISM SECTOR - Mexico City 
 
FORMAL SECTOR BUSINESS REGISTRATION FALLS BY 4.7% IN FIRST FOUR 
MONTHS OF 2009 - Ciudad Juarez 
 
STATE TAX REVENUE DECLINES 19 PERCENT IN FIRST QUARTER - Ciudad 
Juarez 
 
BANCO COMPARTAMOS EXPANDS LENDING TO THE POOR AMIDST ECONOMIC 
DOWNTURN IN CHIHUAHUA - Ciudad Juarez 
 
COMPANIES THAT DECLARED TECHNICAL UNEMPLOYMENT HAVE CLOSED - 
Tijuana 
 
 
TRADE AND INVESTMENT: 
--------------------- 
 
CISCO TO LAUNCH MEXICO TRAINING ACADEMY IN MAY - Mexico City 
 
MAQUILADORA ASSOCIATION SEES IMPROVEMENT IN BAJA CALIFORNIA - 
Tijuana 
 
FUEL SALES PLUMMET - Tijuana 
 
MAQUILADORAS INCREASING SECURITY BRIEFINGS FOR MANAGERS 
 - Matamoros 
 
MAQUILADORAS ADDRESS H1N1 INFLUENZA EFFECTS ON INDUSTRY 
 - Matamoros 
 
 
TRANSPORTATION AND INFRASTRUCTURE: 
---------------------------------- 
 
1Q RESULTS AT CONTINENTAL AND AMERICAN PORTEND WEAKNESS IN MEXICAN 
AIR TRAVEL - Mexico City 
 
 
-------------------- 
ECONOMY AND FINANCE: 
-------------------- 
 
¶3.  (U) SECOND FINANCIAL PACKAGE FOR SMES AND TOURISM AFFECTED BY 
THE H1N1 FLU:  Finance Secretary Agustin Carstens announced May 11 a 
second set of measures aimed at supporting SMEs negatively impacted 
by the H1N1 flu outbreak.   The financial package includes 
guarantees provided by both development banks, as well as by FIRA 
and Financiera Rural (development banks for the agricultural 
sector), and loans given through commercial banks for 15 billion 
pesos (USD 1.1 billion -USD 837 million in new loans and USD 304 
million for restructuring debts) during the second and third 
quarters of the year which will be directed to SMEs in the most 
affected sectors, such as: restaurants, hotels, airlines, 
transportation, entertainment businesses, and pork breeders.   The 
11 billion peso (USD 837 million) package will be distributed as 
follows:  5 billion pesos (USD 380 million) to SMEs; 2 billion (USD 
152 million) pesos to the tourism, entertainment and restaurant 
sectors; 3 billion pesos (USD 228 million) to airlines; and 1 
billion pesos (USD 76 million) to the pork sector.  Most of these 
resources will be channeled to Mexico City, the State of Mexico and 
San Luis Potosi, the states which had the largest number of H1N1 
cases and suffered the gravest economic consequences.  This package 
represents the largest program to address an emergency implemented 
by the government in a decade. (Mexico City) 
 
¶4.  (U) SUPPORT FOR TOURISM SECTOR:  Secretary of Tourism Rodolfo 
 
MEXICO 00001306  002 OF 004 
 
 
Elizondo announced a separate series of measures to reactivate 
tourism in Mexico.  An inter-agency effort, which involves the 
Secretariats of Tourism, Finance, Economy, Labor, Social 
Development, and Foreign Affairs, will maintain current air 
connectivity to tourist destinations, give liquidity to tourist 
businesses, protect employment, and reposition Mexico as a tourist 
destination domestically and abroad.  Some of the measures were 
already announced by Carstens last week, such as reduced payroll, 
lodging and social security taxes for the tourism sector and a 50% 
discount on cruise lines and migration fees.  The Tourism 
Secretariat also created a USD 15 million state/federal fund to 
promote tourism.  The Finance and Tourism Secretariats, along with 
the Council for Tourism Promotion of Mexico (CPTM) created another 
one billion peso fund (USD 76 million) to promote tourism in Mexico 
and abroad.  The Office of the President, the Mexican Embassy in 
Washington, PROMexico, the Secretariat of Tourism and the CPTM will 
participate in the campaign.  To protect employment in the eleven 
most affected states, the Labor Secretariat and the Economic 
Development Secretariat implemented a temporary support program for 
employees in the tourism sector for the coming three months. (Mexico 
City) 
¶5.  (SBU) FORMAL SECTOR BUSINESS REGISTRATION FALLS BY 4.7% IN FIRST 
FOUR MONTHS OF 2009: The downward trend in business creation in 
Chihuahua continued during the first four months of 2009.  According 
to the Mexican Business Information Database (SIEM), the total 
number of formal businesses registered in Chihuahua fell from 33,174 
on January 1 to 31,602 on April 1.  For the past three years, 
Chihuahua has ranked fourth in Mexico for total number of registered 
businesses.  As a result of the recent closures, the state now ranks 
fifth behind the Federal District (117,356), Jalisco (90,373), State 
of Mexico (83,071) and Veracruz (33,397).  Oscar Marquez Vega, 
President of the Chihuahua chapter of the National Chamber of 
Commerce (CANACO), commented that many businesses in Chihuahua have 
closed due to the economic slowdown, lack of credit availability, 
and extortion fees levied by organized crime.  (Ciudad Juarez) 
 
