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Cablegate: Mexico Economic Weekly - Jan 29, 2010

VZCZCXYZ0003
RR RUEHWEB

DE RUEHME #0308/01 0292057
ZNR UUUUU ZZH
R 292056Z JAN 10
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 0255
INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHME/AMEMBASSY MEXICO

UNCLAS MEXICO 000308

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 - Jan 29, 2010

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 TO MEXICO DOWN 15.7 PERCENT IN 2009 - Mexico City

LOSS OF 50,000 JOBS IN NUEVO LEON PREDICTED FOR 2010- Monterrey

WAGES FALL IN NUEVO LEON - Monterrey

TRADE AND INVESTMENT:

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

EXPERTS EXPECT CEMEX TO REPORT LOSSES - Monterrey

MEXICANS DOWNLOAD 50% OF ILLEGAL MUSIC IN LATIN AMERICA - Mexico
City

MAQUILA ORGANIZATION NAMES BAJA CALIFORNIA THIRD MOST COMPETITIVE
STATE IN MEXICO - Tijuana

XIGNUX INVESTS US$23 MILLION IN PIIT - Monterrey

TEXAS BORDER UNIVERSITY HOLDS BUSINESS FACILITATION SEMINAR IN
JANUARY, ANOTHER TO BE HELD IN MARCH NEAR MATAMOROS - Matamoros

NATIONAL COUNCIL OF THE MAQUILA INDUSTRY AND EXPORT MANUFACTURERS
(CNIMME) SWEARS IN FIRST FEMALE PRESIDENT - Matamoros

MATAMOROS EXPO 2010 TO BE HELD FEBRUARY 24-25 - Matamoros

FONAES OFFERING FUNDS TO SMALL BUSINESSES - Monterrey

TRANSPORTATION AND INFRASTRUCTURE:

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

MEXICO REJECTS OPEN SKIES - Mexico City

RAILROAD COMPANIES INVEST US$895 MILLION IN INFRASTRUCTURE -
Monterrey

ENERGY AND ENVIRONMENT:

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

BP SOLAR REACHES AGREEMENT TO ASSEMBLE SOLAR PANEL IN CHIHUAHUA -

Ciudad Juarez

WATER SHORTAGE WOES IN HERMOSILLO - Hermosillo

CONAGUA AND 80 COMPANIES INVEST IN SAVING WATER -Monterrey

CANADIAN POTASH CORP ANALYZE ZACATECAS RESERVOIR - Monterrey

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

ECONOMY AND FINANCE

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

3. (U) REMITTANCES TO MEXICO DOWN 15.7 PERCENT IN 2009:
Remittances from Mexicans living overseas totalled 21.28 billion
dollars last year, a 15.7% decline from the previous year, the Bank
of Mexico (BOM) reported yesterday. These are the country's
second-largest source of foreign exchange, after oil exports, and
represent nearly 27% of income for rural - and 19% for urban -
households. The recession in the U.S. has hit hard many Mexican
migrants working in volatile sectors such as construction and
manufacturing. Nonetheless, BOM Governor Agustin Carstens has
stated that remittances increased 1.3% month-on-month in December,
which may be an incipient sign of recovery. Remittances will
recover further, particularly towards the end of this year, though
volatility in sectors in which Mexicans are employed in the United
States, combined with a tougher approach to illegal migration, mean
this will be a slow and halting process. Lacklustre remittances
will contribute to continuing sluggish domestic demand, which will
act as a brake on Mexican economic recovery. (Mexico City)

4. (U) LOSS OF 50,000 JOBS IN NUEVO LEON PREDICTED FOR 2010:
Coparmex, the Mexican Employers' Association, estimates that Nuevo
Leon's private sector will lose 50,000 jobs in 2010 due to the lack
of public security. On January 21, the president of Coparmex,
Marcelo Canales Clariond, warned that unless measures are taken to
decrease the incidence of crime, industry will refrain from
investing in Nuevo Leon. (any sign of this happening yet? Have
firms failed to invest strictly on security grounds?) (Monterrey)

5. (U) WAGES FALL IN NUEVO LEON: Total income for workers of all
pay scales in Nuevo Leon fell 8.57 percent in real terms in 2009 as
a result of fewer jobs and lower wages. Salaries for low-income
workers increased 4.95 percent, while salaries for high-income
workers dropped 17.75 percent. Sergio Tapia, a private-industry
labor specialist noted that when companies restructure, higher paid
workers are often terminated to reduce personnel expenses.
(Monterrey)

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

TRADE AND INVESTMENT

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

6. (U) EXPERTS EXPECT CEMEX TO REPORT LOSSES: During the fourth
quarter of 2009, analysts predict Monterrey-based Cemex, the
world's third largest cement maker, will report a loss of USD 519
million for the October-to-December 2009 period, only its second
net loss in more than a decade. Analysts polled expect Cemex to
show a 21 percent fall in its total sales and 34 percent slide in
its earnings before interest, depreciation and amortization
(EBITDA). Cemex is struggling with slumping cement sales in its
key Mexican, U.S., and European markets as the global economic
downturn has stemmed construction activity. Included in the fourth
quarter 2009 figures will be a loss of USD 446 million resulting
from the sale of Cemex's Australian assets for less than their book
value. The loss is likely to be less than in the fourth quarter of
2008, when Cemex reported a USD 707 million loss, its first in at
least a decade. (Monterrey)

