VZCZCXYZ0013
RR RUEHWEB

DE RUEHME #3120/01 3031729
ZNR UUUUU ZZH
R 301729Z OCT 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 8833
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 MEXICO 003120 
 
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 30 
 
¶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: 
-------------------- 
 
MEXICAN CONSUMERS SIZABLE PART OF MCALLEN, TEXAS RETAIL 
BASE - Matamoros 
 
FAINT LIGHT AT THE END OF THE TUNNEL AS SONORA 
ANTICIPATES WEAK GROWTH IN 2010 - Hermosillo 
 
 
TRADE AND INVESTMENT: 
--------------------- 
 
EMBASSY SPONSORED IPR TRAINING PAYS OFF AS MEXICAN 
CUSTOMS SEIZE COUNTERFEIT PRODUCTS - Mexico City 
 
CEMEX PROFITS DROP SHARPLY - Monterrey 
 
LOCAL TRANSPORTATION MANUFACTURER ENJOYS GROWTH DESPITE 
CRISIS - Monterrey 
 
ECONOMIC CRISIS IS A BOON TO LOCAL COUNTERFEITERS - 
Monterrey 
 
 
TRANSPORTATION AND INFRASTRUCTURE: 
---------------------------------- 
 
SCT: SCALED BACK PUNTA COLONET STILL ALIVE - Mexico City 
 
AIR PASSENGER TRAFFIC THROUGH CIUDAD JUAREZ FALLS BY 33 
PERCENT - Ciudad Juarez 
 
 
ENERGY AND ENVIRONMENT: 
----------------------- 
 
BARK BEETLES THREATEN MONARCH BUTTERFLY RESERVE - Mexico 
City 
 
MEXICO-GUATEMALA INAUGURATE ELECTRICITY LINK DURING 
CALDERON STATE VISIT - Mexico City 
 
 
------------------- 
ECONOMY AND FINANCE 
------------------- 
 
¶3.  (U) MEXICAN CONSUMERS SIZABLE PART OF MCALLEN, TEXAS 
RETAIL BASE:  In a meeting with PO and EconOff October 
29, 2009, Vice Presidents of the McAllen Chamber of 
Commerce outlined the effect that Mexican retail tourism 
has on their city.  They described shoppers from 
Monterrey as "power shoppers" who come to McAllen every 
one and a half (1.5) months, spend an average of USD 
$1,100 per person, and stay in the city for two nights. 
Approximately 30% of the USD $1,100 is spent in services 
(restaurants, hotels).  They also noted a sizable group 
of retail tourists who come from Mexico City, 
approximately once every three months, and spend an 
average of USD $3,000-$3,500 per person.  The overall 
impact of Mexican retail tourism in McAllen is impressive 
- in a city where the average household income is USD 
$55,000/year, McAllen has an average of USD $82,000/year 
per household in retail sales.  (Matamoros) 
 
¶4.  (U) FAINT LIGHT AT THE END OF THE TUNNEL AS SONORA 
ANTICIPATES WEAK GROWTH IN 2010:  Speaking at the 
Manufacturing in Mexico Summit to more than 100 investors 
and manufacturing managers, Dr. Deborah Riner, Chief 
Economist for the U.S. Mexico Chamber of Commerce, 
predicted weak economic growth in 2010 as demand for 
manufactured goods in the U.S. is only expected to see 
modest increases.  The Offshore Group, one of Mexico's 
largest maquila operators, held its 15th annual summit to 
discuss the investment climate in Sonora, Mexico on 
October 23.  Fifty percent of the workforce, 7,200 
workers, has been downsized since October 2007 at the 
largest maquila operator, Maquilas Tetakawi, as orders 
have diminished in relation to slowdowns in the 
electronics and aviation industries.  Operators were 
encouraged by the predictions that the biggest fall in 
demand is over and by expectations that the peso's 
exchange rate volatility is abating.  The state's new 
governor, Guillermo Padres, spoke at the conference 
signaling that the new state government would continue to 
promote an investment-friendly environment for foreign 
companies.  Twenty new, potential manufactures from the 
U.S., Canada, and Germany attended the conference.  On a 
related note, econoff met the plant manager for Radiall 
USA, a maker of cable connectors and antennas.  In 2008, 
the company opened a plant in Ciudad Obregon, Sonora to 
fill orders for Boeing's new 787 Dreamliner.  The 500 
person plant is operating at 25 percent capacity as 
Boeing has delayed the launch of the new aircraft several 
times over the last year.  They anticipate increasing 
production as orders increase mid-year 2010. 
(Hermosillo) 
 