¶6.  (U) STATE TAX REVENUE DECLINES 19 PERCENT IN FIRST QUARTER:  The 
Chihuahua State Finance Secretary, Cristian Rodalegas, reported in 
late April that state tax revenue fell 19 percent during the first 
quarter of this year compared with the same period in 2008. 
Rodalegas cited lower revenue from income taxes, highway tolls and 
new vehicle registration as the principal source of the decline.  He 
added that Governor Baeza (PRI) requested additional resources from 
Mexico's Treasury Department (Secretaria de Hacienda) to ensure that 
infrastructure and social programs slated for the remainder of the 
fiscal year will not be impacted.  In 2008, Chihuahua federal 
transfers accounted for 83 percent of Chihuahua's budget.  State 
fiscal deficits could place a further drag on federal coffers, which 
have been hit by the H1N1 influenza outbreak, falling oil revenue 
and increased infrastructure spending.  For 2009, the Mexican 
Congress passed an economic stimulus measure permitting the federal 
budget deficit to reach 1.8%. (See also reftel Mexico 1260 on 
stimulus package)  (Ciudad Juarez) 
 
¶7.  (U) BANCO COMPARTAMOS EXPANDS LENDING TO THE POOR AMIDST 
ECONOMIC DOWNTURN IN CHIHUAHUA:  At a time when most sectors of 
Chihuahua's economy are contracting, Banco Compartamos - a 
micro-lending institution - is expanding credit as demand holds up 
from self-employed workers in the state.  "Our customer base 
increased in 2008 as laid off workers increasingly turned to self 
employment for income," Regional Manager for Chihuahua and Sonora, 
Pablo Bodegas said.  The Mexico City-based bank targets the 
country's large unbanked population, by offering short maturity 
loans ranging from $US 100 to $US 2,500.  Compartamos advertises 
interest rates from 3.5 to 4.5 percent, but due to the short-term 
structure of the loans the annual percentage rate (APR) often 
exceeds 70 percent.  Through mid-April, the bank's stock rose 41 
percent, making it Mexico's second-best performing stock.  In 
Chihuahua, Compartamos offers credit primarily to indigenous 
communities and women's groups to purchase raw materials and goods 
for micro-enterprises.  Bodegas commented that since loans are made 
to groups, as opposed to individuals, borrowers rarely default.  The 
bank's second quarter non-performing loan ratio stood at 1.9 
percent, well below the industry average in Mexico.  The success of 
Compartamos demonstrates the potential of "trapped" capital in the 
informal economy and that the rising mass of unemployed workers in 
Chihuahua is increasingly resorting to self-employment as they shift 
out of the formal sector.  (Ciudad Juarez) 
 
 
--------------------- 
TRADE AND INVESTMENT: 
 
MEXICO 00001306  003 OF 004 
 
 
--------------------- 
 
¶8.  (U) CISCO TO INVEST UP TO 5 BILLION IN MEXICO AND LAUNCH MEXICO 
TRAINING ACADEMY IN MAY:  Cisco Systems has selected Mexico City as 
the site for its fifth Global Talent Acceleration Program (GTAP) 
Academy.  GTAP schools help Cisco staff its emerging market offices 
and partner fiQ with qualified personnel.  Of broader public 
benefit, GTAP is a step toward filling a gap in technical/network 
education provision and toward expansion of the local IT skill pool. 
 Cisco's selection of Mexico coincides with the company's joint 
announcement with President Calderon that it will invest as much as 
USD 5 billion in Mexico over the next five years.  Cisco is placing 
a large bet on long-term growth in Mexico.  GTAP seeks to reduce the 
bet's downside as a down payment on reduced structural barriers to 
growth.  Courses are scheduled to begin in late May.  The initial 
investment (through month six) in the program is USD 1 million. 
(Mexico City) 
 
¶9.  (U) MAQUILADORA ASSOCIATION SEE AND IMPROVEMENT IN BAJA 
CALIFORNIA:  Javier Martinez Luna, president of the Manufacturing 
Industry and Export Association of Tijuana (AIM), commented that 
there are various companies that have increased production lines and 
sales.  This upturn has been seen especially in companies involved 
in the electronic industry.  According to Martinez Luna Baja 
California will be the first one to emerge from the crisis. 
(Tijuana) 
 
