VZCZCXRO2343
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #2885/01 2782220
ZNR UUUUU ZZH
R 052220Z OCT 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 8489
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 002885 
 
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 - October 02 
 
¶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: 
-------------------- 
 
MEXICO NEEDS A DYNAMIC DOMESTIC MARKET TO CONSOLIDATE ECONOMIC 
RECOVERY - Mexico City 
 
GOVERNOR DEFENDS DEBT LEVELS, DESCRIBES CRITICAL ANALYSIS AS 
"INADEQUATE" - Monterrey 
 
BAJA CALIFORNIA GOVERNOR URGES SUPPORT FOR CALDERON BUDGET 
PROPOSAL - Tijuana 
 
REMITTANCE PAYMENTS BECOME MOST STABLE SOURCE OF FOREIGN 
EXCHANGE IN CHIHUAHUA - Ciudad Juarez 
 
 
TRADE AND INVESTMENT: 
--------------------- 
 
TEMPEL STEEL SET TO INVEST IN NUEVO LEON ONCE AGAIN - 
Monterrey 
 
ALFA BREAKS PROFIT EXPECTATIONS - Monterrey 
 
MEXICAN DAIRY PRODUCTS FIRM ACQUIRES HOLDINGS IN THE U.S. - 
Monterrey 
 
 
ENERGY: 
------- 
 
PEMEX TO HOLD 'MEET THE BUYER' SESSION - Matamoros 
 
ENERGY CONSUMPTION ON THE RISE - Monterrey 
 
 
ENVIRONMENT, SCIENCE, TECHNOLOGY AND HEALTH 
------------------------------------------- 
 
SECOND MAJOR WAVE OF H1N1 INFLUENZA HITS MEXICO - Mexico City 
 
FEMSA LAUNCHES ENERGY EFFICIENT REFRIGERATORS - Monterrey 
 
 
------------------- 
ECONOMY AND FINANCE 
------------------- 
 
¶3.  (U) MEXICO NEEDS A DYNAMIC DOMESTIC MARKET TO CONSOLIDATE 
ECONOMIC RECOVERY:  The economic recovery in Mexico will not 
consolidate until the domestic market -particularly private 
consumption - which contributes with 50% of the economic 
activity, strengthens.  For economists, such as Alfredo 
Coutio from Moody's and Jorge Smeke from Universidad 
Iberoamericana, the government should continue working on 
structural reforms in order to eliminate the existing bottle 
necks, which delays a larger and more rapid economic growth. 
For them, an important factor for the economic recovery is the 
improvement in labor markets and workers conditions in 
combination with strong finances and social policies that 
strengthen private consumption.  Both believe that Mexico 
needs a change in the economic growth drivers.  Coutio and 
Smeke agreed that unfortunately the countercyclical programs 
implemented by the government during the economic recession 
were insufficient because of the limited available resources 
as a result of the decline in oil and tax revenues.  (Mexico 
City) 
 
¶4.  (U) GOVERNOR DEFENDS DEBT LEVELS, DESCRIBES CRITICAL 
ANALYSIS AS "INADEQUATE":  Responding to criticisms that he 
has left Nuevo Leon the most indebted of all Mexican states, 
outgoing Nuevo Leon Governor Jose Natividad Gonzalez Paras 
 
MEXICO 00002885  002 OF 003 
 
 
claimed that, if debt levels have increased, so has the 
state's ability to generate income.  According to Gonzalez 
Paras, the debt contracted has been invested in infrastructure 
that has made Nuevo Leon a leader in the nation, as evidenced 
by a more rapid economic recovery in the state than in other 
parts of Mexico.  This debt has been measured as 51% of the 
state's 2008 budget; the national average of states' debt as a 
percentage of budget is 17%.  (Monterrey) 
 
