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Viewing cable 09MEXICO1591, Mexico Economic Weekly - June 5

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Reference ID Created Released Classification Origin
09MEXICO1591 2009-06-08 13:39 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Mexico
VZCZCXRO3122
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #1591/01 1591339
ZNR UUUUU ZZH
R 081339Z JUN 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 6816
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 05 MEXICO 001591 
 
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 - June 5 
 
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: 
-------------------- 
 
GUILLERMO ORTIZ CALLS FOR ECONOMIC REFORMS - Mexico City 
 
BANK OF MEXICO RELAXES TOOLS TO STEM PESO DEPRECIATION - 
Mexico City 
 
LOSSES IN TIJUANA DUE TO THE SWINE FLU - Tijuana 
 
BAJA CALIFORNIA'S ECONOMIC PERFORMANCE - Tijuana 
 
 
TRADE AND INVESTMENT: 
--------------------- 
 
SONORA TARGETS SOFTWARE DESIGN INVESTMENTS - Hermosillo 
 
EXPORTS AFFECTED BY ECONOMIC CRISIS - Tijuana 
 
AMCONSUL TIJUANA CERTIFIES EXPO CONSTRUCCION 
INTERNACIONAL 2009 - Tijuana 
 
AUTOMOTIVE SECTOR UPDATE - Monterrey 
 
AMERICAN BUSINESSES SCALING BACK IN TORREON - Monterrey 
 
PROCESS UNDERWAY TO ATTRACT FIRST AUTOMOTIVE ASSEMBLY 
PLANT IN CIUDAD JUAREZ - Ciudad Juarez 
 
ARMED ROBBERY AT JUAREZ MAQUILADORA HIGHLIGHTS SECURITY 
CONCERNS - Ciudad Juarez 
 
AFI AGENTS CRACK DOWN IN IPR VIOLATIONS - Monterrey 
 
 
ENERGY: 
------- 
 
GOVERNOR ACCUSES PEMEX OF POLLUTING - Matamoros 
 
 
TRANSPORTATION AND INFRASTRUCTURE: 
---------------------------------- 
 
VIVAAEROBUS ADDS NEW ROUTES - Monterrey 
 
 
LABOR: 
------ 
 
LOW PAYING JOBS INCREASE IN NUEVO LEON - Monterrey 
 
 
-------------------- 
ECONOMY AND FINANCE: 
-------------------- 
 
3.  (U) GUILLERMO ORTIZ CALLS FOR APPROVAL OF REFORMS: 
For the central bank's governor the threat that Mexico's 
sovereign debt may be downgraded is real since the crisis 
has revealed that Mexico's public finances are deficient. 
Ortiz noted that although the financial sector in Mexico 
proved to be strong, the real economy was hit hard by the 
global crisis.  Thus, in order to strengthen its 
shrinking economy Mexico should pass a fiscal and labor 
reform.  In addition to security issues and the fall in 
oil prices, potential investors look at fiscal 
vulnerabilities.  Mexico continues to rely on oil 
revenues for 35% to 37% of total budget revenues.  Ortiz 
added that when the immediate crisis is over, Mexico 
needs to recharge its batteries for the medium and long 
 
MEXICO 00001591  002 OF 005 
 
 
terms by passing reforms and improving productivity.  He 
proposed passing tax reform this year, which could be 
implemented in three years to give  consumers and 
industry time to recover, while making making public 
finances more sustainable in the long run.  Ortiz opined 
that while the economic crisis has bottomed out, signs of 
an economic recovery will not be palpable until 2010, 
depending on what happens in the U.S.  He asserted that 
including the impact of the flu, the economy will 
contract 5.3% this year, not negative 8% as many 
observers have said.  The Bank of Mexico expects year-end 
inflation rate of around 4%.  (Mexico City) 
 
4.  (U) BANK OF MEXICO RELAXES TOOLS TO STEM PESO 
DEPRECIATION:  The Foreign Exchange Commission 
anticipates lower peso volatility as a result of more 
global financial stability and availability of credit. 
It also said that under current conditions it would not 
have to activate the USD 47 billion flexible credit line 
granted by the International Monetary Fund.  The 
Commission reduced its daily dollar auction from USD 100 
million to USD 50 million.  The Commission noted that 
even with daily auctions and direct dollar sales, year- 
end international reserves would reach USD 85 billion 
similar to the previous year.  Both, the Finance 
Secretariat and the Bank of Mexico asserted that Mexico 
will be able to finance the expected current account 
deficit.  (Mexico City) 
 
5.  (U) LOSSES IN TIJUANA DUE TO THE SWINE FLU:  Tijuana 
lost 125 million pesos in the first five days of May as a 
result of the swine flu alert according to Roberto 
Quijano Sosa, President of the Mexican Employers' 
Confederation (COPARMEX). He noted a decline in sales of 
between 35 and 70 percent.  The Coparmex executive called 
for the government's intervention in an effort to protect 
employment during the economic crisis.  (Tijuanana) 
 