7. (U) MEXICANS DOWNLOAD 50% OF ILLEGAL MUSIC IN LATIN AMERICA:
IFPI reported that every year, Mexicans download approximately 4
billion illegal songs of the 7 billion songs downloaded illegally
in Latin America. Mexico leads the list because of internet
service providers' unwillingness to take responsibility for their
clients' violations. The music and entertainment industry has been
unable to convince the ISPs and the government to take similar
measures to those implemented in Europe. In France, for example,
internet services are suspended to clients that are found to have
illegally downloaded music. The Communications and Transportation
Secretariat has implemented a working group with the music industry
and ISPs to address this problem, but has made little progress
after more than a year. (Mexico City)

8. (U) MAQUILA ORGANIZATION NAMES BAJA CALIFORNIA THIRD MOST
COMPETITIVE STATE IN MEXICO: Monica Gonzalez Garcia, president of
the Consejo Nacional de la Industria Maquiladora de Exportacion,
cited Baja Govenor Osuna Millan as a positive factor in maintaining
the state's competitiveness in the eyes of foreign investors. In
the state's largest city, Tijuana, the net balance of industrial
space being used was negative in the last two quarters of 2008 and
the first two quarters of 2009, but began a positive trend in the
third quarter of last year. Post's business sector contacts
indicate they believe foreign investment is on the increase so far
in 2010. While Asian investment is taking a larger role, U.S. and
Mexican investors still dominate. (Tijuana)

9. (U) XIGNUX INVESTS US$23 MILLION IN PIIT: On January 21,
Xignux, a Monterrey-based industrial conglomerate, announced plans
to invest USD 23 million in the next two years in the Technological
Investigation and Innovation Park (PIIT) at Monterrey Tec. The
conglomerate will open three development centers - one each for
cables, transformers, and food. The centers will employ 180 people
and construction should begin in late-February. (Monterrey)


10. (U) TEXAS BORDER UNIVERSITY HOLDS BUSINESS FACILITATION
SEMINARS: The International Trade Center of the University of
Texas at Brownsville and Texas Southmost College (UTB/TSC) held a
business facilitation seminar: "How to do Business in the U.S. and
Mexico" on January 21st. More than 100 people and 60 companies
attended the event. The Consul General opened the conference along
with the Mexican Consul of Brownsville, Texas, and Dr. Abraham
Greenspan, Program Director of the International Trade Center.
Seminar topics included how to establish a business in the U.S. or
Mexico, legal issues in both countries, and business opportunities
in the region. The Matamoros Consulate General also offered
presentations on business visas and commercial services on behalf
of the U.S. Commercial Service. The Small Business Development
Center at the University of Texas, Pan American plans to have a
similar event at their facilities in Edinburg, Texas on March
11-12, 2010. (Matamoros)

11. (U) NATIONAL COUNCIL OF THE MAQUILA INDUSTRY AND EXPORT
MANUFACTURERS (CNIMME) SWEARS IN FIRST FEMALE PRESIDENT: This
month, Monica Gonzalez Greer became the first female president of
the National Council of the Maquila Industry and Export
Manufacturers in Mexico (CNIMME). Gonzales is the operations
director of Porta-Systems, a telecommunications firm located in
Matamoros. She is also a past president of the Matamoros
Maquiladora Association. In local news reports, Gonzales stressed
increasing the competitiveness of Mexican maquilas as her goal.
CNIMME represents 1,200 member corporations and about 1.3 million
employees throughout Mexico. (Matamoros)

12. (U) MATAMOROS EXPO 2010 TO BE HELD FEBRUARY 24-25: The
Matamoros Maquila Association will hold their annual suppliers expo
February 24-25, 2010, in Matamoros, Mexico. Anticipated attendees
include purchasing representatives, engineers, plant managers and
key decision makers from more than 100 plants located in Matamoros
and the state of Tamaulipas. Some of the companies seeking
suppliers and schedule to attend include: Delphi, HIlti, Tyco
Electronics, TRW automotive, Kidde, PEMEX, and Black & Decker.
More information can be found at: http://expoproveedores2010.com/,
or contact Matamoros EconOff (palazzoloaj@state.gov). (Matamoros)

13. (U) FONAES OFFERING FUNDS TO SMALL BUSINESSES: On January 19,
the National Support Fund for Social Enterprises (Fonaes),
announced plans to offer financing up to USD 77,000 to
entrepreneurs with limited resources. Fonaes signed an agreement
with the Monterrey city government to help channel support for
business incubator programs to encourage job and new business
creation as a means to improve economic conditions. The smallest
grants are for individuals in the amount of USD 3,860 while the
largest grants are for social enterprises or cooperatives up to USD
77,000. Fonaes will also provide business training to grant
recipients. (Monterrey)

