VZCZCXRO6186
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #2038/01 1941947
ZNR UUUUU ZZH
R 131947Z JUL 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 7427
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 03 MEXICO 002038 
 
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 - July 10 
 
¶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 Joe Salazar (salazarje3@state.gov) for 
questions or comments about this report. 
 
¶2.  (U) Table of Contents: 
 
 
ECONOMY AND FINANCE: 
-------------------- 
 
IMF PREDICTS MEXICAN ECONOMY WILL CONTRACT 7.3 PERCENT - Mexico 
City 
 
ANTI-TRUST COMMISSION DECLARES TELMEX DOMINANT - Mexico City 
 
ECONOMY MINISTRY AND UNIVERSITY LURE MICROENTERPRISES OUT OF THE 
INFORMAL SECTOR - Tijuana 
 
GUADALAJARA PRIVATE SCHOOL INSCRIPTIONS DOWN 20 PERCENT - 
Guadalajara 
 
PACE OF JOB LOSSES SLOWS IN CHIHUAHUA - Ciudad Juarez 
 
 
TRADE AND INVESTMENT: 
--------------------- 
 
GRADUAL ECONOMIC IMPROVEMENT IN MAQUILA SECTOR - Matamoros 
 
CEMEX STILL SCRAMBLING TO SHORE UP BALANCE SHEETS - Monterrey 
 
LG ELECTRONICS SHIFTS OPERATIONS IN MEXICO - Monterrey and 
Matamoros 
 
AILING U.S. AUTO INDUSTRY BLAMED FOR TRADE DECLINE IN EL PASO-JUAREZ 
CORRIDOR - Ciudad Juarez 
 
 
ENERGY AND ENVIRONMENT: 
----------------------- 
 
SENER LAUNCHES A NATIONAL ENERGY TRANSITION AND SUSTAINABLE ENERGY 
STRATEGY - Mexico City 
 
 
------------------- 
ECONOMY AND FINANCE: 
------------------- 
 
¶1.  (U) IMF PREDICTS MEXICAN ECONOMY WILL CONTRACT 7.3 PERCENT:  The 
International Monetary Fund stated on July 8 that Mexico will be the 
country most affected by the global crisis.  It revised its downward 
economic projection to an overall decline of 7.3 percent for Mexico 
in 2009.  The IMF also projects that the Mexican economy will 
register a modest rebound of 3 percent in 2010.  Bank of Mexico 
Governor Guillermo Ortiz reportedly responded that given the deep 
decline this year, the economy could have a stronger recovery than 
the IMF believes.  However, he noted that this will depend on the 
U.S. recovery.  He also called for the cooperation of the new 
PRI-dominated Mexican Congress in approving structural reforms, 
especially tax reform.  He agreed with some lawmakers that now is 
not the perfect time to implement new taxes, but added that the 
approval and implementation of a medium-term fiscal plan, aimed at 
strengthening the country's public finances, is critical to recovery 
efforts.  He also suggested eliminating existing tax loopholes and 
reducing tax evasion.  (Mexico City) 
 
¶2.  (U) ANTI-TRUST COMMISSION DECLARES TELMEX DOMINANT:  In another 
bite at the apple, Mexico's anti-monopoly commission (CFC) issued a 
more definitive resolution confirming the dominance of incumbent 
Telmex in fixed line, local transit in 191 local services areas and 
in the wholesale leasing of dedicated lines.  Billionaire Carlos 
Slim's Telmex has been in their sights for more than a decade now, 
and in 1997 the company had won the first court battles against the 
anti-monopoly commission.  In 2000, Mexican telecom regulator 
Cofetel issued specific rules based on the ruling issued on 1997, 
but Telmex filed an injunction and won the case years later.  This 
new ruling does not include sanctions, but is merely a more direct 
description of the telecommunications market's situation.  It is now 
up to Cofetel to issue special rules in order to ensure a more 
 
MEXICO 00002038  002 OF 003 
 
 
equitable balance in the market.  Cofetel's commissioner Gonzalo 
Martinez Pous commented to the press that the regulator will have to 
decide whether to issue a general asymmetric regulation or specific 
rules for Telmex.  Such specific rules could be challenged in the 
courts, which could nullify the entire ruling and its effect on the 
dominant company.  Telmex has 20 days to submit a reconsideration 
statement.  (Mexico City) 
 
¶3.  (U) ECONOMY MINISTRY AND UNIVERSITY LURE MICROENTERPRISES OUT OF 
THE INFORMAL SECTOR:  In an effort to encourage small and medium 
size enterprises (PYMES by their Spanish acronym) to register with 
the Mexican social security agency (IMSS) and the Finance 
Secretariat (Hacienda), the Baja California State Ministry of 
Economic Development (SDE) and the Universidad Autonoma de Baja 
California (UABC) have launched a program to offer these small, 
irregular enterprises non-financial technical assistance and the 
right to apply for a MX$5500 peso loan in exchange for registering 
with IMSS.  The goal of the program is to assist 11,000 PYMES, 
generate 22,000 jobs, and also to advertise the program in other 
states.  The director of the program says increasing the number of 
PYMES operating in the formal sector will increase tax revenue and 
make it easier for the government to provide assistance during 
economic crises.  (Tijuana) 
 
