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Mexico: Mexico Economic Weekly - October 30

     
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Reference ID: 09MEXICO3120
Created: 2009-10-30 17:29
Released: 2011-08-30 01:44
Classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY
Origin: Embassy Mexico

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RR RUEHWEB

DE RUEHME #3120/01 3031729
ZNR UUUUU ZZH
R 301729Z OCT 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 8833
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 MEXICO 003120

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 - October 30

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

MEXICAN CONSUMERS SIZABLE PART OF MCALLEN, TEXAS RETAIL
BASE - Matamoros

FAINT LIGHT AT THE END OF THE TUNNEL AS SONORA
ANTICIPATES WEAK GROWTH IN 2010 - Hermosillo


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

EMBASSY SPONSORED IPR TRAINING PAYS OFF AS MEXICAN
CUSTOMS SEIZE COUNTERFEIT PRODUCTS - Mexico City

CEMEX PROFITS DROP SHARPLY - Monterrey

LOCAL TRANSPORTATION MANUFACTURER ENJOYS GROWTH DESPITE
CRISIS - Monterrey

ECONOMIC CRISIS IS A BOON TO LOCAL COUNTERFEITERS -
Monterrey


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

SCT: SCALED BACK PUNTA COLONET STILL ALIVE - Mexico City

AIR PASSENGER TRAFFIC THROUGH CIUDAD JUAREZ FALLS BY 33
PERCENT - Ciudad Juarez


ENERGY AND ENVIRONMENT:
-----------------------

BARK BEETLES THREATEN MONARCH BUTTERFLY RESERVE - Mexico
City

MEXICO-GUATEMALA INAUGURATE ELECTRICITY LINK DURING
CALDERON STATE VISIT - Mexico City


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

3. (U) MEXICAN CONSUMERS SIZABLE PART OF MCALLEN, TEXAS
RETAIL BASE: In a meeting with PO and EconOff October
29, 2009, Vice Presidents of the McAllen Chamber of
Commerce outlined the effect that Mexican retail tourism
has on their city. They described shoppers from
Monterrey as "power shoppers" who come to McAllen every
one and a half (1.5) months, spend an average of USD
$1,100 per person, and stay in the city for two nights.
Approximately 30% of the USD $1,100 is spent in services
(restaurants, hotels). They also noted a sizable group
of retail tourists who come from Mexico City,
approximately once every three months, and spend an
average of USD $3,000-$3,500 per person. The overall
impact of Mexican retail tourism in McAllen is impressive
- in a city where the average household income is USD
$55,000/year, McAllen has an average of USD $82,000/year
per household in retail sales. (Matamoros)

4. (U) FAINT LIGHT AT THE END OF THE TUNNEL AS SONORA
ANTICIPATES WEAK GROWTH IN 2010: Speaking at the
Manufacturing in Mexico Summit to more than 100 investors
and manufacturing managers, Dr. Deborah Riner, Chief
Economist for the U.S. Mexico Chamber of Commerce,
predicted weak economic growth in 2010 as demand for
manufactured goods in the U.S. is only expected to see
modest increases. The Offshore Group, one of Mexico's
largest maquila operators, held its 15th annual summit to
discuss the investment climate in Sonora, Mexico on
October 23. Fifty percent of the workforce, 7,200
workers, has been downsized since October 2007 at the
largest maquila operator, Maquilas Tetakawi, as orders
have diminished in relation to slowdowns in the
electronics and aviation industries. Operators were
encouraged by the predictions that the biggest fall in
demand is over and by expectations that the peso's
exchange rate volatility is abating. The state's new
governor, Guillermo Padres, spoke at the conference
signaling that the new state government would continue to
promote an investment-friendly environment for foreign
companies. Twenty new, potential manufactures from the
U.S., Canada, and Germany attended the conference. On a
related note, econoff met the plant manager for Radiall
USA, a maker of cable connectors and antennas. In 2008,
the company opened a plant in Ciudad Obregon, Sonora to
fill orders for Boeing's new 787 Dreamliner. The 500
person plant is operating at 25 percent capacity as
Boeing has delayed the launch of the new aircraft several
times over the last year. They anticipate increasing
production as orders increase mid-year 2010.
(Hermosillo)