6.  (U) BAJA CALIFORNIA'S ECONOMIC PERFORMANCE UP.  Baja 
California's economic indicators are favorable, which may 
mean that the state's economy could be one of the first 
to recover its growth rate according to Secretary of 
State for Economic Development (SEDECO), Dr. Alejandro 
Mungaray Lagarda.  From January to May, the state 
attracted USD 471 million in investment, more than over 
the same period in the past 5 years, with emphasis on 
investment and service trade, energy, aerospace and 
electronics, among others.  With regard to the employment 
indicators, while Mexico as a whole logged a decrease of 
750,000 jobs in 2008, Baja California lost only 3,752. 
Some sectors such as manufacturing and construction have 
been hit hard by the economic crisis, but others, such as 
agriculture, livestock and trade, have benefited from an 
increase in retail sales, partially compensating for 
losses in weak sectors.  (Tijuana) 
 
 
--------------------- 
TRADE AND INVESTMENT: 
--------------------- 
 
7.  (U) SONORA TARGETS SOFTWARE INVESTMENTS:  Consejo 
Para La Promocion Economica de Sonora (COPRESON) 
officials told econoffs May 21 that U.S. businesses have 
reached out to COPRESON's Softlanding office, in search 
of ways to cut operating costs.  COPRESON explained that 
the Softlanding office was the State Government's one- 
stop shop to help foreign investors navigate bureaucracy, 
showcase Sonora's competitive advantages, and help 
existing foreign companies grow their businesses.  The 
Sonoran Government has targeted for growth software 
development, especially embedded software, such as in 
automotive and industrial electronics.  With a newly 
completed first phase of a technology park in the city of 
Obregon, Sonora also boasts 1,000 technology graduates 
per year and currently ranks fourth in Mexico in the 
technology sector after Mexico City, Nuevo Leon, and 
Jalisco respectively.  While cost savings for a U.S. firm 
moving its operations to Sonora might be in the range of 
30-40 percent, it remains approximately 20 percent more 
than China.  However, COPRESON emphasized Sonora's 
geographic advantage and direct flights between 
 
MEXICO 00001591  003 OF 005 
 
 
Hermosillo and many cities in the southwestern U.S.  One 
locally-based U.S. tech firm told post that it chose 
Hermosillo in part due to the convenient non-stop flights 
from Las Vegas and Los Angeles and the fact that Sonora 
is in the same time zone.  The automotive industry in 
Sonora had been hardest hit by the economic crisis. 
While overall production levels in the state fell 50 
percent from last year, Sonora was much better off than 
many other states in Mexico.  The Sonoran Secretariat of 
Economy contributes to the salaries of workers if the 
companies reduce worker hours but allowed them to keep 
their jobs.  Over the last year, 45 manufactures have 
taken part in the program and 65,000 of the 120,000 
manufacturing jobs in Sonora have been supported.  Apart 
from the automotive sector, electronics and plastics 
manufacturers, construction material suppliers and other 
sectors related to the U.S. export market have been 
adversely impacted.  (Hermosillo) 
 
8.  (U) MEXICAN EXPORTS DOWN:  According to the Mexican 
Customs' office in Tijuana, used vehicle imports have 
decreased 80% and exports destined for the manufacturing 
industry have fallen 12% as a result of the economic 
crisis.  Customs Administrator Carlos Ramirez Escoto 
reported that between January and April of this year 
importation of goods destined for the maquiladora 
industry fell 19.7%.  (Tijuana) 
 
9.  (U) AMCONSUL CERTIFIES THE EXPO CONSTRUCTION 
INTERNATIONAL 2009:  The U.S. Commercial Service 
announced the certification of the 7th edition of Expo 
Construction 2009 and added that the event offered great 
business opportunities for U.S. companies operating in 
Mexico.  At a press conference held at Consul General 
Ronald Kramer's residence, Ricardo Calderon, Director of 
the U.S. Commercial Service office in Tijuana, awarded 
the certification to the organizers of the event. 
(Tijuana) 
 
10.  (U) AUTOMOTIVE SECTOR UPDATE:  Production in the 
automotive sector has fallen 60% and there are 15% fewer 
workers in the sector compared to the same time last year 
according to the director of the Nuevo Leon?s automotive 
trade group, Manuel Montoya.  Many more employees are 
working reduced hours or are on furlough.  Nuevo Leon and 
its neighboring state of Coahuila are both large 
exporters of car parts and engine blocks for Ford, 
Chrysler and General Motors.  The collapse of auto sales 
in the United States has had a devastating effect on the 
local economy.  Industry executives point out though that 
inventory levels are decreasing and the unusual summer 
furlough of factories in the U.S. is scheduled to end in 
July, so there is some optimism that production will pick 
up by the end of the year.  There is also some 
expectation by local parts suppliers that U.S. car 
manufacturers will shift production to Mexico where labor 
cost are 75% less than in the United States.  (Monterrey) 
 
11.  (U) AMERICAN BUSINESSES SCALING BACK IN TORREON: 
Drug violence in Torreon-Gomez Palacio metropolitan area 
has forced American companies to reduce their presence in 
the area.  A post contact reports that many U.S. 
companies have decreased their expat presence in the 
area.  Two well known companies, Tyson Foods and John 
Deere, have pulled out all of their AMCIT employees.  The 
violence is primarily a result of growing number of armed 
bands related to drug cartels and the lack of reliability 
of the police forces.  On May 26, a Milenio newspaper 
reporter who covered local police news was found dead a 
day after being kidnapped.  His murder was the second 
death of a journalist in a month.  (Monterrey) 
 
