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Cablegate: Mexico Economic Weekly - January 9

VZCZCXRO7356
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #0106/01 0132204
ZNR UUUUU ZZH
R 132203Z JAN 10
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 0043
INFO ALL US CONSULATES IN MEXICO COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 06 MEXICO 000106

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 - January 9

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:

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

REMITTANCES FALL AS PRICES FOR BASIC GOODS RISE - Mexico City

DECEMBER RETAIL SALES UP IN REYNOSA IN SPITE OF RETAIL COMPETITION
FROM TEXAS - Matamoros

ECONOMY AND VIOLENCE CAUSE SHARP DECLINE IN EL PASO BORDER TRAFFIC;
SANTA TERESA BENEFITS - Ciudad Juarez

BANORTE BECOMES FOURTH LARGEST RETIREMENT FUND IN MEXICO -
Monterrey

TRADE AND INVESTMENT:

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

METALSA ACQUIRES ASSETS FROM U.S. CORPORATION - Monterrey

TRANSPORTATION AND INFRASTRUCTURE:

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

ANZALDUAS INTERNATIONAL BRIDGE UPDATE - Matamoros

LABOR:

---------

SME CLASHES WITH POLICE - Mexico City

MEXICO NOT REQUESTED TO REPORT ON CHILD AND FORCED LABOR - Mexico
City

MEXICO 00000106 002 OF 006


NUEVO LEON UNEMPLOYMENT REMAINS HIGH - Monterrey

ENERGY AND ENVIRONMENT:

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

RAISE IN GAS AND DIESEL PRICES PROVOKES LIMITED TRANSPORTATION
STRIKE - Mexico City

POLITICIANS AND BUSINESSMEN COMPLAIN ABOUT FUEL PRICE INCREASES -
Tijuana

PEMEX BEGINS BIOFUEL PRODUCTION AT CADEREYTA REFINERY - Monterrey

SCIENCE AND TECHNOLOGY:

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

I2T2 SIGNS AGREEMENT WITH QUEBEC BIOTECH CENTER - Monterrey

SCHNEIDER ELECTRIC OPENS INNOVATION AND TECHNOLOGY CENTER -
Monterrey

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

ECONOMY AND FINANCE

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

3. (U) REMITTANCES FALL AS PRICES FOR BASIC GOODS RISE: The
downward trend in remittances continues as November statistics show
a 14.4% drop in year-over-year measurements. Remittances, down on
average 13% since 2008, are currently at levels close to what they
were in 2005. Manuel Orozco, Director of the Remittances and
Development Program at the Inter-American Dialogue and one of the
original students of modern Latin American remittances, predicts
that remittances could recover by as much as 5% by the second
trimester of 2010 as the U.S. job market begins to recover and add
jobs.

Mexico's Minimum Wage Commission approved an increase in the
minimum wage of around 5% or 2 pesos, effective January 1.
Depending on the geographic area, Mexicans currently earn between
MX$57.46 pesos daily (US$4.45) and MX$54.47 (US$4.22). Mexican
newspapers announced in early January that prices for staple foods
and fuels are likely to rise at least in early 2010. Gasoline and
diesel fuel have already increased from 6.3 to 8.16 pesos per
liter, and tortillas are likely to follow, increasing in cost by
around 50 centavos. The price of items in the basic basket of
goods in Mexico City has increased by around 30% due to the
increased costs of gas and gasoline. An announcement about the
cost of bread, thus far stable, will be made in early January.

MEXICO 00000106 003 OF 006


Mexicans also face the increased Value-Added Tax (IVA) rate, up 1%
from 15% to 16% this year. (Mexico City)

4. (U) DECEMBER RETAIL SALES UP IN REYNOSA IN SPITE OF RETAIL
COMPETITION FROM TEXAS: Retailers had a strong, positive December
close due to strong sales December 22-24, according to Ad????n
Cisneros de la Rosa of the Camara Nacional de Comercio (CANACO) in
Reynosa. De la Rosa added Reynosa retail businesses are at a
disadvantage competing against retail in south Texas. He said
there is a lack of retail advertising that could capture some
Mexican shoppers who pass through Reynosa on their way to south
Texas. (Matamoros)

