VZCZCXRO0979
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #2519/01 2380236
ZNR UUUUU ZZH
R 260236Z AUG 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 8017
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 002519 
 
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 - August 21 
 
¶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: 
-------------------- 
 
INFLATION DROPS TO 5.12% - Mexico City 
 
CNBV WILL SUPERVISE "CENTROS CAMBIARIOS" - Mexico City 
 
ECONOMIC ADVANTAGES OVERRIDE SECURITY ISSUES - Matamoros 
 
ECONOMY CONTINUES TO BE WEAK - Monterrey 
 
SMALL BUSINESSES ASK NAFINSA TO EXPAND AID - Monterrey 
 
POSITIVE JOBS DATA IN JUAREZ MAQUILA SECTOR MAY INDICATE EARLY 
STAGES RECOVERY - Ciudad Juarez 
 
US RECESSION HITS ECONOMY IN SONORA AND SINALOA - Hermosillo 
 
 
TRADE AND INVESTMENT: 
--------------------- 
 
EXPORTS FALL IN JULY - Mexico City 
 
REIT INVESTMENT STALLS - Matamoros 
 
THE "THIRD COAST" - Matamoros 
 
TAMAULIPAS ATTRACTING IT CORPORATIONS WITH NEW SCIENCE AND 
TECHNOLOGY PARK - Matamoros 
 
 
INFRASTRUCTURE: 
--------------- 
 
GUADALAJARA BELTWAY TO BE COMPLETE IN 2011 - Guadalajara 
 
 
------------------- 
ECONOMY AND FINANCE: 
------------------- 
 
¶3.  (U) INFLATION DROPS TO 5.12%:  During the first half of August 
annual inflation totaled 5.12%, 0.21 percentage points lower than 
the second half of July.  Should inflation continue with its 
downward trend, it will likely converge toward the Bank of Mexico's 
target of 4.75%-5.25% for the third quarter of 2009.  Merchandise 
and processed food, as well as government administered prices did 
not grow as much as last year.  On the other hand, produce prices 
dropped 0.51%.  Given this downward trend, the Bank of Mexico 
decided to keep its benchmark lending rate at 4.5% on August 21. 
 
¶4.  (U) CNBV WILL SUPERVISE "CENTROS CAMBIARIOS": Around 6,000 
unregulated money exchange houses (centros cambiarios), will be 
supervised by the banking regulator, the National Banking and 
Securities Commission (CNBV, Mexico's SEC equivalent) rather than 
the Tax Administration Services (IRS equivalent).  As a result, the 
CNBV will have more control over these exchange houses in terms of 
preventing money laundering and other illegal activities.  The bill 
still needs to be approved by the Senate.  In order to conduct 
operations, centros cambiarios will have to obtain an authorization 
from the CNBV, be registered as a company rather than an individual, 
and have a fixed address. Among the new rules that the centros 
cambiarios will have to implement is to identify and create a record 
of the users or clients who conduct operations of USD 500 or more. 
 
 
¶5.  (U) ECONOMIC ADVANTAGES OVERRIDE SECURITY ISSUES:  While there 
is an acute awareness of recent clashes between military and drug 
trafficking organizations in the area, it has not deterred companies 
from conducting business in and around Reynosa.  General security is 
of concern, but the industrial parks are reasonably secure, and 
dedicated to conducting and basing businesses in Tamaulipas and 
 
MEXICO 00002519  002 OF 003 
 
 
Reynosa, contacts told ECON and CONOFFS at the Foro Internacional 
Clusters 2009 last week.  The conference focused on recent security 
issues in Reynosa with companies in the auto, medical, real estate 
and information technology (IT) sectors.  All contacts emphasized 
the operational savings they experience in Mexico, especially in 
this time of economic uncertainty.  One attendee highlighted the 
positive involvement of government officials in Reynosa during 
recent security incidents (Matamoros) 
 
