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Cablegate: Calderon Names Economic Cabinet

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DE RUEHME #6570/01 3261406
ZNR UUUUU ZZH
P 221406Z NOV 06
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 4333
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
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RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 MEXICO 006570

SIPDIS

STATE PASS TO USTR FOR MELLE AND EIESSENSTAT
STATE FOR A/S SHANNON
STATE/INR/B
NSC DAN FISK
STATE FOR WHA/MEX, WHA/EPSC, EB/ESC
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND SLADISLAW
DOC FOR ITS/TD/ENERGY DIVISION
FEDERAL RESERVE (CARLOS ARTETA)

SENSITIVE, SIPDIS

E.O. 12958: N/A
TAGS: ECON ELAB PGOV PREL ETRD PINR MX
SUBJECT: CALDERON NAMES ECONOMIC CABINET

REF A. Mexico 6516

B. Mexico 6424
C. Mexico 6065
D. Monterrey 1361
E. Mexico 6413
E. Mexico 5810
G. Mexico 6542
H. Mexico 6067

-------
SUMMARY
-------
1. Mexican stocks jumped 1.6 percent on November 21 after
President Elect-Calderon announced his Economic Cabinet.
Many of the members were expected, having worked on the
transition team, and/or for the Fox Administration. The new
Secretary for Telecommunications and Transport Luis Tellez,

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however, was a member of the PRI who worked for past PRI
governments. The only somewhat surprising choice is
Secretary of Energy Georgina Kessel Q but she served as

SIPDIS
head of the Mexican Federal Regulatory Commission on
Energy. Together, the new cabinet represents a consistent
message that Calderon intends to continue the policies that
have led to Mexico's macro-economic success and stability.
The cabinet includes some U.S.-educated members, including
former Fulbrighter (Kessel) and at least one participant in
a U.S. Embassy International Visitor Program (Tourism
Minister Elizondo). Since being officially named winner of
the Presidential election in September 2006, Calderon has
consistently called for economic reforms to create jobs by
promoting public and private investment in infrastructure
and undertaking fiscal, labor, energy, education and other
economic reforms to improve Mexico's competitiveness (REFS
A-D). The key for the new cabinet will be to move beyond
rhetoric and actually implement reform. This would require
tackling the monopolies, oligopolies and other special
interests that have blocked reform in the past (REF E).
Specific challenges facing each Minister are described
below. END SUMMARY

2. On November 20, President-elect Calderon announced his
Economic Cabinet:
Secretary of Finance, Agustin Carstens

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Secretary of Energy, Georgina Kessel

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Secretary of Economy, Eduardo Sojo Garza Aldape

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Secretary of Communications and Transport, Luis Tellez

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Kuenzler
Secretary of Labor, Javier Lozano Alarcon

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Secretary of Tourism, Rodolfo Elizondo

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--------------------------------------
Agustin Carstens, Secretary of Finance
--------------------------------------

3. (SBU) Agustin Carstens' expected appointment as
Secretary of Finance (Hacienda) will undoubtedly be well-

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received in the financial community, as he is known to be a
solid economist and a skillful negotiator. Carstens, who
was the head of Calderon's economic transition team, has
already begun work on his initial tasks of developing the
new government's economic program and the 2007 federal
budget. When announcing Carstens' appointment to his
transition team in October, Calderon noted that Carstens
was charged with designing an economic program that would
maintain macroeconomic stability and strengthen public
finances in order to improve Mexico's competitiveness and
generate jobs. In accepting his appointment, Carstens
pledged to work to boost employment and combat poverty.
Carstens had earlier been quoted saying that in order to
achieve faster growth and poverty reduction, successful
integration needs to be accompanied by prudent
macroeconomic policies and a deepening of structural
reforms.

4. (U) Carstens was Deputy Managing Director at the IMF
from August 1, 2003 to October 16, 2006 and an Executive
Director at the IMF from 1999 to 2000. Prior to taking his
position as the Fund's Deputy Managing Director, Carstens

MEXICO 00006570 002 OF 003


was Mexico's Deputy Secretary of Finance. He also held
senior positions at the Bank of Mexico, including those of
head of operations and chief economist, and he was an
Alternate Governor for Mexico at the Inter-American
Development Bank and the World Bank. Born in 1958, Mr.
Carstens received his BA in Economics from the Autonomous
Technological Institute of Mexico (ITAM) in 1982, and his
MA and Ph.D. in Economics from the University of Chicago in
1983 and 1985, respectively. Mr. Carstens has published
many articles in leading journals in Mexico and abroad. He
is fluent in English. (See REF H for additional information
on Carstens.)