 
-------------------- 
TRADE AND INVESTMENT 
--------------------- 
 
¶5.  (U) EMBASSY SPONSORED IPR TRAINING PAYS OFF AS 
MEXICAN CUSTOMS SEIZE COUNTERFEIT PRODUCTS:  The Servicio 
de Administracion Tributaria published two press releases 
late October reporting on separate seizures by Mexican 
customs authorities of counterfeit goods at the ports of 
Ensenada and Lazaro Cardenas on the Pacific shore of 
Mexico.  On September 29, customs authorities in Ensenada 
seized 31,000 false decals for Barbie, Hello Kitty, 
Mickey Mouse, and Sponge Bob products.  On October 20, 
customs authorities in Lazaro Cardenas seized three 
containers containing roughly 60 tons of counterfeit 
sporting goods and accessories bearing the fraudulent 
marks of Louis Vuitton, Adidas, Tous, Puma, and Nike, 
among others.  The customs authorities credited newly 
implemented risk analysis and detection techniques. 
These seizures follow a training program, coordinated by 
the US Embassy, on detecting, detaining, and deterring 
the importation of pirated and counterfeit goods for 
Mexican customs and law enforcement officials in 
Manzanillo from September 8-11.  Customs agents from 
Ensenada and Lazaro Cardenas were among the 59 
participants.  (Mexico City) 
 
¶6.  (U) CEMEX PROFITS DROP SHARPLY:  Monterrey-based 
CEMEX, the world's third largest cement producer, 
announced that net income plunged almost 40 percent in 
the third quarter due to a global drop in sales, 
declining by 27 percent in Mexico and 38 percent in the 
U.S., the company's largest market.  While executive vice 
 
president Hector Medina said he is optimistic about the 
stability of future sales after successfully completing 
the company's refinancing this quarter, he admitted that 
CEMEX expects 2009 cement volume to decrease by 30 
percent in the U.S., where his company is the country's 
largest cement producer.  (Monterrey) 
 
¶7.  (U) LOCAL TRANSPORTATION MANUFACTURER ENJOYS GROWTH 
DESPITE CRISIS:  TYTAL, a nine year old Nuevo Leon-based 
manufacturer of aluminum products for the transportation 
and storage of combustible liquids and flammable 
materials, has enjoyed consistent growth despite the 
economic crisis.  In 2009, annual sales nearly doubled to 
$35 million dollars, allowing the company to increase its 
workforce by 76% to 255 employees and move into a new 
8,500 square meter production facility.  Luis Alberto 
Arrasco, TYTAL's business manager, attributed the 
company's success to increased demand from PEMEX's 
production facilities in Veracruz and Tabasco and the 
company's low production cost for aluminum tanks - 40% 
 
below the international market average.  TYTAL, Mexico's 
first aluminum tank truck manufacturer, is the largest 
supplier of 20,000 liter tanker trucks to PEMEX and has 
sold 80 trucks to the company this year, doubling last 
year's sales to the company.  (Monterrey) 
 
¶8.  (U) ECONOMIC CRISIS IS A BOON TO LOCAL 
COUNTERFEITERS:  According to Gilberto de Hoyos Koloffon, 
the regional President of the Mexican Association for the 
Protection of Intellectual Property, the economic crisis 
has "detonated an explosion" in the production and sale 
of pirated products in Mexico.  De Hoyos says that in 
Nuevo Leon, music CDs, movie DVDs and computer software 
are the most commonly pirated products, but that he is 
very concerned about local counterfeiters' continued 
expansion into footwear, clothes and medicine.  He noted 
a strong correlation between the increase in piracy in 
Nuevo Leon and local unemployment.  Many of the region's 
unemployed have turned to counterfeiting as a cheap 
alternative to searching for a legitimate job since it 
requires little investment and offers an easy way to take 
advantage of the increased demand for cheaper goods as 
people cut back on consumer spending.  (Monterrey) 
 
