VZCZCXYZ0000
RR RUEHWEB

DE RUEHME #0630/01 0531552
ZNR UUUUU ZZH
R 221551Z FEB 10
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 0543
INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHME/AMEMBASSY MEXICO

UNCLAS MEXICO 000630 
 
SENSITIVE 
SIPDIS 
SIPDIS 
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 - February 19, 2010 
 
¶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: 
 
------------------------------- 
 
 
 
FINANCE MINISTRY REVISES GROWTH PROJECTION UPWARD - Mexico City 
 
 
 
NUEVO LEON, FOURTH HIGHEST TOTAL UNEMPLOYMENT - Monterrey 
 
 
 
SECURITY AFFECTING JOB CREATION - Monterrey 
 
 
 
NUEVO LEON EXPENDITURES EXCEED 2009 BUDGET - Monterrey 
 
 
 
FUNDS FOR PUBLIC SAFETY LEFT UNUSED - Monterrey 
 
 
 
 
 
TRADE AND INVESTMENT: 
 
-------------------------------- 
 
 
 
WIDOWS AT PASTA DE CONCHOS SUE GRUPO MEXICO IN ARIZONA - Mexico 
City 
 
 
 
FDI FLOWING INTO NUEVO LEON - Monterrey 
 
 
 
 
 
ENERGY AND ENVIRONMENT: 
 
------------------------------------ 
 
 
 
MEXICO TO STUDY REALIGNING TAX SYSTEM TO ENCOURAGE GREEN PURCHASES 
- Mexico City 
 
 
 
 
 
LABOR: 
 
--------- 
 
 
 
STAND-OFF IN CANANEA CONTINUES - Hermosillo 
 
------------------------------- 
 
ECONOMY AND FINANCE 
 
------------------------------- 
 
 
 
¶3.  (U) FINANCE MINISTRY REVISES GROWTH PROJECTION UPWARD:  The 
Finance Secretariat raised its 2010 GDP growth forecast to 3.9% 
from 3.0%, citing indications of recovery in domestic and 
international demand, after the Bank of Mexico (Banxico) -- which 
estimates that GDP contracted 6.8% last year -- last month 
increased its growth forecast for this year to 3.2-4.2%.  Deputy 
Finance Secretary Alejandro Werner earlier this month signalled 
that the growth forecast could be increased, depending on economic 
data.  Since then, the national statistics institute (INEGI) has 
reported that industrial production rose 1.6% year-on-year in 
December -- the first increase since April 2008 -- with 
manufacturing growing 4.3% year-on-year.  Automotive output in 
particular is driving the rebound -- helped by peso weakness during 
the recession -- rising 104.2% year-on-year in January, according 
to the Mexican Automotive Industry Association (AMIA).  The Economy 
Secretariat official who oversees the automotive sector, Ana Ruth 
Solano, recently stated that output in the sector could rise 20% 
during 2010 as a whole.  While growth may surpass the revised 
Finance Secretariat forecast and could exceed 4% as manufacturing 
drives demand recovery, the GOM is likely to seek to maintain 
international and domestic credibility by remaining relatively 
cautious in its outlook.  (Mexico City) 
 
 
 
¶4.  (U) NUEVO LEON, FOURTH HIGHEST TOTAL UNEMPLOYMENT:  According 
to the National Institute of Statistics and Geography (INEGI), the 
number of unemployed workers (145,547) seeking jobs in Nuevo Leon 
in the fourth quarter of 2009 was 64 percent higher than the same 
period in 2008.  The National Survey of Occupation and Employment 
(ENOE) noted that only Coahuila, Durango, and three other states 
rank higher than Nuevo Leon in rate of unemployment.  While Nuevo 
Leon is 6th highest in unemployment rate, it is the 4th highest in 
total number of unemployed job seekers, behind the State of Mexico, 
the Federal District, and Jalisco.  In 2008, Nuevo Leon gained a 
net total of 14,147 jobs (a number deeply affected by the 32,391 
jobs lost in December 2008).  In 2009, the state lost a net total 
of 25,396 jobs.  (Monterrey) 
 
 
 
¶5.  (U) SECURITY AFFECTING JOB CREATION:  Companies did not create 
between 40,000 and 50,000 potential jobs in Nuevo Leon in 2009 due 
to security concerns and now face the prospect of a loss of 70,000 
more in 2010 according to Marcelo Canales Clariond, president of 
the Mexican Employers Federation in Nuevo Leon (Coparmex).  He 
estimated that the cost of additional corporate security in Nuevo 
Leon has cost the nation 2-3 percent in GDP gains.  (Monterrey) 
 
 
 
¶6.  (U) NUEVO LEON EXPENDITURES EXCEED 2009 BUDGET:  Nuevo Leon 
exceeded its State Expenditures Budget for 2009 by US$631 million 
according to the Fourth Quarter Public Account of 2009.  The state 
government overshot its US$3.3 billion budget in 2009 in every 
expense category.  Public administration funds, which include 
government salary increases, were US$116 million (108 percent) over 
budget.  In contrast, public security funds were only allowed to 
spend US$1.2 million (1 percent) more than allocated despite the 
deteriorating security situation.  (Monterrey) 
 