¶4.  (U) GUADALAJARA PRIVATE SCHOOL INSCRIPTIONS DOWN 20 PERCENT: 
Private school inscriptions in metropolitan Guadalajara for the 
2009-2010 school year are down as much as 30 percent.  In most 
schools, more 10 percent of the student body already is committed to 
leaving.  According to a survey done by a trusted local paper, the 
economic crisis has severely impacted the educational sector; 
roughly one quarter of parents are behind in their payments, with 
some schools seeing up to 60 percent of families in arrears.  Adding 
insult to injury, many parents are refusing to pay May fees because 
of the reduced number of classes during the influenza outbreak. 
Schools are attempting to deal with the shortage of funds by 
creating new payment plans and extending credit for cash-strapped 
families while withholding degrees until debts are paid in full. 
(Guadalajara) 
 
¶5.  (U) PACE OF JOB LOSSES SLOWS IN CHIHUAHUA:  In a sign that the 
Chihuahua labor market might be beginning to stabilize, in May the 
State recorded its lowest month-over-month formal sector job loss 
total since June 2008.  According to the Mexican social security 
agency (IMSS), Chihuahua lost 3,000 formal sector jobs in May, down 
from an average of 8,000 monthly job losses over the past 12 months. 
 Statewide, over 94,000 jobs have disappeared since May 2008, with 
the manufacturing sector in Ciudad Juarez accounting for more than 
54,000 of this total.  The negative shock in external demand for 
goods produced in Chihuahua's maquiladora sector- particularly 
intermediate goods for the U.S. auto sector- largely explains this 
sharp contraction.  As a result of this downturn, in the past year 
Ciudad Juarez lost one out of every five formal sector jobs. (Ciudad 
Juarez) 
 
--------------------- 
TRADE AND INVESTMENT: 
--------------------- 
 
¶6.  (U) GRADUAL ECONOMIC IMPROVEMENT IN MAQUILA SECTOR:  The local 
Secretary for Economic Development and Employment (SEDEEM), Alfredo 
Gonzalez Fernandez, recently told the local media that the 
manufacturing sector in Tamaulipas will gradually begin to improve 
in the second half of this year.  He said the impact of the U.S. 
economic recession was most obvious between March and June of this 
year, when the economy lost an average of 1,000 jobs per month. 
(Matamoros) 
 
¶7.  (U) CEMEX STILL SCRAMBLING TO SHORE UP BALANCE SHEETS:  Cemex, 
the world's largest building materials supplier and third largest 
cement producer, came close to default on its corporate bonds and 
faced forced government intervention late last year.  This year, it 
continues to face liquidity problems.   The company's shares have 
fallen 30 percent in recent weeks after disappointing second quarter 
results and Strabag SE pulled out of a deal to purchase Cemex assets 
in Austria and Hungary.  On July 8, the company announced it will 
place up to US$374 million in new debt backed by accounts 
receivables.   However, the company still needs to raise US$4.1 
billion by the end of this year and another US$10.4 billion in 2011 
to roll over maturing debt.  Given the tight worldwide market for 
credit and the continuing slump in construction, the company faces a 
very dire financial situation.  (Monterrey) 
 
 
MEXICO 00002038  003 OF 003 
 
 
¶8.  (U) LG ELECTRONICS SHIFTS OPERATIONS IN MEXICO:  As part of a 
national reorganization, electronics and appliance maker LG 
Electronics is closing its plant in Mexicali and will expand plants 
in Reynosa and Apodaca (near Monterrey).  LG will spend over US$100 
million over the next three years at the two plants to increase 
production, creating 1,200 new jobs in Reynosa and 1,300 in Apodaca. 
 The plant in Reynosa produces LCD televisions and the Apodaca plant 
manufactures stoves, refrigerators, and microwaves.  The 
manufacturing of cellular phone components currently done at the 
Mexicali plant will be transferred to plants in China and South 
Korea.  Since January, three other companies announced production 
expansions in Reynosa - Corning Cable Systems, Rowe International 
Corporation, and BSN Medical.  Additionally, a local economic 
development contact told the consulate's reporting officer that some 
corporations have begun moving their headquarters into Reynosa, or 
nearby on the U.S. side (McAllen, TX), to lower their costs.  The 
latest example is Alps Electronics, which is moving their 
headquarters from Detroit to McAllen. (Monterrey and Matamoros) 
 
¶9.  (U) AILING U.S. AUTO INDUSTRY BLAMED FOR TRADE DECLINE IN EL 
PASO-JUAREZ CORRIDOR:  The total value of trade through El 
Paso-Ciudad Juarez ports of entry fell by 0.5 percent, to US$41.2 
million, from 2007 to 2008.  This slight decline contrasts with the 
5.5 percent increase in total U.S.-Mexico bilateral trade during 
this same period, according to U.S. Department of Commerce 
statistics.  Dallas Federal Reserve analyst Roberto Coronado 
attributes this asymmetry in large part to lower production at 
maquiladora plants in Ciudad Juarez that service the U.S. auto 
industry.  Despite the decline, El Paso-Ciudad Juarez ports of entry 
remain second only to Nuevo Laredo in terms of trade volume, 
accounting for 11 percent of total U.S.-Mexico trade.  (Ciudad 
Juarez) 
 
----------------------- 
ENERGY AND ENVIRONMENT: 
----------------------- 
 
¶10.  (U) SENER LAUNCHES A NATIONAL ENERGY TRANSITION AND SUSTAINABLE 
ENERGY STRATEGY:  On July 7, the Energy Secretariat (SENER) 
officially announced its plan to promote energy efficiency, the use 
of clean energy sources, and the reduction of the country's reliance 
on hydrocarbons.  The federal government will funnel US$1.5 billion 
to implement more than 50 projects in order to foster the use of new 
technologies to generate renewable energy, create standards for 
energy efficiency, and diversify energy sources.  The government 
will also focus on strengthening the regulations for SENER, the 
Energy Regulatory Commission, and the National Commission for the 
Efficient Use of Energy. (Mexico City) 
 
FEELEY