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Cablegate: Mexico Economic Notes, July 14 - July 27

VZCZCXRO6349
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #4017/01 2112241
ZNR UUUUU ZZH
P 302241Z JUL 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 8200
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHMFIUU/CDR USSOUTHCOM MIAMI FL PRIORITY
RHMFIUU/CDR USNORTHCOM PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 MEXICO 004017

SIPDIS

SENSITIVE
SIPDIS

STATE FOR A/S SHANNON
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA
STATE FOR WHA GSPROW
STATE FOR EB/ESC MCMANUS AND IZZO
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GWORD
USDOC FOR ITS/TD/ENERGY DIVISION
TREASURY FOR IA (ALICE FAIBISHENKO)
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND ALOCKWOOD
STATE PASS TO USTR (EISSENSTAT/MELLE)
STATE PASS TO FEDERAL RESERVE (CARLOS ARTETA)
NSC FOR DAN FISK

E.O. 12958: N/A
TAGS: ECON ECPS EFIN ELAB MX PGOV PREL
SUBJECT: MEXICO ECONOMIC NOTES, JULY 14 - JULY 27

Summary
-------

1. (SBU) Senior Mexican officials told Commerce Assistant
Secretary Bohigian they wanted more participation from U.S.

SIPDIS
Cabinet level officials to push the prosperity agenda at the
upcoming North America SPP Summit. While the Confederation
of Mexican Workers (CTM) publicly announced its support for
President Calderon's fiscal reform initiative, other CTM
members do not support it. Pemex reported that Mexico has
less than seven years of oil production remaining at current
rates. The USG trained more than 50 Mexican officials in IPR
enforcement. Consumer price inflation rose 0.25% in the
first half of July.

Need More Ministerial Senior Participation
------------------------------------------

2. (SBU) Representatives from the Economy Secretariat used a
meeting with Commerce A/S David Bohigian to again express
their desire for the upcoming Leader's meeting in Canada to
be under the auspices of the Security and Prosperity
Partnership (SPP). Undersecretary for Trade, Beatriz
Leycegui, and Chief Advisor to the Minister of Economy
Alberto Ortega both said that the SPP is the proper forum for
the meeting and asked for U.S. support in making sure the SPP
agenda is advanced. They further said that the current
agenda is too focused on security without a proper balance of
prosperity issues. They requested that there be more
participation from Cabinet level officials to push the
prosperity agenda and requested Commerce Secretary
Guittierrez's participation as a complement to Economy
Secretary Sojo, who will be attending.

SIPDIS

CTM Supports Fiscal Reform, but members differ
--------------------------------------------- -

3. (SBU) Joaquin Gamboa Pascoe, the national leader for the
Confederation of Mexican Workers (CTM), the largest labor
federation in Mexico has publicly announced his
organization's support for President Calderon's fiscal reform
initiative. According to Gamboa, the reform is a necessary
measure and, in his view, does not negatively affect the
interests of Mexico's workers. In the same public statement
Gamboa indicated that he had met with Mexico's Treasury
Secretary, Agustin Carstens, to discuss the reform and

SIPDIS
received assurances from him that the proposed reform would
protect the current legal rights of workers. Gamboa's public
position on the GOM's fiscal reform initiative is at odds
with the private positions of some members of the CTM
National Executive Committee. One member of the Committee in
particular, who is also a federal deputy who will vote on the
initiative, is reportedly very much opposed to the reform.
At this point it is not clear whether the federal deputy has
changed his view, is going to quietly oppose his union's
national leader, or will follow Gamboa's orders in this
matter despite his own reservations on the issue.


Embassy Trains Mexican Customs Officials
----------------------------------------

4. (SBU) The Embassy, together with the Departments of
Justice and Homeland Security, and supported by the World
Customs Organization, held a five-day training course on
detecting and detaining imports of pirated and counterfeit
goods for more than 50 Mexican customs and law enforcement
officials at the Port of Veracruz July 23-27. See septel for
a detailed read-out.

Pemex: Only Seven Years of Oil Left

MEXICO 00004017 002 OF 002


-----------------------------------

5. (U) In an SEC filing, Pemex reported developed proven
oil reserves of 8.978 billion barrels and annual production
of 1.332 billion barrels implying that Mexico has less than
seven years of production remaining at current rates.
Previously, Pemex had reported 9.3 years of reserves
remaining at current production rates. A Pemex spokesman
noted that the SEC filing did not include 3.92 billion
barrels of reserves "under development," which would add an
additional 2.9 years to Pemex's remaining production.
Meanwhile Mexican private sector organizations called for
changes in the country's restrictive energy policy. The
Businessmen's Coordinating Council (CCE) called on the
government and congress to open hydrocarbon development to
the private sector, making it a "real platform for
development." The Mexican Businessman's Council proposed
changing Pemex's legal framework to permit the company access
to new technologies, financial resources, and specialized
personnel.

Inflation Up
------------

6. (U) Consumer price inflation rose 0.25% in the first half
of July, resulting in increased annual inflation rate of
4.08%. A Bank of Mexico (BOM) report said the prices of
dairy, tomatoes, and other food products rose and thus
resulted in overall higher consumer prices. Analysts believe
that the BOM will face continued pressure to raise interest
rates by a quarter percentage point to 7.5%. The BOM has
stated that it will resist the urge to hike interest rates,
as their predictions see inflation rates dropping below 4% by
mid-August. Core inflation rose 0.20% in the first half of
the month of July.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
GARZA

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