------------------------------------
Georgina Kessel, Secretary of Energy
------------------------------------

5. (U) In the press conference announcing her appointment
as Mexico's first female Secretary of Energy, Georgina
Kessel Martinez underscored the importance of the petroleum
sector for public finances and said she world work for a
significant modernization of the sector, preserve the
national patrimony, and seek more autonomy for Pemex, the
national monopoly, as well as improve the firm's
operational capacity.

6. (SBU) Kessel's greatest challenge will be reversing
Mexico's declining oil production (REF E) and addressing
massive inefficiencies in Pemex. The Mexican constitution
forbids private or foreign investment in oil production.
Absent fiscal reform to reduce the amount of Pemex revenue
going to support the state budget, it is difficult to see
how the firm can obtain the funds it needs for required
investment to prevent significant production declines over
the next five to eight years. Finding policy options
(including possibly joint ventures and some foreign
investment) that will bring in needed investments will be a
key preoccupation.

7. (U) Kessel's most recent position, before being named
Energy Secretary was as director of the Mexican Mint (Casa
de Monedas). She also served as the first President of
Mexico's Energy Regulatory Commission, the CRE. She has
also served in the Mexican Secretariat of Finance/Treasury
(Hacienda) as an Assistant Secretary for Investment and
Privatization and at the Secretariat of Trade and
Industrial Promotion, a precursor to today's Secretariat of
the Economy.

8. (U) As an academic, Kessel taught for nine years at the
prestigious Instituto Tecnologico Autonomo de Mexico
(ITAM). Starting her career as an office secretary in the
travel industry, later she earned a bachelor's degree in
economics at ITAM and won a 1980 Fulbright scholarship to
Columbia University where she earned a Masters and PhD,
also in economics. The Fulbright panel considering her
candidacy singled her out for leadership potential.

9. (SBU) Kessel worked with leading Mexican economists
Enrique Davila and Santiago Levy to develop Mexico's "Plan
Puebla Panama" that supports development of Southern Mexico
and Central America. This could suggest that the Calderon
administration may retain the Fox team's Mesoamerican
Energy Integration Plan (PIEM), an outgrowth of the Plan
Puebla Panama. Earlier key Calderon staffers had suggested
that the incoming Calderon team would scrap the PIEM.

--------------------------------------------- --
Eduardo Sojo Garza Aldape, Secretary of Economy
--------------------------------------------- --

10. (U) In accepting his appointment as Secretary for the
Economy, Eduardo Sojo Garza Aldape promised to promote
foreign investment and strengthen international trade in
order to make Mexico one of the most attractive investment
destinations in the world. He also pledged to work with
the Mexican Congress and other sectors of the country.

MEXICO 00006570 003 OF 003


During the recent presidential campaign, Sojo worked in the
Calderon war room on economic policy issues. Since the
election, he has been Calderon's transition coordinator.
Sojo is well-regarded in Mexico and brings with him a
considerable amount of policy and academic experience in
economic affairs.

11. (SBU) Sojo has pointed with great pride to the
economic (and political) stability that the Fox
Administration is bequeathing to its successor but has
lamented its inability to gain congressional support for
the sort of structural reforms necessary for a higher
growth rate. As Secretary of Economy, Sojo will be
responsible for international trade, foreign investment,
industry and commerce, small and medium-sized enterprises,
and intellectual property rights. Key challenges that Sojo
will face include the implementation of Mexico's final and
most painful NAFTA obligations (including corn and beans).
Other challenges are strengthening the international
competitiveness of Mexican industry, and diversifying
Mexico's exports (at present, the U.S. takes approximately
85 percent of Mexico's exports).

12. (U) Sojo served as Coordinator of Public Policy in the
Office of the President during much of the Fox
Administration, and had worked on Fox's transition team in
2000. Prior to that, he had been Coordinator of then-
Governor Fox's Economic Cabinet for the state of
Guanajuato. Even earlier, he had been Technical Director
and Short-Term Statistics Director of INEGI (National
Geography and Statistics Institute). From 1979 to 1982 he
performed a variety of activities as an analyst in the
General Economic and Social Policy Bureau. He has been a
researcher and professor at the Monterrey Institute of
Technology and Advanced Studies, and has authored numerous
economic articles in various periodicals and reviews.
Together with Nobel Prize winner Lawrence Klein, he
published research on combined time series and econometric
modeling. Born January 9, 1956 in Leon, Guanujuato, Sojo
earned his Bachelors in Economics from the Monterrey
Institute of Technology and Advanced Studies, and a Masters

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