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Cablegate: Mexico Economic Weekly - February 5, 2010

VZCZCXYZ0001
RR RUEHWEB

DE RUEHME #0428/01 0391449
ZNR UUUUU ZZH
R 081447Z FEB 10
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 0370
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 000428

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 - February 5, 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 FALL NEARLY 16% IN 2009 - Mexico City

LOWER OIL SHARES REDUCES FEDERAL FUNDING TO NUEVO LEON - Monterrey

TRADE AND INVESTMENT:

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

ALFA ANNOUNCES BEST QUARTER IN HISTORY - Monterrey

CEMEX REPORTS US$265 MILLION IN PROFITS FOR FOURTH QUARTER -
Monterrey

SMITHS MEDICAL DELAYS US$15 MILLION INVESTMENT, CONSIDERS
RELOCATION DUE TO CRIME - Monterrey

INDIA PROMOTES COMMERCIAL INTERACTION WITH MEXICO - Monterrey

MATAMOROS-BASED MEXICHEM FLUOR PURCHASES INEOS FLUOR HOLDINGS
LIMITED - Matamoros

TRANSPORTATION AND INFRASTRUCTURE:

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

TIJUANA TRIES (AGAIN) TO IMPLEMENT MASS TRANSIT - Tijuana

ENERGY AND ENVIRONMENT:

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

COPENHAGEN ACCORD UPDATE - Mexico City

CALDERON ON COPENHAGEN - Mexico City

LABOR:

---------

SME FILES CLAIM UNDER THE NAALC - Mexico City

NUEVO LEON SALARY PURCHASING POWER DROPS - Monterrey

UNEMPLOYMENT PERSISTS IN TIJUANA - Tijuana

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

ECONOMY AND FINANCE

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

3. (U) REMITTANCES FALL NEARLY 16% IN 2009: Remittances from the
U.S. to Mexico fell nearly 16% in 2009, disrupting the spending
patterns of recipients. Remittances are expected to regain their
2008 levels of around US$21 billion per year as the job market in
the U.S. recovers and Mexican migrant workers can once again find
work. (Mexico City)

4. (U) LOWER OIL SHARES REDUCES FEDERAL FUNDING TO NUEVO LEON:
According to the Secretary of Finance, Nuevo Leon state posted a
2009 budget deficit of US$100 million (lower than expected), which
includes accumulated debt from the previous administration. The
state received US$1.4 billion in federal funds for 2009 (a drop of
16.9 percent over 2008), less than the US$1.5 billion it had
budgeted. For 2010, Nuevo Leon predicts a budget deficit of US$194
million pursuant to its total budget of US$3.58 billion. Nuevo
Leon expects US$1.6 billion in federal funding for 2010.
(Monterrey)

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

TRADE AND INVESTMENT

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

5. (U) ALFA ANNOUNCES BEST QUARTER IN HISTORY: On January 27,
Monterrey-based conglomerate Alfa announced record 2009 fourth
quarter net earnings of US$132 million, ending the year with US$155
million in net income, in contrast to 2008's US$791 million loss.
Mario Paez, Alfa's Director of Planning and Finance, reported that
Alfa will invest US$380 million in 2010 in its own development:
US$100 million each in its petrochemical, automotive, and food
subsidiaries (Alpek, Nemak, and Sigma), and US$80 million in its
telecommunications subsidiary, Alestra. Alfa also recently
announced its intention to invest around US$62 million to develop
an oil and gas field it recently discovered in Texas along with

U.S. partner Pioneer Natural Resources. (Monterrey)

