Cablegate: Mexico Economic Weekly - November 6

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DE RUEHME #3186/01 3132256
ZNR UUUUU ZZH
R 092256Z NOV 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 8943
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 SECTION 01 OF 03 MEXICO 003186

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 - November 6

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:
--------------------

CONGRESS APPROVES MOST 2010 REVENUE LEGISLATION - Mexico City

TRADE AND INVESTMENT:
---------------------

FOREIGN DIRECT INVESTMENT PLUNGES 66% - Monterrey

STATE SEEKS PRIVATE INVESTMENT TO DRIVE SCHOOL CONSTRUCTION -
Monterrey

TIJUANA ATTRACTS NEW INVESTMENT IN THIRD QUARTER - Tijuana

CHIHUAHUA'S MINING SECTOR ATTRACTS CHINESE INVESTMENT - Ciudad
Juarez

HERMOSILLO FORD PLANT RECOVERED FROM AUTO CRISIS- Hermosillo

TRANSPORTATION AND INFRASTRUCTURE:
----------------------------------

UPDATED BORDER CONTINGENCY PLANS SIGNED BETWEEN SISTER CITIES
- Matamoros

AIRPORT OPERATOR CALLS FOR RELIEF ON TICKET PRICES - Monterrey

INFRASTRUCTURE DEVELOPMENT TOPS NUEVO LEON'S BUDGET PROPOSAL -
Monterrey

SCIENCE TECHNOLOGY AND HEALTH:
------------------------------

SEASONAL FLU RETURNS TO MEXICO - Mexico City

-------------------
ECONOMY AND FINANCE
-------------------

3. (U) CONGRESS APPROVES MOST 2010 REVENUE LEGISLATION:
Legislators watered down the original GOM revenue and tax
proposals (see reftel), eliminating some of the key elements
of the original package, but maintaining an increase in value
added taxes and income tax rates. Finance Minister Carstens
said the package will help revive the economy. While
President Calderon welcomed approval of the legislation, he
emphasized that that declining oil production left the country
with no fiscal leeway, and called for all political actors to
work together to boost growth and employment. It is unclear
whether what was approved will avoid a significant increase in
the medium-term fiscal deficit, and a public debt downgrade
from the main ratings agencies. With the economy expected to
contract by about 7% during 2009 (its worst performance since
the early 1930s), momentum for a downgrade may be unstoppable.
(Mexico City)

--------------------
TRADE AND INVESTMENT
---------------------

4. (U) FOREIGN DIRECT INVESTMENT PLUNGES 66%: Nuevo Leon's
Secretary for Economic Development Othon Ruiz Montemayor
stated on November 3rd that he expects 2009 will end with the
lowest amount of foreign direct investment in the state in
many years. Ruiz estimates that the state of Nuevo Leon will
finish the year with about US$500 million in foreign
investment, a 66% decrease from 2008. (Monterrey)

MEXICO 00003186 002 OF 003

5. (U) STATE SEEKS PRIVATE INVESTMENT TO DRIVE SCHOOL
CONSTRUCTION: Nuevo Leon's Education Secretary Jose Antonio
Gonzalez plans to use private capital to build 33 new schools
and renovate or expand 50 others during the current school
year. The projects are located in the state's 13 fastest-
growing areas. Of the predicted construction cost of about
US$41 million dollars, Gonzalez expects that US$30 million
will come from investment by private contractors, although the
exact financing mechanism has yet to be determined.
(Monterrey)

6. (U) TIJUANA ATTRACTS NEW INVESTMENT IN THIRD QUARTER:
Despite the continued gloomy global economic outlook, Tijuana
continues to attract foreign investment. Sixteen new
companies set up shop in the Tijuana area between July and
September 2009. Half of the companies are American, one from
Korea, one from New Zealand, and the rest from Europe. The
companies are in traditional industries for Tijuana:
manufacturing medical equipment, telecommunications, and
electronics. However, FDI for 2009 is still lower than 2008.
(Tijuana)

7. (U) CHIHUAHUA'S MINING SECTOR ATTRACTS CHINESE INVESTMENT:
Mainland China's Jinchuan Group, a mining company, plans to
invest USD 500 million in Chihuahua to produce copper, zinc,
and silver, according to the Director of Mining for
Chihuahua's Industrial Development Secretariat, Ignacio Vega
Vaca. In 2008, Jinchuan Group purchased mining concession
rights from Canada's Tyler Resources to extract resources from
the Bahuerachi mining project in southwestern Chihuahua.
Mining analysts purport the Bahuerachi mine includes Mexico's
largest undeveloped copper and zinc deposits. The Jinchuan
Group reportedly spent $25 million dollars on exploration of
the Bahuerachi project to determine the feasibility of mining
production. Vega Vaca announced the Jinchuan Group expects to
move forward with its investment plans by mid-2010. Chihuahua
is Mexico's leading producer of zinc and the second largest
producer of gold and silver. (Ciudad Juarez)