 
--------------------------------- 
TRANSPORTATION AND INFRASTRUCTURE 
--------------------------------- 
 
¶9.  (U) SCT: SCALED BACK PUNTA COLONET STILL ALIVE:  One 
year since the downturn hit, the Secretariat of 
Communications and Transportation (SCT) continues a 
dogged effort to demonstrate the viability of the Punta 
Colonet project.  The megaport flagship of the National 
Infrastructure Plan (NIP) has become the symbol by which 
many measure NIP success.  SCT Secretary Molinar visited 
the site of the unrealized port on 8 October and his 
ministry published a long-promised redesign of the bid 
specifications on 19 October.  The specs do not set a 
date to award the winning bid.  According to SCT, 4 
consortiums are interested.  Additional bidders are 
welcome until 3 November.  The revised plan envisions a 
reduced initial phase to handle 1 million 20-foot 
container equivalent units (TEUs) per year, half the 
capacity of the original first phase.  Subsequent 
expansion to a maximum capacity of 10 million TEUs will 
take more than the 20 years first proposed.  President 
Calderon pushed in 2008 and early 2009 for the Punta 
Colonet rail link to the U.S. to cross the frontier at 
Santa Teresa, New Mexico.  SCT has backed away from this 
700-kilometer long tie-in to the U.S. rail network, now 
seen as too expensive.  The rail crossing point is 
dependent on the proposal of the winning consortium, with 
Yuma, Arizona the new favorite.  The worst case growth 
estimate for the trans-Pacific container trade in the 
initial Colonet plan was 3.9% annually; the figure for 
2009 is double-digits negative, and experts' prognoses 
for medium term recovery are mixed.  Container traffic at 
Los Angeles and Long Beach, which together handle 36% of 
the U.S. volume (and a share of whose trade Colonet hopes 
to capture), was off 16% and 21% year-on-year 
respectively in September.  (Mexico City) 
 
¶10.  (U) AIR PASSENGER TRAFFIC THROUGH CIUDAD JUAREZ 
FALLS BY 33 PERCENT:  Airline passenger traffic at the 
Juarez International Airport fell by 33 percent this year 
to September compared with the same period in 2008 (Jan- 
Sept 2008 - 723,412; Jan-Sept 2009 - 486,817), according 
to the Operadora Mexicana de Aeropuertos (OMA).  OMA 
attributes the drop in traffic through Juarez to the 
suspension of Aviacsa and Alma airline operations, which 
in 2008 accounted for almost half of the daily flights 
through the city's airport.  Other industry analysts 
argue that traffic volume fell largely because of lower 
demand, not supply constraints.  In this view, demand for 
air travel is down in Juarez due to the drug-related 
violence and the economic slowdown.  Mexico's Secretary 
of Transportation and Communication (SCT) reported that 
nationwide passenger traffic fell by 17 percent during 
this same period.  (Ciudad Juarez) 
---------------------- 
ENERGY AND ENVIRONMENT 
---------------------- 
 
¶11.  (U) BARK BEETLES THREATEN MONARCH BUTTERFLY RESERVE: 
Mexican officials are reporting an outbreak of bark 
beetles in the Monarch Butterfly Reserve, a World 
Heritage Site and one of the largest and most 
controversial protected areas in Mexico.  Scientists and 
Mexican authorities believe the infestation is a result 
of two years of severe drought.  Authorities have begun 
to fell selected trees as part of a "sanitation logging" 
program, which has divided environmentalists and local 
communities.  Neither the beetle nor the sanitation 
program will affect the number of butterflies that will 
arrive this year, but their survival throughout the 
winter will depend in part on the abundance of trees in 
the reserve.  (Mexico City) 
 
¶12.  (U) MEXICO-GUATEMALA INAUGURATE ELECTRICITY LINK 
DURING CALDERON STATE VISIT:  Mexico and Guatemala 
inaugurated a $50 million electricity link on October 26 
that will allow the Central American nation to buy power 
from Mexico.  The transmission line is 100 kilometers 
long and runs from Tapachula, on Mexico's border with 
Guatemala, to the city of Retalhuleu near Guatemala's 
Pacific coast.  Mexican President Calderon, in Guatemala 
for a State visit, hailed the project as "the first step 
towards making the interconnection, to which my 
government is committed, of the entire Project 
Mesoamerica, in other words, between Mexico and Colombia, 
by supplying electricity to every Central American 
nation".  Backers of the regional power grid say it will 
cut energy costs for Central America and make investments 
in new generating capacity more attractive.  The 
interconnection has a capacity of 400 megawatts.  For now 
Guatemala will purchase 120 megawatts of power from 
Mexico's Federal Electricity Commission (CFE) which has 
considerable surplus generating capacity after demand 
growth in Mexico earlier this decade fell far short of 
projections.  The system integration should be completed 
in mid-2010 but significant regulatory issues need to be 
resolved before the network will attract major new 
investments.  Reports identifying key differences between 
national level regulatory regimes are being prepared and 
should be presented to key stakeholders by the end of the 
first quarter of 2010.  (Mexico City) 
 
FEELEY