Cablegate: San Diego/Baja Mission Advocates for Border Development

DE RUEHME #1215/01 1141750
R 231750Z APR 08




TREASURY FOR IA (Rachel Jarpe)

E.O. 12958: N/A



Introduction and Summary

1. (U) The San Diego/Baja California Mission to Mexico, sponsored by
the Mexico Business Center and the San Diego Regional Chamber of
Commerce, met Mexican government officials and analysts during their
third annual visit, including Mexican President Calderon; Economy
Secretary Eduardo Sojo Guillermo Ortiz, Mexican Central Bank

Governor; Luz Maria de la Mora, Undersecretary for International
Economic Relations at the Secretariat of Foreign Relations; Humberto
Trevino, Undersecretary of Transportation at the Secretariat of
Communications and Transportation(SCT).

2. (SBU) Mission members pressed Mexican officials to support a
proposed cross border terminal at Tijuana International airport and
to improve port and rail infrastructure to increase cargo transit
capabilities in the region. They discussed health tourism promotion
and the possibility of Medicare acceptance in Mexico. The
delegation suggested the GOM work to increase efficiencies and
decrease wait times at the San Diego/Tijuana area border crossings.
Bank of Mexico Governor Ortiz told the group Mexico would weather a
U.S. economic slowdown better than it had during the 2001 downturn.
The mission was receptive to the advice and comments by Mexican
officials. End Introduction and Summary.

Tijuana Cross Border Terminal

3. (U) In every meeting with Mexican officials the delegation
lobbied for constructing a cross border terminal to serve Tijuana
International Airport. They argued that San Diego International
Airport cannot keep pace with demand while Tijuana airport is
becoming a significant transit hub featuring a flight to Tokyo and
later this year to Shanghai. They noted that the concept of cross
border terminals exists at the Geneva International Airport on the
border between France and Switzerland.

3. (U) Delegation member Christian Checa Levien, Chairman of the
Mexican Airport Control Board and Baja California mission delegate,
announced that his group, along with other investors, had acquired
land on the Mexican side of the border to prepare for the building
of the cross border terminal. In meetings with SCT, he suggested to
members of the San Diego group that U.S. shareholders do the same on
their side of the border as land is at a premium and could be
unavailable when construction time arrives, increasing the cost for
the project.

4. (U) In the meeting with Mexican and U.S. customs officials, the
group presented the project and asked whether or not it was
feasible. Fernandez Wilburn, International Affairs Administrator
for Mexican Customs (Aduanas), said that Aduanas would be willing to
review any proposal for a cross border terminal and would decide,
jointly with CBP, the feasibility and requirements for such a
facility. Embassy Mexico's Deputy CBP Attache agreed that CBP would
be willing to consider any proposal presented.

5. (U) Newly appointed SCT Undersecretary for Transportation,
Humberto Trevino, said he supported a cross border terminal and
pressed the group for a development timeline. When asked by the
customs officials about details of the terminal, such as whether it
would be a full service terminal or only a passenger bridge and
whether it would be funded with public or private sources, San Diego
members of the delegation explained that they did not have details
yet but were willing to work with the two governments to find the
easiest, most efficient plan. They said that they could present a
draft proposal by April 18 for review by both federal governments.
As of COB April 18, the proposal had not yet been received.

6. (SBU) Comment: The Tijuana Cross Border Terminal appears to be in
the early planning stage. In order to move forward with this
project, the backers from both sides of the border will have to
better organize and present detailed proposals to both federal
governments. That being said, as Tijuana International continues to
increase routes (specifically trans-Pacific) while San Diego reaches
saturation, expect the Cross Border Terminal to be a recurring
talking point with stakeholders from the region. End Comment.

Punta Colonet/Improving Ensenada Rail Corridor
--------------------------------------------- -

7. (U) The delegation also raised increasing rail traffic
capabilities and interconnectivity in the region. U/S Trevino noted
that the Punta Colonet intermodal project was going forward. The

MEXICO 00001215 002 OF 003

Punta Colonet project is a joint plan between the Mexican federal
government and the government of the state of Baja California to
build an intermodal port to accommodate the ever-increasing trade in
transit from Asia to the United States. Plans consist of a shipping
port to be built in Punta Colonet, 50 miles south of Ensenada,
Mexico with a rail connection leading from the port to the U.S. and
linking to existing U.S. rail routes. The project has been
estimated to cost anywhere from USD 4 and 9 billion and is included
in President Calderon's National Infrastructure Plan. U/S Trevino
said that he expected the project to be tendered and licensed in
September. He also said that the winning concessionaire would
decide the crossing's location and complete the presidential permit
process with support from SCT.

8. (U) Representatives of the region's cross border railway company
explained to Trevino that Punta Colonet was a long-term project that
will not likely be completed until 2018. They suggested that there
were ways to make short- to mid-term improvements at the Ensenada
port to take advantage of Baja California's natural logistic
advantages. While they conceded that Punta Colonet will no doubt
improve upon Baja California's logistic benefits, they suggested the
GOM look to improving current infrastructure in the near term.

9. (SBU) Comment: Trevino and other officials from SCT are overly
optimistic about Punta Colonet. Their announcement that the tender
would go forward without a location selected for the border
crossing, let alone the necessary permits, suggests that they are
putting off some of the major problems inherent in the project until
after the government chooses a private sector partner. Comments by
the delegation reflect that the region's private sector feels, and
rightly so, that the GOM is neglecting quick and easy fixes in favor
of their pet project. End Comment.

