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BUSINESS
Energy
• Mexico's Oil Surplus to Build Roads, Renew Pemex
• US company to Build a Re-Gasification Plant in Sonora
• Pemex Plans to Open US Service Stations
• Mexican Public Companies To Save Energy Costs


Industry
• Cement Shortage Seen
• Canacem Wants CDM's Imports Watched
• Cemex Could Close Cement Plant in the Philippines


Construction
• Tunnel in Veracruz Awarded


Trade
• Antitrust Regulators Probe Femsa, Modelo


Trade: Agricultural
• Mexican Mezcal Battles Nasty Firewater Image


Telecommunications

• Telmex Requests in Chile What it Denies in Mexico
• Codisco Case Continues


Automotive
• Strike Ends at VW Factory in Puebla, Mexico
• Japanese Brands gain preference in Mexico's Automobile Market
• Hipotecaria Su Casita Places Second Round of Debt
• A Boom Along Mexico's Border




Immigrants & Border
• Immigrant's Family Receives U.S. Compensation
• 209 Mexicans Attacked With Rubber Bullets in the U.S.
• Foundation to Help Migrants
• Mexican Remittances Head For New Record




Safety
• Mexico Detains 8 from Armenia, Iran & Iraq
• Mexico Tightening Surveillance at Oil Platforms
• Mexico Arrests Leading Suspect in Drug Cartel




Politics
• Fox's New Bid for Tax Reforms
• Gov't. Gives Up On Sweeping Reforms
• Nephew Campaigns for Bush In Mexico




Other
• Mexico's Olympic Failure has a Silver Lining

    Gabriela Roldan
  +011-5255-5281-8297

    Juan Casillas
  +011-5255-5281-8297

   Susana Cervantes
  202-463-4329

Historically high oil prices are boosting Mexico's coffers, and public oil monopoly Pemex as well as state governments are set to benefit most from the windfall.

Mexico, the world's eighth largest crude oil exporter, could boost its $146 billion budgeted revenues for this year by at least 5 percent because of record-high oil prices, analysts say.

According to changes made for the 2004 budget, 40% of any extra revenue generated from oil exports will be returned to Pemex and reinvested in exploration and infrastructure renewal.

About 30% of the extra oil revenue will go to the country's 31 states and to the government of Mexico City for infrastructure projects like highways, bridges and schools.

The DKRW Energy firm, through its Sonora subsidiary Pacific Mexico, announced that it had acquired 600 hectares in the community of Puerto Libertad to build a storage and a natural liquid gas re-gasification plant that will supply Sonora, Sinaloa and Arizona. Tom White, company partner, said that the construction will start in mid 2005, and will begin operations on the second half of 2008. He indicated the project would result in environmental benefits, because instead of using fuel oil to generate electricity, natural gas, a cleaner and less harmful fuel, will be used.

In partnership with two other companies, Mexico's state oil company Pemex is working on a plan to sell gasoline in the U.S. through Pemex service stations, said Juan Bueno Director of Pemex Refinación while addressing the distributors' association, Onexpo.

Bueno did not name the two other companies, and simply said they are listed. Neither did he say how many service stations the Pemex partnership plans for the U.S.. Pemex is presently working on contract- and fuel- supply schemes for the service stations, so he said.

"It's an excellent opportunity for you," he told the Onexpo meeting.

Pemex currently has some 6,600 service stations across Mexico, and wants 10,000 under franchise by 2012, of which at least 1,000 would be directly owned.

Service stations outside of Mexico are part of the expansion plan, and Pemex wants to open franchises in Honduras, Guatemala and Belize. There could be developments in these three countries in the coming months, according to Bueno.

Public companies Alfa and Ahmsa are engaged in saving energy costs by replacing equipment and machinery to cope with the soaring prices of natural gas that have risen 200% from 2001 to June 2004, fuel by 100% and electric power by 60%. Ahmsa, for instance, shifted three of its ovens from natural gas to granulated coke saving US$4,000, decreasing its natural gas consumption from 10.45m2 to 0.64m2. The cement giant, Cemex, has closed a 50-year deal with Pemex that will supply it with crude oil coke.

Florida's efforts to rebuild from the destruction of Hurricane Charley probably will exacerbate a yearlong shortage of cement in the state and slow construction, according to Cemex SA, the biggest producer in the Americas.

Cement demand exceeded supply by as much as 20% before last week's storm. Monterrey, Mexico-based Cemex and other producers have rationed cement to customers since April, said the director of special projects for Cemex USA, Florida's second-largest producer. The shortages may drive up cement prices in Florida.