¶5.  (U) BAJA CALIFORNIA GOVERNOR URGES SUPPORT FOR CALDERON 
BUDGET PROPOSAL:  Governor Osuna Millan (PAN) has spoken out 
twice in the last week urging legislators to pass the 
administration's budget.  According to Osuna Millan, failure 
to pass the budget will result in less money for the state to 
pursue infrastructure projects and less money for municipal 
governments.  Business groups in Baja, however, have 
publically come out against the tax increases included in the 
budget.  (Tijuana) 
 
¶6.  (U) REMITTANCE PAYMENTS BECOME MOST STABLE SOURCE OF 
FOREIGN EXCHANGE IN CHIHUAHUA:  Second quarter remittance 
payments from the U.S. to Chihuahua fell at a year-over-year 
rate of almost 20%, according to recent statistics published 
by the Mexican Central Bank (Banxico).  In the second quarter 
of 2009, Chihuahua received $US 107.6 million in remittances, 
compared to $US 131.6 million during the same quarter last 
year.  Despite the decline, remittances have become a more 
stable source of foreign exchange for Chihuahua than foreign 
direct investment (FDI), which fell by almost 60% during this 
same period.  In 2008, remittances were equivalent to 43% of 
total state foreign direct investment (FDI); this year to the 
second quarter they were equivalent to 67%.  Many economists 
argue that remittances are more counter-cyclical than other 
capital flows due to the personal relationship between the 
sender and receiver of these income transfers.  In Chihuahua, 
this appears to be the case.  Even though remittances have 
fallen, they remain an important source of income for low- 
income families to meet their consumption needs as the economy 
slows.  (Ciudad Juarez) 
 
-------------------- 
TRADE AND INVESTMENT 
--------------------- 
 
¶7.  (U) TEMPEL STEEL SET TO INVEST IN NUEVO LEON ONCE AGAIN: 
Timothy Tyler, President of U.S. multinational Tempel Steel, a 
manufacturer of magnetic steel laminates for the electrical 
and electronics industry, recently announced that his company 
will move forward with a planned investment of $25 million in 
its plant in Apodaca, Nuevo Leon.  This investment will bring 
the plant up to 89% of its designed capacity.  Tyler indicated 
that the company plans to close one of its plants in the state 
of Illinois, and relocate $2.5 million of equipment to its 
Apodaca facility.  These plans had been put on hold in 2008, 
after company sales dropped 45%.  The company is currently 
registering a 4%-5% growth in sales, and hopes to reduce 
production costs by expanding operations in Mexico. 
(Monterrey) 
 
¶8.  (U) ALFA BREAKS PROFIT EXPECTATIONS:  Exceeding analysts' 
expectations, Monterrey based conglomerate Alfa reported a 23% 
increase in earnings at the conclusion of the third quarter, 
slightly higher than analysts had predicted.  Alfa's divisions 
operate in various manufacturing sectors:  Alpek manufactures 
petrochemicals, Nemak auto parts, Sigma food products, and 
Alestra provides telecommunications services.  According to 
Mario Paez, Alfa's Director of Finances, sales were 
particularly strong in the auto parts sector, where the U.S. 
"Cash for Clunkers" stimulus package increased sales of 
aluminum heads for automobile engines.  (Monterrey) 
 
¶9.  (U) MEXICAN DAIRY PRODUCTS FIRM ACQUIRES HOLDINGS IN THE 
U.S.:  Durango based dairy conglomerate Grupo Industrial Lala 
S.A. announced on September 28 the purchase of two U.S. dairy 
firms:  Farmland Dairies of New York and New Jersey, and 
Promised Land of San Antonio, TX.  While Lala did not 
publicize the purchase price, independent analysts estimate 
the purchase at $500 million.  This purchase follows closely 
Lala's $435 million acquisition last May of National Dairy, 
the second largest dairy processor in the U.S.  Lala's product 
line in the North American market will include not only milk 
and derivative products, such as butters, creams, and cheeses, 
 
MEXICO 00002885  003 OF 003 
 
 
but fruit juices as well.  (Monterrey) 
 