5. (U) ECONOMY AND VIOLENCE CAUSE SHARP DECLINE IN EL PASO BORDER
TRAFFIC; SANTA TERESA BENEFITS: Passenger vehicle and commercial
truck traffic at El Paso ports-of-entry fell by a combined 16
percent from 2008 to 2009, according to Customs and Border
Protection statistics. The number of commercial trucks entering
the El Paso sector fell from 834,435 in 2008 to 707,230 in 2009,
while 2.7 million fewer passenger vehicles crossed northbound
(15,972,615 - '09; 13,289,381 - '08). El Paso CBP spokesman Roger
Maier said the recession and concerns about safety in Juarez were
responsible for the decline. In contrast to this downward trend,
the Santa Teresa POE located ten miles west of Juarez was the only
border crossing in the El Paso Sector to experience an increase in
traffic, with passenger vehicle and cargo traffic both increasing
by 13 percent year-over-year (passenger vehicles: 424,797 - '09;
377,573 - '08; commercial trucks: 51,276 - '09; 45,499 - '08).
Assistant El Paso Port Director Isabel Mullens attributed the
increase to expanded hours at the Santa Teresa POE, improved
highway infrastructure south of the Santa Teresa POE, and the
opening of a major new manufacturing plant near the POE. (Ciudad
Juarez)

6. (U) BANORTE BECOMES FOURTH LARGEST RETIREMENT FUND IN MEXICO:
Banorte Financial Group, a Monterrey-based bank, bought out Afore
Argos, a pension fund manager, for US$46.2 million on December 21.
Banorte will take over Argos' 22,000 clients and become the fourth
largest retirement fund in Mexico. This comes after a June 10
acquisition of Ixe Afore, another pension fund with assets over
US$420 million. (Monterrey)

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

TRADE AND INVESTMENT

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

7. (U) METALSA ACQUIRES ASSETS FROM U.S. CORPORATION: Metalsa
(formerly Monterrey Metals Manufacturing), an automobile parts
manufacturer based in Apodaca, acquired the structural products
business of U.S.-based Dana Holding Corporation for US$ 150
million. This acquisition strengthens Metalsa's position as a
global supplier providing structural components to the light and
commercial vehicle markets. Under the terms of the agreement,
Metalsa, a subsidiary of Grupo Proeza, will assume control of 10
Dana manufacturing facilities that produce structural components
for chassis and body structures in light and commercial vehicles,
including accompanying administrative, technical and sales centers.
These facilities are located in Argentina, Australia, Brazil, the
U.S., and Venezuela. (Monterrey)

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

TRANSPORTATION AND INFRASTRUCTURE

MEXICO 00000106 004 OF 006


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

8. (U) ANZALDUAS INTERNATIONAL BRIDGE UPDATE: The ceremonial
opening of Anzalduas International Bridge is scheduled to take
place January 11th. Ambassador Kirk, U.S. Trade Representative and
Mexican President Calderon will inaugurate the bridge along with
officials from the Mexican state of Tamaulipas and Texas.
According to traffic reports, the bridge has averaged 2,400
southbound vehicles per day since opening December 15th. Local
U.S. and Mexican media reports have highlighted that the new
crossing is up to 30 minutes faster than the Pharr-Reynosa Bridge
for travelers coming north from Monterrey. On Dec 23rd Customs and
Border Patrol (CBP) recorded the first drug seizure of 123 pounds
of Marijuana. On December 30th, CBP officers arrested Isis Cristal
Sanchez-Hernandez on alien smuggling charges in the first alien
smuggling case recorded at Anzalduas. According to news reports,
Sanchez-Hernandez attempted to smuggle two Mexican citizen children
into the U.S. using fake birth certificates from Hidalgo and Starr
Counties in Texas. (Matamoros)

--------

LABOR

--------

9. (U) SME CLASHES WITH POLICE: On December 3, a violent
confrontation took place between ex-members of the defunct
Sindicato Mexicano de Electricistas (SME) and Comision Federal de
Electricidad (CFE) workers who replaced them. Federal police were
present in their function of protecting the electricity
distribution plants from disturbances like this, and they were able
to prevent the violence from escalating dramatically. According to
news sources, ex-members of the SME attempted to prevent CFE
workers from leaving the electricity plant. The police responded
in defense of the CFE workers, and the scuffle left six wounded.
Ex-SME members claimed that they were protecting their property
from privately hired workers (non-CFE) who were badly damaging
their goods. The SME continues to accuse the police of provoking
the confrontation. On the morning of January 6, the Day of the
Three Kings in Mexico, ex-SME workers carried three pi????atas shaped
like Labor Secretary Javier Lozano to the Lozano's house and broke
them open with a baseball bat.

Since late November the SME's cause has suffered serious legal
setbacks. The courts have ruled consistently that the GOM's
actions in shutting down Luz y Fuerza del Centro (LFC) were legal
and that, while unfortunate, it was legal to dismiss all the
workers. The SME has only one case outstanding at this point, and
it is likely to be decided against the workers. Around 63% of
former workers have accepted the severance package offered, many
under economic duress. (Mexico City)

10. (U) MEXICO NOT REQUESTED TO REPORT ON CHILD AND FORCED LABOR:
Mexico will not report to the Department of Labor (DOL) this year
on the Trade Development Act (TDA) or the Trafficking Victims
Protection Reauthorization Act (TVPRA) reports. Mexico is not on
DOL's Worst Forms of Child Labor list this year, excusing it from
the TDA report. DOL believes it has sufficient information from
previous reports and research to also exclude Mexico from the TVPRA
report, despite Mexico's appearance on DOL's September 2009 TVPRA
list of goods. The TVPRA report requires reporting only on
products not already listed on the TVPRA list of goods. (Mexico
City)