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

TRANSPORTATION AND INFRASTRUCTURE

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

14. (U) MEXICO REJECTS OPEN SKIES: The Communications and
Transportation Secretariat (SCT) maintains its position of
rejecting open skies, despite the fact that the governors of
Nayarit, Quintana Roo and Guanajuato believe it would greatly
benefit tourism. Gilberto Lopez Meyer, Director of Airports and
Auxiliary Services (ASA), said that an open skies policy would hurt
national airlines. Currently, only three U.S. airlines are allowed
to operate in Mexico and vice-versa. Labor Secretary Javier Lozano
defended SCT's position by saying that Mexico should first
strengthen competition domestically. He emphasized that Mexico
should continue to sign bilateral agreements with other countries

based on reciprocity. (Mexico City)

15. (U) RAILROAD COMPANIES INVEST US$895 MILLION IN
INFRASTRUCTURE: At the 2010 Expo-Rail conference, held in
Monterrey on January 25, railroad industry representatives
discussed strategies for increasing shipment volumes by 10 percent
in 2010, methods for protecting shipments, and ways to invigorate
stalled suburban train projects that were suspended in 2007 due to
lack of government funding. The federal government will invest USD
466 million in infrastructure projects while the railroad
companies, including Ferromex, Ferrosur, Kansas City Southern
Mexico, Ferrovalle, Ferroistmo, and Metrorrey, agreed to invest USD
429 million. Monterrey-based Metrorrey will invest USD 116.6
million. (Monterrey)

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

ENERGY AND ENVIRONMENT

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

16. (U) BP SOLAR REACHES AGREEMENT TO ASSEMBLE SOLAR PANEL IN
CHIHUAHUA: BP Solar, a unit of oil company British Petroleum,
announced an agreement with Jabil Circuit, Inc. on January 26 to
assemble solar panels for its North American market in Jabil's
Chihuahua City plant. The agreement calls for Jabil to produce 45
megawatt (MW) panels. "Mexico is strategic in improving module
time-to-market for our North American customers, and we expect
Jabil will become a cornerstone of our fulfillment strategy," said
CEO of BP Solar, Reyad Fezzani. Production will begin in the
second quarter of this year. Jabil's partnership with BP Solar
follows its June 2009 agreement with SunPower, a solar panel
manufacturer, to assemble solar modules in Chihuahua City.
Combined, these investments are expected to create more than 1,000
jobs, according to Jabil's vice president of strategic development.
(Ciudad Juarez)

17. (U) WATER SHORTAGE WOES IN HERMOSILLO: Due to an extended
period of lower-than-average rainfall in Hermosillo, the local
reservoir responsible for one-quarter of the municipality's water
is closed and underground aquifers providing the other
three-quarters are being rapidly depleted. To prevent a more
serious crisis during the dry spring and early summer months, the
PAN municipal government has implemented water rationing, with only
8 hours of public access to water each day. While local residents
complain of low water pressure, poor water quality and far less
than 8 hours of service, manufacturers report a cut back in
production due to short water supplies. Governor Guillermo Padres
(PAN) is expected to present a long term water resources plan by no
later than March. Two rumored solutions are the construction of an
aqueduct from eastern Sonora's El Novillo reservoir and/or a
desalination plant on the coast of the Sea of Cortez. While
financially more feasible, the El Novillo project faces strong
opposition from agricultural and tribal interests that control
water rights in that area. Until local governments come up with a
comprehensive solution and secure financing, water rationing,
conservation measures, government subsidies for water tanks and
repair of existing infrastructure will likely continue.
(Hermosillo)

18. (U) CONAGUA AND 80 COMPANIES INVEST IN SAVING WATER: On
January 21, the National Commission of Water (Conagua) and 80
companies, including Monterrey-based firms such as Cemex, Femsa,
and Lamosa, signed on to a USD 78 million initiative aimed at
saving and efficiently using water. The companies plan to
implement a program that will conserve water in their facilities
and in the homes of 600,000 of their direct employees (which will
indirectly impact an estimated 2.4 million people). The companies
will replace bathroom fixtures, showers, and high water consumption

valves for water-saving accessories and mechanisms available on the
market. (Monterrey)

19. (U) CANADIAN POTASH CORP ANALYZE ZACATECAS RESERVOIR: On
January 20, the world's largest potassium company, Potash Corp, a
Canadian potash, nitrogen, and phosphate producer, visited the a
large lithium and potassium reservoir in Zacatecas to analyze the
potential for investment in the newly discovered reservoir. If the
company decides to proceed, initial investments to jump-start the
project would be around USD 500 million. A production plant for
the project envisioned for San Luis Potosi would generate between
2,000-3,000 jobs. Industry watchers expect demand for lithium, a
key battery component, to increase as automobile companies gear up
to produce more electric "green" automobiles worldwide. (Monterrey)
FEELEY

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