------ 
ENERGY 
------ 
 
¶10.  (U) PEMEX TO HOLD 'MEET THE BUYER' SESSION:  PEMEX will 
hold a Meet the Buyer session for a targeted group of 30 small 
to medium U.S. natural gas service and supplier firms on 
October 16, 2009 in Edinburg, Texas.  The gathering will be 
held at the University of Texas Pan American's Small Business 
Development Center.  PEMEX sought assistance in locating small 
to medium size firms to assist them with their Burgos Basin 
natural gas project.  PEMEX states the goal of the project is 
to increase the number of natural gas wells in the Burgos 
basin from the 6,500 currently in operation.  [Note:  The U.S. 
side of the basin has more than 70,000 natural gas wells 
currently in operation.]  According to PEMEX, the Mexican side 
of the Burgos basin has a potential capacity of 52 million 
square meters of natural gas.  Sessions for invited business 
include:  How to do business with PEMEX, a presentation by 
PEMEX's procurement division, and a presentation by PEMEX's 
commercial and customs agents.  The session is being organized 
through the joint efforts of the U.S. Consulate General, 
Matamoros; the Mexican Consulate, McAllen, Texas; U.S. 
Commercial Service, U.S. Export Assistance Center, San 
Antonio, Texas; and the University of Texas, Pan American, 
Small Business Development Center.  (Matamoros) 
 
¶11.  (U) ENERGY CONSUMPTION ON THE RISE:  After having fallen 
to the lowest levels seen in years, national energy 
consumption statistics could indicate an increase in Nuevo 
Leon's industrial production.  According to Federal 
Electricity Commission (CFE) and Secretariat of Energy data, 
national consumption of electricity has almost recovered to 
levels typical before the economic crisis:  in August 2009 
electrical usage was 1001 gigawatts/hour, a 54% increase over 
January of 2009.  This rate is only 3% below August 2008 
figures.  The consumption of natural gas is also growing, up 
to 714.7 million cubic feet/day in July 2009 from a low of 600 
million cubic feet/day in January 2009, but 25% less than that 
of July 2008.  According to Fernando Turner, President of the 
Nation Association of Independent Businessmen, much of Nuevo 
Leon's recovery stems from its auto parts industry as a result 
of the U.S. "cash for clunkers" stimulus plan.  Inventories 
remain low and manufacturers are hopeful that demand for auto 
parts will continue to rise absent the U.S. stimulus plan. 
(Monterrey) 
 
------------------------------------------- 
ENVIRONMENT, SCIENCE, TECHNOLOGY AND HEALTH 
------------------------------------------- 
 
¶12.  (U) SECOND MAJOR WAVE OF H1N1 INFLUENZA HITS MEXICO: 
H1N1 influenza cases are peaking again in Mexico following the 
August 24 start of the school year.  GOM ability to cope with 
the illness has improved greatly since the initial outbreak. 
Nationwide, numbers of reported flu cases are equal or close 
to those of April, when the outbreak was at its peak. 
However, unlike last spring, when lab capacity and lack of 
familiarity with the disease presented serious challenges to 
the Mexican health care system, public and medical 
practitioner awareness of the disease is high.  The GOM is 
conducting its own public health campaign and is working 
closely with the Centers for Disease Control on presenting an 
accurate and unified message to the press and public.  (Mexico 
City) 
 
¶13.  (U) FEMSA LAUNCHES ENERGY EFFICIENT REFRIGERATORS: 
Monterrey based beverage giant Fomento Econ"mco Mexicano 
(FEMSA), in cooperation with commercial refrigerator 
manufacturer Ibera, recently announced the introduction of a 
new line of energy savings coolers and refrigerators, which 
are advertised as consuming 3.6 kilowatt hours/day, an 
electricity consumption reduction of 43% in comparison with 
conventional units.  Alfonso Garza, Director General of 
Strategy for FEMSA, estimated that mini groceries and 
convenience stores could save approximately $300/year 
utilizing the new units and significantly reduce their carbon 
footprints.  (Monterrey) 
 
PASCUAL