VZCZCXRO6300
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #1477/01 1492024
ZNR UUUUU ZZH
P 292024Z MAY 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 6707
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHOT/AMEMBASSY OTTAWA 2616

UNCLAS SECTION 01 OF 02 MEXICO 001477 
 
SENSITIVE, SIPDIS 
 
STATE FOR EEB/TPP/BTA/GROUT 
STATE FOR WHA/MEX/LEE 
USTR FOR MELLE/SHIGETOMI 
COMMERCE FOR ITA/MAC/ONAFTA/WORD/OLSEN 
TREASURY FOR JARPE 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD PINR PGOV PREL MX
SUBJECT: MEXICO LOOKS TO CONSOLIDATE CENTRAL AMERICAN TRADE 
AGREEMENTS 
 
¶1.  (SBU) SUMMARY:  Mexico will launch negotiations later this 
year with its Central American neighbors to consolidate its 
three trade agreements in the region into one treaty.  With 
this initiative, Mexico appears to be looking beyond the 
current global crisis and position itself as the fulcrum of 
commercial activity between Central and North America, and 
even Asia.  Trade with these Central American neighbors is but 
a small percentage of Mexico's overall trade, but is an 
important step in Mexico's trade strategy for future export 
growth and market diversification.  END SUMMARY. 
 
¶2.  (U) Last week at an annual convention of Mexican 
exporters, Undersecretary of Foreign Commerce Beatriz Leycegui 
announced that the Mexican Secretariat of Economy will launch 
negotiations in July with its five Central American trading 
partners to secure a single trade agreement.  The consolidated 
treaty will attempt to harmonize the various regulations, 
including cumulation, rules of origin and tariffs, contained 
in the three trade agreements signed with Costa Rica in 1995, 
with Nicaragua in 1998, and with the Northern Triangle of El 
Salvador, Guatemala and Honduras in 2001. 
 
¶3.  (SBU) Mexico's Director General for International Trade 
Negotiations, Juan Carlos Baker, told EconOff on May 26 that 
the five governments agreed to the Mexican proposal following 
a meeting between Undersecretary Leycegui and her Central 
American counterparts in Managua earlier this year.  Baker was 
less optimistic than Leycegui as to the timeline, saying that 
he did not think movement was likely until perhaps next year. 
The six trading partners have just begun to examine the 
agreements, and there might be some sticking points that would 
impede quicker action.  However, Baker pointed out that the 
agreements are very similar; for example, the rules of origin 
are not that different. 
 
¶4.  (U) Mexico's exports to these five Central American 
countries topped US$ 630 million in 2008, up almost 40 percent 
from 2007 but only 1.4 percent of Mexico's total global 
exports.  80 percent of Mexico's exports go to the United 
States.  However, this trade bloc constitutes Mexico's fourth 
largest export market behind the United States, the European 
Union, and Canada.  Mexico's top exports to Central America 
include iron and steel products, electrical and other types of 
machinery, and plastics.  Imports from Central America reached 
US$ 260 million in 2008, up more than 28 percent from 2007. 
These imported products, consisting primarily of such raw 
materials as grain, fats and oils, precious stones, knit 
apparel - but electrical machinery from Costa Rica - 
constitute a mere 0.53 percent of Mexico's total global 
imports.  In comparison, 52 percent of Mexico's global imports 
come from the United States, and several Asian, European and 
South American countries surpass Central America as major 
suppliers to Mexico. 
 
¶5.  (SBU) "We should strive to continue our strong trade 
partnership with North America while at the same time seek 
greater participation in this market," Leycegui told the 
audience of Mexican exporters in reference to Central America. 
Although Mexico and Central America both have trade agreements 
with North America, Mexico's proximity to the United States 
gives it a competitive advantage.  According to Baker, 
securing a single Central American agreement, while 
strengthening NAFTA and the Arc of the Pacific forum, serves 
Mexico's strategy to become the fulcrum of commercial activity 
between Central and North America, and even Asia. 
 
¶6.  (SBU) COMMENT:  In its trade strategy, Mexico appears to 
be looking beyond the current global crisis to secure the 
growth of its exports beyond the United States, its largest 
trading partner.  As with Chile's efforts to position itself 
as the trade gateway between South America and Asia, Mexico's 
pursuit of a single Central American agreement points to a 
similar effort by the only other Latin American APEC member 
further up the Pacific coast.  This initiative also serves to 
consolidate the American continent and harmonize the numerous 
bilateral trade agreements in the region.  However, Mexico has 
no plans to deepen its trade ties with Asia in the near 
future; Mexico's trade agreement negotiations with South Korea 
 
MEXICO 00001477  002 OF 002 
 
 
have been stalled for almost two years, and the Government of 
Mexico has publicly ruled out the possibility of pursuing a 
trade agreement with China.  END COMMENT. 
 
BASSETT