¶6.  (U) MONTERREY BANKER ON WEAK ECONOMY:  The Mexican economy 
continues to suffer, but the U.S. economy appears to be improving 
and the Mexican economy should follow suit after a few months delay, 
according to Agustin del Rio, the regional Bank of Mexico delegate 
in Monterrey who spoke at an August 7 presentation to U.S. and 
Mexican real estate executives.  Del Rio said Northern Mexico is 
expected to lead the recovery, which is the reverse of the economic 
decline which began in southern Mexico and spread north.  Del Rio's 
major concern for long-term growth was the poor outlook for Mexico's 
public finances.  More than one third of all public sector revenue 
in Mexico is from petroleum.  The depletion of petroleum reserves 
and lower worldwide oil prices have combined to adversely impact 
revenues.  Many Mexican states are already borrowing to avoid 
spending cuts.  (Monterrey) 
 
¶7.  (U) SMALL BUSINESSES ASK NAFINSA TO EXPAND AID:  Caintra, an 
association of Nuevo Leon's manufacturing businesses, has formally 
requested Mexico's national development bank, Nafinsa, to expand aid 
to small and medium sized businesses in Nuevo Leon under its special 
financing program to combat the effects of the H1N1 influenza.  At 
an August 18 press conference, Eduardo Coronado, a representative of 
Caintra, said of the nearly US$200 million in credit Nafinsa has 
promised as economic relief for small businesses in Mexico, Nuevo 
Leon area companies have only received US$2 million.  Nuevo Leon's 
manufacturing sector, which was already reeling from the effects of 
the economic crisis, was hit hard by the H1N1 flu the results of 
which caused sales to plummet from April to June.  The association's 
members, which have already laid off numerous employees or enacted 
temporarily plant shutdowns, have claimed they will have to lay-off 
additional employees if they do not receive economic aid soon. 
(Monterrey) 
 
¶8.  (U) POSITIVE JOBS DATA IN JUAREZ MAQUILA SECTOR MAY INDICATE 
EARLY STAGES RECOVERY:  Recent jobs data reveals the 18 month labor 
contraction in the Juarez maquila sector may have reached its trough 
this past June.  After losing 84,000 jobs since 2007, in July the 
Juarez Maquila Association (AMAC) reported the city's maquila sector 
added almost 2,500 jobs (166,458 to 168,883), which represents the 
first month-over-month increase in maquila jobs since the downturn 
began.  According to AMAC's President, the recent rise in U.S. 
manufacturing production has led to higher orders for Juarez-based 
suppliers, which will increase demand for labor during the second 
half of 2009.  AMAC forecasts an increase of 12,000 jobs from the 
June low by the end of the year.  In addition, from March to June of 
this year, the total number of maquila employees working reduced 
hours fell from 55,000 to 35,000.  Despite this positive news, many 
economists warn that continued improvement in the Juarez maquila 
sector will depend on the U.S. economic recovery.  (Ciudad Juarez) 
 
¶9.  (U) US RECESSION HITS ECONOMY IN SONORA AND SINALOA:  News 
reports from Sonora and Sinaloa indicate that they are struggling as 
a result of the U.S. recession.  A recent article in Culiacan's El 
Debate described the troubled state of Sinaloa's agricultural 
economy where local businesses in small farming towns are seeing 
sales to wholesalers drop by 50 percent from last year.  Sinaloan 
Undersecretary for Economic Development, Lic. Amadeo Zazueta, noted 
a sharp increase in unemployment, indicating the quantity of 
packaged agricultural goods shipped from Sinaloa to the United 
States has dropped by more than 15 percent since last year.  His 
staff attributes lower agricultural product purchases to frugality 
in American households theorizing that they are now buying just 
enough produce instead of buying more than they need each week and 
letting some spoil.  According to Hermosillo's El Imparcial 
newspaper, three thousand Sonoran workers from the recently 
bankrupted retail and grocery chain VH are struggling to find work. 
On an optimistic note, local officials noted unemployment held 
steady in July and government run job placement programs are 
reporting some openings, but it's not clear that these employees are 
qualified for the vacant positions.  (Hermosillo) 
 
 
--------------------- 
TRADE AND INVESTMENT: 
 
MEXICO 00002519  003 OF 003 
 
 
--------------------- 
 
¶10.  (U) EXPORTS FALL IN JULY:  During July Mexican exports fell 
34.7% after having dropped 26.6% in June.  The value of exports 
totaled USD 17.9 billion, while the value of imports reached USD 
19.2 billion.  Thus, the trade deficit rose 5% in annual terms. 
Manufacturing exports plummeted 30.6% with vehicle exports to the 
U.S. falling by 32.8%.  Oil exports fell 51.2%. 
 