6. (U) CEMEX REPORTS US$265 MILLION IN PROFITS FOR FOURTH QUARTER:
On January 26, Monterrey-based Cemex SAB announced fourth quarter
profits of US$265 million, a rebound from a US$743 million loss in
the same period in 2008. Cemex said the profit came on gains from
foreign exchange positions and financial instruments, as well as
cutbacks in operating costs and spending. Indeed, consolidated net
sales declined 17 percent in the fourth quarter to US$3.4 billion
and were down 28 percent for the full year to US$14.5 billion. The
company reported that weak demand hit sales in the U.S. and Spanish
construction markets but pointed to signs of stabilization and said
it had modest increases in some areas like U.S. highway building.
Cemex sales in the fourth quarter in the United States decreased 39
percent compared to the same quarter in 2008. Fourth-quarter sales
in Spain were down 21 percent. The company's net debt declined by
US$2 billion in the fourth quarter (to US$15.1 billion).
(Monterrey)

7. (U) SMITHS MEDICAL DELAYS US$15 MILLION INVESTMENT, CONSIDERS
RELOCATION DUE TO CRIME: Lorenzo Casas, Director of Operations for
UK-based Smiths Medical, warned that his company may close its
800-employee plant in Apodaca and relocate to another state or a
different country due to their concerns for employee public safety.
The company had planned to invest US$15 million to expand its
existing plant by 50,000 square feet, but the worsening security
situation has delayed plans. Casas said employees have been
assaulted and their cars and computers have been stolen outside of
the plant's facilities. Moreover, he said, traffic police have
extorted and harassed employees. Smiths Medical has three other
plants in Tijuana and employs over 4,000 people in Mexico.
(Monterrey)

8. (U) INDIA PROMOTES COMMERCIAL INTERACTION WITH MEXICO: The
Indian community in Monterrey recently announced the creation of
the Northeast Chapter of the India-Mexico Chamber of Commerce,
Culture, Industry, Tourism, and Technology (CIMCITT). CIMCITT's
goal is to promote commercial relations between India and the
states of Coahuila, Nuevo Leon, and Tamaulipas as well as initiate
a census of the Indian population in northeast Mexico. Thus far,
400 Indians have been registered in the census. Pablo Longoria
Trevino, Executive Chairman of CIMCITT, stated that trade between
the two countries in 2009 totaled around US$3 billion and predicted
that figure to rise to US$5 billion in 2010. Nuevo Leon has
attracted investment from Indian companies such as Saskens,
Aricent, Infosys, and Wipro. (Monterrey)

9. (U) MATAMOROS-BASED MEXICHEM FLUOR PURCHASES INEOS FLUOR
HOLDINGS LIMITED: Mexichem Fluor is one of the world's largest
producers of hydrofluoric acid (HF), a key ingredient in
refrigerants and essential to the production of aluminum,
high-octane gasoline, nuclear fuels, electronic circuitry cards,
Teflon, and other items. A company contact confirmed press reports
that Mexichem Fluor has purchased INEOS Fluor Holdings Limited, a
U.K.-based manufacturer and supplier of fluorinated chemicals and
feedstocks with plants in the U.K., Louisiana, and Japan.
According to media reports, the deal is valued at US$350 million
and should close in March 2010. With the purchase of INEOS,
Mexichem Fluor will become an integrated, global producer of
specialty fluorochemicals and forecasts annual sales revenues of
more than US$500 million. Mexichem Fluor - Matamoros has an
installed capacity of 208 million pounds of HF a year and exports
98 percent of its production to the U.S. (Matamoros)

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

TRANSPORTATION AND INFRASTRUCTURE

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

10. (U) TIJUANA TRIES (AGAIN) TO IMPLEMENT MASS TRANSIT: In a
forthright presentation to the Committee on Binational Regional
Opportunities, Jorge Gutierrez, of Tijuana's planning agency,
explained the poor state of public transit in the city, resulting
from monopolistic concessionaires who control bus and taxi lines in
the city. Concessions are often granted due to political
considerations, and routes do not make sense for commuters. This
feeds the city's traffic problems because residents opt to buy used
cars (usually imported illegally from the U.S.) instead of using
the city's expensive and inconvenient public transit. Gutierrez
explained the city has tried on four previous occasions to
implement light rail or other forms of transportation, but failed,
making it difficult for the current municipal administration to get
federal funds for its plans to construct Brazilian-style VRT buses
in the city. The city has been more successful implementing a
"white-topping" pavement program, an improvement over asphalt
streets which are quickly destroyed in rains due to the city's lack
of adequate sewers. (Tijuana)