12.  (U) PROCESS UNDERWAY TO ATTRACT FIRST AUTOMOTIVE 
ASSEMBLY PLANT IN CIUDAD JUAREZ:  The Juarez Maquila 
Association (AMAC) announced on May 27 that it is working 
with public and private sector actors to attract the 
first auto assembly plant to Ciudad Juarez within three 
to four years.  AMAC claims to be in negotiation with an 
un-named auto manufacturer to install a plant in the 
city.  The AMAC President, Soledad Maynez, added that the 
Association is working to identify land for the plant and 
to obtain a certificate required by automotive assembly 
 
MEXICO 00001591  004 OF 005 
 
 
companies prior to investment.  Ciudad Juarez offers 
relatively lower labor costs than the U.S., a favorable 
geography and an established auto part supply chain for 
auto manufacturing companies, such as Chrysler and 
General Motors, that seek to reduce their production 
costs, she added.  The establishment of an auto assembly 
plant in Ciudad Juarez would create an estimated 35,000 
direct jobs.  (Ciudad Juarez) 
 
13.  (U) ARMED ROBBERY AT JUAREZ MAQUILADORA HIGHLIGHTS 
SECURITY CONCERNS:  On May 28, four armed individuals 
broke into the U.S.-owned auto-parts manufacturing plant, 
Capsonic, stealing an estimated US$ 200,000 from an 
automatic teller machine (ATM).  According to Chihuahua's 
Secretary for Public Security (SSPE), there have been 23 
robberies reported at maquiladoras in Juarez this year, 
of which two involved ATM thefts.  The Juarez Maquila 
Association (AMAC) explained that there are currently 350 
Chihuahua state police officers assigned to patrol 
approximately 190 maquiladoras in the city.  AMAC also 
expressed concern that crime rates will increase if the 
estimated 10,000 federal police and army troops deployed 
to Ciudad Juarez as part of the Joint Operation Chihuahua 
depart prematurely.  In AMAC's view, the Juarez Municipal 
Police will not be ready to take over public security 
responsibilities for at least two years.  (Ciudad Juarez) 
 
14.  (U) AFI AGENTS CRACK DOWN IN IPR VIOLATIONS:  Early 
on the morning of May 31, AFI agents raided Monterrey's 
largest flea market searching for IPR violations.  The 
agents seized nearly 300,000 illegal copies of CDs, 
movies and video games.  At the flea market, video games 
that sell legally for up to 900 pesos were on sale for 
only 50 pesos.  Political candidates and business leaders 
have been calling for state and federal law enforcement 
agencies to conduct more seizures but this raid was only 
the second one of its kind this year.  There were no 
arrests in the raid and it is highly expected that the 
vendors will return to the same area to sell pirated 
goods.  (Monterrey) 
 
 
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ENERGY: 
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15.  (U) GOVERNOR ACCUSES PEMEX OF POLLUTING:  Tamaulipas 
Governor Hernandez Flores alleged this week that Pemex's 
crude oil production has been polluting Tamaulipas' 
beaches, a delicate position for a state that depends 
heavily on Pemex employment.  This environmental 
declaration was countered by Matamoros Mayor Erick Silva, 
who claimed that there is very little pollution on the 
beaches near Matamoros.  Mayor Silva's remarks could be 
seen as a move to provide support for further expansion 
of the port of Matamoros, expanding industry in the 
region.  (Matamoros) 
 
 
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TRANSPORTATION AND INFRASTRUCTURE: 
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16.  (U) VIVAAEROBUS ADDS NEW ROUTES:  Monterrey based 
airline VivaAerobus is adding three new routes to/from 
Guadalajara filling in a void caused by the closure of 
Alma Airlines and also adding a new direct Monterrey-Las 
Vegas route.  VivaAerobus, partly owned by Ireland's 
Ryanair, runs a very conservative business so the 
expansion of service is a strong vote of confidence from 
the airline for the domestic travel and tourism industry. 
However, the airline is less optimistic about U.S. 
tourists coming back any time soon to Mexico. 
VivaAerobus canceled all of its flights from its only 
other international destination, Austin, to Cancun and 
Puerto Vallarta.  (Monterrey) 
 
 
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LABOR: 
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MEXICO 00001591  005 OF 005 
 
 
17.  (U) LOW PAYING JOBS INCREASE IN NUEVO LEON:  In 
another sign that the economic recession in Mexico may be 
bottoming out, formal low-cost employment in Nuevo Leon 
is starting to increase.  Those earning MXN$3,200 a month 
increased 71% and those earning MXN$4,800 increased 4% 
compared to October while total formal sector jobs fell 
5.8% during the same time period (See Monterrey 0176). 
Even though the recession has hit Nuevo Leon hard, the 
rate of job losses is slowing and the economy shows signs 
of readjusting to the changes in the labor market. 
(Monterrey) 
 
 
BASSETT