Health Tourism and Medicare

10. (SBU) Delegation member Flavio Olivieri, representative of the
Tijuana Chamber of Commerce and the Tijuana Health Tourism Cluster,
brought up the booming health tourism industry, and asked for the
GOM's assistance in getting Mexican medical centers approved to
receive Medicare payments. As previously reported, (reftel) the
Ensenada corridor is home to an increasing number of retired baby
boomers. Olivieri explained, though did not provide data to
confirm, that more U.S. citizens are retiring to Mexico and cannot
afford to return to the U.S. for health care. He noted that,
because Mexican health care is cheaper and Mexico does not suffer
the nursing shortage the U.S. does, it would be beneficial to allow
U.S. citizens in Mexico to use Medicare. Though Olivieri brought up
the issue at numerous meetings, the common reaction from the GOM
officials was that they would look into the issue but could not
provide any guarantees. GOM interlocutors suggested that he would
be better served encouraging the U.S. citizen consumers of Medicare
to lobby the USG. Comment: Extending Medicare benefits to Mexico
remains a common request from Mexican officials, including local
developers and Finance Minister Carstens, who has asked the
Ambassador and U.S. Treasury officials to help get to authorize
payments for services in Mexico. End Comment.

Meeting with Secretariat of the Economy

11. (U) The Secretariat of Economy (Economia) sponsored a working
meeting headed by Chief of Staff, Alberto Ortega. In line with
previous discussions by the Joint Border Facilitation Working Group
(BFWG), of which Ortega is a key GOM member, he told the group that
they need to focus on short to medium term ideas. He announced that
the GOM had undertaken a study of bottlenecks in the border region
and would share a copy of the study at the Leader's Meeting in New
Orleans. He suggested that the San Diego/Baja California group
discuss and publish any of their own findings to be presented to the
two federal governments. He also said that the group needed clear
leadership and sub-groups and should try not to get bogged down in
"bureaucracy." Mexican Consul General in San Diego, Remedios Gomez
Arnau suggested that the border liaison mechanism could be used to
channel proposals so as better take advantage of current binational
communication methods and decrease the likelihood of any new
bureaucratic hurdles. Ortega also encouraged the group to feed
proposals to the BFWG. He explained that the group is the best way
to reach all pertinent agencies in the U.S. and Mexico. He further
explained the organization of the group and listed the participating

12. (U) Speaking on behalf of the joint mission, Cesar Alejandro
Monraz Sustaita, Federal Delegates of the Economy Secretariat for
the State of Baja California, said that the delegation had a list of

MEXICO 00001215 003 OF 003

17 issues to be resolved by either or both federal governments.
Some of the issues mentioned included the possibility of an enhanced
ID for use between California and Baja California, a push for land
acquisition on the U.S. side of the border to increase the capacity
of border crossings, and increased double stacking (two simultaneous
inspection booths per lane) at ports of entry under construction to
better handle traffic.

13. (SBU) Despite the BFWG visiting San Diego last year and meeting
with the San Diego Chamber of Commerce, the members of the mission
seemed unaware that a key purpose of the group was to engage the
private sector in finding solutions to decrease border waits and
increase crossing efficiencies. Now that they have been made aware,
members of the group were optimistic that they have interlocutors in
both federal governments who will be receptive to their ideas.

Mexican Economy and U.S. Recession

14. (U) While the visit focused on advocating for border
improvements, the mission also had an opportunity to meet with both
Guillermo Ortiz, Governor of the Bank of Mexico and Juan Pedro
Trevino, Chief Economist at HSBC Mexico. Trevino predicts the U.S.
will experience a recession through 2009. As a result, he said that
Mexico's growth will decrease in 2008 further slow in 2009, though
he did not predict a Mexican recession. He expects inflation in
Mexico to be above 3% until 2009 as well. He cited various Mexican
strategies for improving economic performance as a reason for the
optimistic outlook, namely a 10% increase in real budget spending
over 2007, the National Infrastructure Fund, and USD 7.2 billion
worth of programs to support the economy. He said that, ultimately,
six issues will affect the Mexican economy in the near term:

- The size and length of the U.S. slowdown
- Less restrictive monetary policy by the U.S. Federal Reserve
- The level and volatility of oil prices and production
- Supply side inflationary shocks
- More restrictive Mexican Central Bank monetary policy
- Delays in structural reforms

15. (U) Ortiz, for his part, would not give a prediction for the
Mexican economy, however he did express optimism. He said that this
recession would not be as bad for Mexico as the recession of 2001
because Mexico was less stable and the recession hit U.S.
manufacturing at the same time that competitor nation China joined
the WTO. This time, he said that Mexico has stronger indicators,
U.S. manufacturing is stable, and the weak dollar makes Mexican and
U.S. goods cheaper abroad. He expects inflation overall to remain
high through 2008 and 2009.

16. (U) Ortiz suggested that Bank of Mexico policy and U.S. Federal
Reserve policy during this time would likely differ because Mexico
is not currently experiencing the same crisis as the U.S. He said
that the U.S. is decreasing interest rates because of the housing
crisis, but the Bank of Mexico plans to keep rates steady or even
raise them. He reiterated that Mexico needs to be aware of
inflation and be prepared to do what is needed to stem it.

Conclusion and Comment

17. (SBU) The group met with a wide array of important decision
makers in the GOM and a key group of attendees managed to meet with
President Calderon. The tone of the GOM representatives across the
board was that they were receptive to issues raised by the private
sector, but required organized, detailed, written proposals in order
to advocate for them. The points presented to the Economy
Secretariat were a first step towards better organizing the San

Diego-Baja California area stakeholders and, if they incorporate the
advice given, they will likely become better advocates for their


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