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

ENERGY AND ENVIRONMENT

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

11. (U) COPENHAGEN ACCORD UPDATE: Annex I countries, identified
as major economies under the Copenhagen Accord, were to commit to
implement quantified economy-wide emissions mitigation targets for
2020 in writing to the UNFCC Secretariat by January 31, 2010. The
non-Annex I countries were to implement mitigation actions and
submit their mitigation plans to the Secretariat by January 31,
2010. Mexico, as a non-Annex I country, inscribed its actions in
Appendix II on January 31, 2010, aimed at reducing GHG emissions up
to 30% with respect to the business as usual scenario by 2020.
With the provision of adequate financial and technological support
from developed countries as part of the global agreement, non-Annex
I countries will act under the principle of common but
differentiated responsibilities. These responsibilities were
framed in Kyoto-like language indicating that Mexico sees its
commitments as being those of a developing country and dependent
upon provision of assistance from the developed countries. As of
February 2, 87 countries (including the EU 27 and the United
States) have inscribed or associated with the Accord. (Mexico
City)

12. (U) CALDERON ON COPENHAGEN: During his participation in the
World Economic Forum in Davos last week, Mexican President Felipe
Calderon urged governments and companies to set targets to cut
their GHG emissions, looking forward to a successful outcome at
COP-16 in Cancun, Mexico. On February 2, President Calderon was
the keynote speaker at the UN University in Tokyo, where he pointed
out the importance of the Copenhagen Accord and all countries'
responsibility to adopt measures to face climate change. He noted
the historically enormous responsibility of developed countries and
the need to strengthen actions of developing countries with
technology and financing. (Mexico City)

--------

LABOR

--------

13. (U) SME FILES CLAIM UNDER THE NAALC: Members of the Sindicato
Mexicano de Electricistas (SME) traveled to Washington, DC, to
present their claim against the GOM for the shutdown of the

electrical company, Luz y Fuerza del Centro (LFC) and the
subsequent dissolution of the union. The complaint was presented
at the Department of Labor, and the SME was accompanied by the
AFL-CIO and the ITUC. The SME submitted the claim on January 29
and coupled its actions in Washington, DC, with a large protest in
Mexico City. Mexican courts continue to rule against the SME's
active cases in Mexico. (Mexico City)

14. (U) NUEVO LEON SALARY PURCHASING POWER DROPS: In 2009, Nuevo
Leon wage earners had the third highest purchasing power loss in
the country (-6.5 percent) according to the Federal Secretariat of
Labor and Social Security. During the year, Nuevo Leon had the
lowest average upward adjustment in salaries and wages paid by
employers of all the Mexican states. The only workers who saw a
nominal wage increase were union workers; their salaries rose 4.7
percent but, in real terms, decreased 2.2 percent in light of
higher inflation. Monterrey posted a 4.87 percent increase, 36.4
percent higher than the national average increase of consumer
prices, and the third highest increase of the 46 Mexican cities
analyzed by Banxico. According to the Secretariat, some 250,000
workers in Nuevo Leon experienced contractual salary revisions.
(Monterrey)

15. (U) UNEMPLOYMENT PERSISTS IN TIJUANA: Despite continued flows
of FDI into the city, the global economic downturn means
unemployment is hovering at 9%, according to INEGI. Statewide
unemployment is around 7.6%, up from 2-3% just two years ago. Baja
California State Secretary for Economic Development Alejandro
Mugarray Lagarda blames an influx of unemployed workers from
California and central Mexico for the uptick in unemployed persons.
(Tijuana)
PASCUAL

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