11. (U) NUEVO LEON UNEMPLOYMENT REMAINS HIGH: According to IMSS

MEXICO 00000106 005 OF 006


statistics, 45,823 people in Nuevo Leon were laid off in October
2009 and were unable to find new jobs by November. Overall, the
state registered 145,881 job losses in the first trimester of 2009,
149,580 in the second trimester, and 178,840 in the third
trimester. (Monterrey)

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

ENERGY AND ENVIRONMENT

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

12. (U) RAISE IN GAS AND DIESEL PRICES PROVOKES LIMITED
TRANSPORTATION STRIKE: Members of the National Confederation of
Retailers and Carriers of the Republic of Mexico (CNCTRM) blocked
highways in Hidalgo, Veracruz, and Puebla on December 4. They are
protesting the increase in prices of diesel from 6.3 ($0.49) to
8.16 ($0.63) pesos/ liter. The CNCTRM has called for a national
strike and has promised to announce it 24 hours in advance to
minimize problems for the GOM and for Mexicans. Two other
important transportation groups - the Mexican Alliance of
Organizations of Carriers (Amotac) and the National Association of
Private Carriers (ANTP), who between them control 90% of cargo
shipping in Mexico - have announced that they will not participate
in the CNCTRM strike. (Mexico City)

13. (U) POLITICIANS AND BUSINESSMEN COMPLAIN ABOUT FUEL PRICE
INCREASES: Rogelio Badillo Arcadia, president of the Baja
California chapter of the Camara Nacional de Autotransporte de
Carga (CANACAR) claims the eight-cent increase for magna and diesel
and nine-cent increase for premium fuels which went into effect in
Tijuana, Rosarito, and Tecate on January 1 will have a negative
impact on jobs and prices in the region, noting that 82% of
products in Mexico are transported by truck. Gas station owners in
Baja are particularly concerned that customers will look for
cheaper gas in California (NOTE: the opposite occurred when gas
prices spiked in the U.S. in 2008 and both U.S. and Mexican
truckers, unsurprisingly, chose to fill up on cheaper, subsidized
Mexican gas. However, stories that surfaced at the time of throngs
of Americans filling up in Baja were exaggerated). (Tijuana)

14. (U) PEMEX BEGINS BIOFUEL PRODUCTION AT CADEREYTA REFINERY: In
December 2009 PEMEX began production of biodiesel at the Cadereyta
refinery in Nuevo Leon. The president of the Federal Congress'
Energy Commission, Felipe de Jesus Cantu Rodriguez, stated that the
company plans to invest rigorously in the refinery in the coming
years to convert it into one of Mexico's most important fuel
sources. Cantu said that over the next 20 years, an investment in
the order of USD$20 billion would be necessary to increase the
efficiency of existing biofuel technology. The refinery currently
produces 8.7 million liters of biodiesel every year; managers hope
to increase this amount to 108 million liters per year during the
2011-2014 time-frame. (Monterrey)

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

SCIENCE AND TECHNOLOGY

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

15. (U) I2T2 SIGNS AGREEMENT WITH QUEBEC BIOTECH CENTER: Jaime
Parada, director general of the Institute of Innovation and
Transference of Technology (I2T2), announced on December 17 an
agreement between I2T2 and the Quebec Center of Biotech Innovation
(CQIB) to exchange advice, counseling, and business opportunities.
The two organizations have invested US$5 million in an effort to

MEXICO 00000106 006 OF 006


establish a biotechnology business incubator. The director general
explained that the Canadians would guide I2T2 to lessen the
learning curve, support scientific exchange of ideas, and
strengthen Canadian and Mexican relations. Meanwhile, I2T2
contemplated helping Quebec take advantage of venture capital
opportunities, thereby fostering entrepreneurship in the region.
CQIB has raised US$8 billion for venture capital investments and
launched the Nuevo Leon Fund for Innovation (Fonlin), which is in
the process of analyzing 200 projects, four of which have already
been approved for funding. (Monterrey)

16. (U) SCHNEIDER ELECTRIC OPENS INNOVATION AND TECHNOLOGY CENTER:
Schneider Electric, a French electric equipment company operating
in Mexico through its U.S. subsidiary, held an inauguration
ceremony for a new Center of Innovation and Technology (CIT) in
Monterrey. According to the company, the center was created at the
request of clients. The center will support clients in developing
methods for increasing processing productivity and finding
competitive advantages in their respective markets. AmCham
Monterrey also played a significant role in persuading Schneider to
expand its operations locally. (Monterrey)
PASCUAL

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