¶10.  (U) TIJUANA FUEL SALES PLUMMET. As a result of the economic 
decline, sales of magna gasoline (i.e. basic gasoline) fell thirty 
percent and for diesel, fifty percent.  Ramiro Zuiga Salazar, 
President of the association of owners of gas stations Onexpo Baja 
announced that this trend is expected to worsen because diesel is 
now more expensive than the magna gasoline.  (Tijuana) 
 
¶11.  (U) MAQUILADORAS INCREASING SECURITY BRIEFINGS FOR MANAGERS: 
According to Clayton Consultants's statistics,  Mexico has become 
the number one country in the world for kidnapping for ransom cases. 
 Dale Bulkley, a senior consultant with Clayton, said corporate 
requests for security seminars in Mexico have increased 
significantly in the past 6 to 12 months.  On April 22, Delphi 
Electronics and Safety hosted Dale Bulkley, addressing over 100 
managers in both Matamoros and Reynosa on security practices, with a 
specific emphasis on anti-kidnapping measures.  According to Damaso 
Rodriguez, human resources director for Mexican operations for 
Delphi, concerns from managers prompted the decision to hire the 
outside consultant firm to help prepare them for increasing threats 
of violence and kidnappings.  .  Bulkley said  his organization had 
recently been employed in kidnapping recovery operations involving 
two mid-level managers in Reynosa.  Aside from his presentation, 
Bulkley informed EconOff that his organization has also been very 
cognizant of threats to its consultants and tried to avoid publicity 
of seminars, particularly following the December kidnapping of 
fellow anti-kidnapping and security consultant Felix Batista in 
Saltillo, Coahuila.  (Matamoros) 
 
¶12.  (U) MAQUILADORAS ADDRESS H1N1 INFLUENZA EFFECTS ON INDUSTRY: 
On April 28, members associations of CNIMME, the national 
maquiladora association, participated in a conference call to 
discuss the effects of the H1N1 Influenza outbreak (i.e. "Swine 
Flu") on the maquiladora industry.  According to Roberto Mattus, 
director of the Matamoros Maquiladora Association (AMMAC), semantics 
over Secretary of Labor regulations regarding pregnant employees was 
a primary topic.  According to Secretary of Labor rules, pregnant 
employees must be sent home with full pay when risky conditions 
exist in the workplace.  However, managers in areas such as 
Matamoros that are relatively untouched by H1N1 influenza cases 
question whether claims are valid that such conditions exist in 
their plants, requiring them to give pregnant employees paid time 
off.  Delphi Electronics and Safety, for example, currently has more 
than 200 pregnant employees in the region, according to Mattus, and 
their absence from the workforce could have a significant impact on 
productivity and finances, particularly in light of the recent 
economic downturn.  Additionally, Mattus noted that an alleged 
increase in "red lights" stopping southbound commercial traffic at 
Mexican points of entry as a result of the outbreak has become a 
point of contention for regional maquiladora managers.  Regarding 
specific H1N1 influenza cases among maquiladora workers, Mattus 
noted that the only mention during the national conference call was 
of two managers in Tijuana who allegedly showed symptoms and were 
forced to wait 24 hours to confirm that they did not have the virus 
before being allowed to cross the Mexico-US border.  (Matamoros) 
 
 
MEXICO 00001306  004 OF 004 
 
 
---------------------------------- 
TRANSPORTATION AND INFRASTRUCTURE: 
---------------------------------- 
 
¶13.  (U) 1Q RESULTS AT CONTINENTAL AND AMERICAN PORTEND WEAKNESS IN 
MEXICAN AIR TRAVEL:  First quarter numbers from Continental and 
American Airlines, the largest U.S. air carriers in Mexico and Latin 
America, presage problems in Mexico.  Where Latin American air 
travel avoided the worldwide fall in passenger numbers last autumn, 
at least in Mexico the downturn is now kicking in.  American 
reported revenue-per-available-seat-mile (RASM) down 8% year-on-year 
and load factors down 6.1% for Latin America traffic.  Continental 
saw RASM down 10.3% in Latin America.  Locally-based airline 
executives noted results for Mexico track with those for the region 
as a whole.  Such figures no longer outperform company-wide numbers. 
 Business travel to/from Mexico has suffered most, but tourist 
travel is also off.  To cope, the two carriers told econoff they are 
reducing capacity by slashing frequency of flights on many routes. 
They are also cutting fares and running promotions.  Nonetheless, 
the drop in demand is significantly outpacing capacity cuts.  For 
now, eliminating destinations altogether is not on the table. 
Continental currently has 29 stations in Mexico; American has 14. 
Continental flies late-model 737s and 50-passenger Embraers on 
Mexico routes.  American draws on a more diverse, and older fleet. 
(Mexico City) 
 
 
BASSETT