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

5. (U) EMBASSY SPONSORED IPR TRAINING PAYS OFF AS
MEXICAN CUSTOMS SEIZE COUNTERFEIT PRODUCTS: The Servicio
de Administracion Tributaria published two press releases
late October reporting on separate seizures by Mexican
customs authorities of counterfeit goods at the ports of
Ensenada and Lazaro Cardenas on the Pacific shore of
Mexico. On September 29, customs authorities in Ensenada
seized 31,000 false decals for Barbie, Hello Kitty,
Mickey Mouse, and Sponge Bob products. On October 20,
customs authorities in Lazaro Cardenas seized three
containers containing roughly 60 tons of counterfeit
sporting goods and accessories bearing the fraudulent
marks of Louis Vuitton, Adidas, Tous, Puma, and NIKE,
among others. The customs authorities credited newly
implemented risk analysis and detection techniques.
These seizures follow a training program, coordinated by
the US Embassy, on detecting, detaining, and deterring
the importation of pirated and counterfeit goods for
Mexican customs and law enforcement officials in
Manzanillo from September 8-11. Customs agents from
Ensenada and Lazaro Cardenas were among the 59
participants. (Mexico City)

6. (U) CEMEX PROFITS DROP SHARPLY: Monterrey-based
CEMEX, the world's third largest cement producer,
announced that net income plunged almost 40 percent in
the third quarter due to a global drop in sales,
declining by 27 percent in Mexico and 38 percent in the
U.S., the company's largest market. While executive vice

president Hector Medina said he is optimistic about the
stability of future sales after successfully completing
the company's refinancing this quarter, he admitted that
CEMEX expects 2009 cement volume to decrease by 30
percent in the U.S., where his company is the country's
largest cement producer. (Monterrey)

7. (U) LOCAL TRANSPORTATION MANUFACTURER ENJOYS GROWTH
DESPITE CRISIS: TYTAL, a nine year old Nuevo Leon-based
manufacturer of aluminum products for the transportation
and storage of combustible liquids and flammable
materials, has enjoyed consistent growth despite the
economic crisis. In 2009, annual sales nearly doubled to
$35 million dollars, allowing the company to increase its
workforce by 76% to 255 employees and move into a new
8,500 square meter production facility. Luis Alberto
Arrasco, TYTAL's business manager, attributed the
company's success to increased demand from PEMEX's
production facilities in Veracruz and Tabasco and the
company's low production cost for aluminum tanks - 40%

below the international market average. TYTAL, Mexico's
first aluminum tank truck manufacturer, is the largest
supplier of 20,000 liter tanker trucks to PEMEX and has
sold 80 trucks to the company this year, doubling last
year's sales to the company. (Monterrey)

8. (U) ECONOMIC CRISIS IS A BOON TO LOCAL
COUNTERFEITERS: According to Gilberto de Hoyos Koloffon,
the regional President of the Mexican Association for the
Protection of Intellectual Property, the economic crisis
has "detonated an explosion" in the production and sale
of pirated products in Mexico. De Hoyos says that in
Nuevo Leon, music CDs, movie DVDs and computer software
are the most commonly pirated products, but that he is
very concerned about local counterfeiters' continued
expansion into footwear, clothes and medicine. He noted
a strong correlation between the increase in piracy in
Nuevo Leon and local unemployment. Many of the region's
unemployed have turned to counterfeiting as a cheap
alternative to searching for a legitimate job since it
requires little investment and offers an easy way to take
advantage of the increased demand for cheaper goods as
people cut back on consumer spending. (Monterrey)