¶11.  (U) REIT INVESTMENT STALLS:  ProLogis, a global real estate 
investment trust (REIT) that owns and manages investments in 
distribution facilities, offices, and industrial properties, many of 
which are in Mexico, has completely reevaluated its business model. 
As manufacturers have reduced production, the need for industrial 
space has diminished, leaving higher vacancy rates in industrial 
rental properties.  According to representatives from ProLogis, the 
company has dramatically reduced its Mexican staff by 37 percent. 
The company recognizes that the previous growth model in Mexico was 
unsustainable, and future growth will be at a more measured pace. 
Despite the more cautious approach to future development, a 
representative from ProLogis is forecasting a recovery of the 
Mexican industrial rental market after the first quarter of 2010. 
(Matamoros) 
 
¶12.  (U) THE "THIRD COAST":  Tamaulipas is positioning itself to 
provide product distribution and logistics support to the vast U.S. 
consumer import market.  The Economic and Employment Development 
office of Tamaulipas stated at the Foro Internacional Clusters 2009 
in Reynosa that Mexican ports provide a viable alternative to U.S. 
ports in California.  While much attention has focused on the 
Mexican Pacific Coast as an alternative import route to the U.S., 
state officials believe that Tamaulipas' 15 border crossing points 
with Texas and the port capacities of Tampico and Altamira, which 
already handle 30% of Mexican exports and imports, will make 
Tamaulipas an important logistics hub for U.S. imports.  They also 
stated that Tamaulipas' proximity to the Trans-Texas Corridor, a 
long-term infrastructure plan stretching from Texas to the Great 
Lakes, will be a distinct competitive advantage for the State of 
Tamaulipas, helping cement its role as the "third coast" of the U.S. 
 (Matamoros) 
 
¶13.  (U) TAMAULIPAS ATTRACTING IT CORPORATIONS WITH NEW SCIENCE AND 
TECHNOLOGY PARK:  TECHNOTAM Science and Technology Park is scheduled 
to open in late October or early November in Ciudad Victoria, 
Tamaulipas.  Phase one of the park is nearly complete.  The first 
tenants will include:  CINVESTAV, a center for research and advanced 
studies specializing in IT and Computer Science, granting Master's 
and PhD's; the Universidad Autonoma de Tamaulipas, specializing in 
technology education to support the IT sector; TiT@M, the Tamaulipas 
Information Technology cluster;  an IT business incubator; and SVAM 
International, a global IT services provider.  Anil Kapoor, 
President and CEO of SVAM International, appeared at Foro 
Internacional Clusters 2009 in McAllen, Texas last week, praising 
the dedication and involvement of the Tamaulipas government and 
economic development officials as a key reason why his company 
decided to expand in Mexico.  He enthusiastically recounted the 
involvement and willingness of local educational institutions to 
work with his company in setting up curricula that will develop the 
workforce SVAM International needs as they grow in Mexico. 
(Matamoros) 
 
 
--------------- 
INFRASTRUCTURE: 
--------------- 
 
¶14.  (U) GUADALAJARA BELTWAY TO BE COMPLETE IN 2011:  A new six lane 
11.5 kilometer (7 mile) stretch of the beltway that loops around 
Guadalajara, el Perifrico, opened Tuesday August 18 to light 
traffic.  The newly opened portion represents two of the five 
planned phases to finish the ring originally planned fifty years 
ago.  At the inauguration ceremony Jalisco Governor Emilio Gonzlez 
announced that the additional 25-30 kilometers (15-19 miles) needed 
to complete the loop would be finished in 2011.  The effort is 
intended to reduce congestion in the city center and along a major 
east-west thoroughfare ahead of the 2012 Pan American games. 
(Guadalajara) 
 
FEELEY