8. (U) HERMOSILLO FORD PLANT RECOVERED FROM AUTO CRISIS: The
Ford Stamping and Assembly Plant in Hermosillo returned to
full capacity in recent months, supplying over 1,000 vehicles
to the U.S. market daily. In January 2008, the plant closed
for one month due to high inventories in the U.S. and laid off
around 200 employees. The downturn was short-lived and plant
managers have rehired employees at previous levels. On
October 30, Consul General Breidenstine and staff from
Hermosillo toured the Ford plant and spoke at length with
management about operations. At the most efficient plant in
its car class, 2,500 workers assemble the Ford Fusion, Mercury
Milan, and Lincoln MKZ in three shifts around the clock. The
three vehicles are mid-sized sedans made from the same
platform, but vary in engine styles and accessories. The
parts are incorporated from the 18 integrated suppliers co-
located within the 35 acre manufacturing park. In 2008, Ford
invested USD $600 million to enable manufacturing of the
Fusion hybrid vehicle that now constitutes five percent of
sales. Ford expects to roll out significant changes to the
Fusion in 2013 and plant managers anticipate assembly line
investment again in 2011-2012. The Ford Fusion is
experiencing record sales in the U.S., up 23 percent from
2008. The Hermosillo plant has been in operation since 1986.
(Hermosillo)

---------------------------------
TRANSPORTATION AND INFRASTRUCTURE
---------------------------------

9. (U) UPDATED BORDER CONTINGENCY PLANS SIGNED BETWEEN SISTER
CITIES: An updated Sister Cities Contingency Plan has been
signed by nine border cities, the Mexican cities of Reynosa
and Rio Bravo and the Texas cities of McAllen, Mission,
Hidalgo, Edinburg, Pharr, Weslaco and Donna. This contingency
plan provides a mechanism for cooperation, preparedness, and
response to civil emergencies between sister cities. The
update to the plan was funded via a 2007 EPA Border 2012
grant. Brownsville and Matamoros will seek to update their
joint contingency plans in 2010. According to Cameron County
sources, the jurisdictions hope to host a "mega" exercise in
2010 to include all the cities. (Matamoros)

MEXICO 00003186 003 OF 003

10. (U) AIRPORT OPERATOR CALLS FOR RELIEF ON TICKET PRICES:
Salvador Alva Gomez, an independent director of the board of
Grupo Aeroportuario del Centro Norte (OMA) and the former
President of PepsiCo Latin America, blamed the reduction in
passenger volume at OMA's airports on high ticket prices. OMA
operates and manages thirteen airports in nine states in
central and northern Mexico, including the Monterrey
International Airport, where the organization is
headquartered. During September, the number of total
passengers using OMA's airports was 16.8% lower than
September, 2008. Alva notes that high ticket prices have been
a barrier to leisure travel and have discouraged first-time
passengers from flying. He also pointed out that low-cost
carrier Aviacsa's suspension of operations on July 6 and the
dissolution two other airlines, Alma and Aladia, have reduced
passenger levels at OMA's facilities. (Monterrey)

11. (U) INFRASTRUCTURE DEVELOPMENT TOPS NUEVO LEON'S BUDGET
PROPOSAL: Nuevo Leon's new governor, Rodrigo Medina,
announced on October 30 that in his first annual budget
request he plans to seek over US$520 million dollars for state
transportation projects. Within the transportation request,
US$75 million dollars would go to the logistics and a
multimodal transportation project known as Interpuerto, a
US$2.5 billion dollar facility to be located on 1,200 hectares
near Monterrey. Medina admitted that his budget would
increase the deficit, but argued that a focus on
infrastructure projects will create jobs and provide long-term
economic development opportunities for small and mid-sized
businesses. (Monterrey)

-----------------------------
SCIENCE TECHNOLOGY AND HEALTH
-----------------------------

12. (U) SEASONAL FLU RETURNS TO MEXICO: A significant number
of patients reporting flu-like symptoms in Mexico are now
testing positive for the seasonal flu rather than H1N1
influenza, according to experts at Mexico's National Institute
for Medical Science and Nutrition, while H1N1 cases may be
showing signs of decline in the general population. Mexico
does not yet have the H1N1 vaccine, but hopes to receive its
first delivery from French vaccine maker Sanofi-Aventis by the
end of 2009. Meanwhile, the Federal Commission for Protection
from Sanitary Risks (COFEPRIS) has extended the dates of
expiration on Tamiflu and Relenza, two common antiviral
H1N1treatments, from three years to five years, which will
increase the supply of the medicines available to gravely ill
patients. (Mexico City)

PASCUAL

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