 
 
¶7.  (U) FUNDS FOR PUBLIC SAFETY LEFT UNUSED:  The Nuevo Leon State 
Government was allotted US$20.5 million in federal funds in 2009 by 
the Contribution Fund for Public Safety (FASP) according to the 
 
National Public Security System, but only spent US$12.2 million. 
Similarly, the municipalities of Monterrey, San Nicolas, Apodaca, 
Escobedo, and Santa Catarina did not use any of the federal funds 
allotted in 2009 for public security, while Guadalupe used 0.22 
percent and San Pedro used 50 percent.  On February 11, in response 
to criticism, the mayors of the Monterrey metropolitan area blamed 
the federal and state governments for delaying the delivery of the 
Grants for Municipal Public Security (Subsemun) for 2009. 
(Monterrey) 
 
 
 
------------------------------- 
 
TRADE AND INVESTMENT 
 
------------------------------- 
 
 
 
¶8.  (U) WIDOWS AT PASTA DE CONCHOS SUE GRUPO MEXICO IN ARIZONA:  On 
February 19, three of the widows of 65 miners killed in a mine 
explosion at the Pasta de Conchos mine in 2006 have brought a 
lawsuit against Grupo Mexico and two of its wholly-owned 
subsidiaries in Phoenix, Arizona.  The explosion that collapsed the 
mine and trapped the workers occurred on February 19, 2006.  The 
miners' widows cited their failure to get the Mexican courts to 
take their case seriously for four years and also claimed to fear 
for their lives for their protest.  (Mexico City) 
 
 
 
¶9.  (U) FDI FLOWING INTO NUEVO LEON:  On February 10, the 
U.S.-based HEB supermarket chain announced a US$41.6 million 
investment in four new stores in San Pedro, Juarez, and Zuazua, 
Nuevo Leon.  Construction began on the first of four stores in 
December 2009.  Meanwhile on February 12, Othon Ruiz Montemayor, 
Nuevo Leon's Secretary of Economic Development, announced that 
Japan's NGK Insulators will continue in its plans to invest US$244 
million on a manufacturing plant for diesel particle filters in 
Monterrey in 2010.  The company purchased land and built a 
warehouse before construction was postponed in 2009 due to the 
economic crisis.  Work on the plant will continue in the 
second-half of 2010 and will ultimately create 650 jobs. 
(Monterrey) 
 
 
 
------------------------------------ 
 
ENERGY AND ENVIRONMENT 
 
------------------------------------ 
 
 
 
¶10.  (U) MEXICO TO STUDY REALIGNING TAX SYSTEM TO ENCOURAGE GREEN 
PURCHASES:  Green taxes, in conjunction with fiscal environmental 
reforms, can help reduce unemployment according to a study on green 
taxes done by the Public Finances Research Center of the lower 
house.  Finland, Sweden and Denmark, where the reduction of labor 
taxes and social security contributions helped with income 
redistribution of companies committed to the environment, and 
Brazil and Colombia where tax incentives have been created to 
support green energy use, can serve as models for Mexico during its 
green tax policy development phase.  In Mexico, such policy is just 
developing.  Currently Mexico's excise tax on gasoline (IEPS), tax 
on new vehicles (ISAN), and tax for owning a vehicle (Tenecia) are 
detrimental to environmental policy.  The Finance Secretariat 
announced that the government of France lent Mexico 185 million 
euros to support Mexico in its climate change efforts.  (Mexico 
City) 
 
 
 
-------- 
 
LABOR 
 
 
 
-------- 
 
 
 
¶11.  (U) STAND-OFF IN CANANEA CONTINUES:  Despite the Mexican 
court's February 11 ruling against striking miners in Cananea, an 
estimated 250 of the union's (National Mine and Metal Workers Union 
- SNTMMSRM) 1,200 members continue to occupy the site.  Grupo 
Mexico has offered severance pay to miners in order to end the 
stand-off and re-start operations at the mine, but until now only 
200 have accepted.  Local political support, specifically from PRI, 
PRD, and PT, for the miners appears to remain strong, and residents 
fear violence might result from any use of force to displace the 
miners.  The Sonora State Congress and Governor Padres have 
appealed to the Federal government to intervene but rule out the 
use of force to resolve the matter.  The ruling dissolved Section 
65 of the National Mine and Metalworkers Union that had been 
striking at Cananea for 31 months over health and safety concerns. 
The situation is complicated by the union's support for Napoleon 
Gomez Urrutia, in exile in Canada, avoiding arrest in Mexico on 
corruption charges.  Many believe the Mexican Workers Confederation 
(CTM) will replace the National Mine and Metalworkers Union.  As of 
February 18, the strikers have not been officially informed by 
Grupo Mexico of the dissolution of the contract.  (Hermosillo) 
FEELEY