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

9. (U) SCT: SCALED BACK PUNTA COLONET STILL ALIVE: One
year since the downturn hit, the Secretariat of
Communications and Transportation (SCT) continues a
dogged effort to demonstrate the viability of the Punta
Colonet project. The megaport flagship of the National
Infrastructure Plan (NIP) has become the symbol by which
many measure NIP success. SCT Secretary Molinar visited
the site of the unrealized port on 8 October and his
ministry published a long-promised redesign of the bid
specifications on 19 October. The specs do not set a
date to award the winning bid. According to SCT, 4
consortiums are interested. Additional bidders are
welcome until 3 November. The revised plan envisions a
reduced initial phase to handle 1 million 20-foot
container equivalent units (TEUs) per year, half the
capacity of the original first phase. Subsequent
expansion to a maximum capacity of 10 million TEUs will
take more than the 20 years first proposed. President
Calderon pushed in 2008 and early 2009 for the Punta
Colonet rail link to the U.S. to cross the frontier at
Santa Teresa, New Mexico. SCT has backed away from this
700-kilometer long tie-in to the U.S. rail network, now
seen as too expensive. The rail crossing point is
dependent on the proposal of the winning consortium, with
Yuma, Arizona the new favorite. The worst case growth
estimate for the trans-Pacific container trade in the
initial Colonet plan was 3.9% annually; the figure for
2009 is double-digits negative, and experts' prognoses
for medium term recovery are mixed. Container traffic at
Los Angeles and Long Beach, which together handle 36% of
the U.S. volume (and a share of whose trade Colonet hopes
to capture), was off 16% and 21% year-on-year
respectively in September. (Mexico City)

10. (U) AIR PASSENGER TRAFFIC THROUGH CIUDAD JUAREZ
FALLS BY 33 PERCENT: Airline passenger traffic at the
Juarez International Airport fell by 33 percent this year
to September compared with the same period in 2008 (Jan-
Sept 2008 - 723,412; Jan-Sept 2009 - 486,817), according
to the Operadora Mexicana de Aeropuertos (OMA). OMA
attributes the drop in traffic through Juarez to the
suspension of Aviacsa and Alma airline operations, which
in 2008 accounted for almost half of the daily flights
through the city's airport. Other industry analysts
argue that traffic volume fell largely because of lower
demand, not supply constraints. In this view, demand for
air travel is down in Juarez due to the drug-related
violence and the economic slowdown. Mexico's Secretary
of Transportation and Communication (SCT) reported that
nationwide passenger traffic fell by 17 percent during
this same period. (Ciudad Juarez)
----------------------
ENERGY AND ENVIRONMENT
----------------------

11. (U) BARK BEETLES THREATEN MONARCH BUTTERFLY RESERVE:
Mexican officials are reporting an outbreak of bark
beetles in the Monarch Butterfly Reserve, a World
Heritage Site and one of the largest and most
controversial protected areas in Mexico. Scientists and
Mexican authorities believe the infestation is a result
of two years of severe drought. Authorities have begun
to fell selected trees as part of a "sanitation logging"
program, which has divided environmentalists and local
communities. Neither the beetle nor the sanitation
program will affect the number of butterflies that will
arrive this year, but their survival throughout the
winter will depend in part on the abundance of trees in
the reserve. (Mexico City)

12. (U) MEXICO-GUATEMALA INAUGURATE ELECTRICITY LINK
DURING CALDERON STATE VISIT: Mexico and Guatemala
inaugurated a $50 million electricity link on October 26
that will allow the Central American nation to buy power
from Mexico. The transmission line is 100 kilometers
long and runs from Tapachula, on Mexico's border with
Guatemala, to the city of Retalhuleu near Guatemala's
Pacific coast. Mexican President Calderon, in Guatemala
for a State visit, hailed the project as "the first step
towards making the interconnection, to which my
government is committed, of the entire Project
Mesoamerica, in other words, between Mexico and Colombia,
by supplying electricity to every Central American
nation". Backers of the regional power grid say it will
cut energy costs for Central America and make investments
in new generating capacity more attractive. The
interconnection has a capacity of 400 megawatts. For now
Guatemala will purchase 120 megawatts of power from
Mexico's Federal Electricity Commission (CFE) which has
considerable surplus generating capacity after demand
growth in Mexico earlier this decade fell far short of
projections. The system integration should be completed
in mid-2010 but significant regulatory issues need to be
resolved before the network will attract major new
investments. Reports identifying key differences between
national level regulatory regimes are being prepared and
should be presented to key stakeholders by the end of the
first quarter of 2010. (Mexico City)

FEELEY

 
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