In the past four months, contractors have had to wait 2-3 weeks for concrete. Typically, orders were delivered in 2-3 days. Cement is a key ingredient in concrete, and concrete is used in nearly every structure in Florida. A short-term solution to the cement shortage would be to eliminate dumping duties of more than 40% on Mexican cement, said Cemex's Miley. The United States slapped dumping duties on Mexican cement makers in 1990. Cemex, pays more than 40% duties on cement it exports to the U.S., or about $40 a ton. That's more than half the cement price in Florida of $75 a ton, Miley said.

The Mexican cement chamber Canacen announced legal actions against CDM (Comercio para el Desarrollo Mexicano) that is engaged in the imports of cement for distribution on the domestic market. Canacen would like for the authorities to watch the CDM import activities. Canacen says around 80% of the cement is sold through retailers and presented in 50 Kg bags. CDM, joining former Cemex employees and the Spanish company Tradeland Commodities, has brought a ship with a 27,000 m tons of cement cargo from Russia that it wants to bring into Mexico and sell at cheaper prices.

Cemex announced it might suspend operations of its Solid Cement plant at Antipolo, Philippines, as result of the local government's ruling that the cement produced there lacks quality and cannot be marketed. Inventories are piling up and with no solution to the production problem, it has had to halt activity. Cemex runs three cement plants in the Philippines with an overall capacity of 5.8mil mtpy. In a related note (Reuters, August 27th 2004) the Philippines agreed on Friday to hold new quality tests on cement produced in the local plant of Mexico's Cemex (CX.N), which had threatened to close the plant if Manila did not revoke an order stopping the sale of its products. Trade undersecretary Adrian Cristobal Junior said his department approved an appeal by Solid Cement, the local unit of the world's No. 3 cement producer, to conduct new tests on its cement products under the brand name "Island".

The Government of Veracruz awarded Spanish Fomento Construcciones y Contratas, and Mexican groups CAABSA and Obras Portuarias de Coatzacoalcos the construction, operation and maintenance of the submerged tunnel, a project that will connect Coatzacoalcos to the petrochemical zone of Congregation de Allende. The contract was valued in about US$190 million.

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Antitrust regulators said Wednesday they are investigating claims that beer suppliers are using anti-competitive practices to keep competitors out of the market. The Federal Competition Commission (CFC) said it will investigate whether actions, contracts, or agreements are blocking competitors' access to vendors or pushing them out of the market.

Mexico's beer market is dominated by two brewers, Fomento Economico Mexicano SA, or Femsa, and Grupo Modelo SA.

Femsa, whose main brands include Sol, Tecate and Dos Equis, recently signed an agreement to distribute Coors brands in Mexico and another for Dutch brewer Heineken to distribute Femsa brands in the U.S.

Modelo, which makes Corona, among others, is a partner of Anheuser-Busch Cos. Inc.

Analysts said the plaintiff, which the CFC didn't identify, is a foreign brewer with limited presence in Mexico (probably Miller Brewing) since earlier complaints by a local competitor were unsuccessful.

Aside from helping small retailers with the licensing requirements, brewers also provide signs or refrigerators in exchange for exclusivity. With more than 100 million inhabitants, Mexico has the world's eighth-largest beer market and the CFC said its probe will cover the whole country.

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Mezcal, the poor cousin of Mexico's national tipple tequila, often comes with a dead worm, or even several dead worms, on the bottom of the bottle, which are decorative but also signal that it's not a drink for the fainthearted. The colorless or yellow-tinged liquor can be a throat-scraping challenge, and since mezcal sounds like it contains the psychedelic drug mescaline, many first-timers prepare for LSD-style hallucinations. That all lends the liquor an image of being firewater, but aficionados say that is an over-generalized fallacy.

Many mezcals from small-scale artisan distilleries in villages of Oaxaca are now in hot demand in the United States, Asia, and Europe. The best mezcals have a smooth smoky taste and a sharper defined agave flavor than tequila, aficionados say.

Both liquors are distilled from the hearts of agave plants. Tequila producers pump out 53 million gallons per year, dwarfing mezcal output of 2.6 million gallons. But mezcal distillers say their drink is purer than tequila. Mezcal has to be made from 100% agave, whereas tequila can be legally diluted up to 49% with other alcohols. Mezcal also rivals single malt Scotch whiskies.

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Whereas in Mexico Telmex has agued against numerical portability, that is, the possibility of allowing users to keep their phone number despite changing service providers, in Chile, Telmex has supported the measure prior to beginning its operations there on September 1st, 2005. Telmex also rejected dis-aggregation or unbundling in Mexico, which involves forcing a network operator (Telmex, in the case of Mexico) to rent out its infrastructure to its competitors, arguing it would inhibit infrastructure development. However, in Chile it is favoring such a policy.

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Pedro Padilla's exit from the General Management position at TV Azteca it will not solve the SEC's investigation relating to the Codisco case. The search by American authorities continue and it is possible that it will uncover new player, most notably Carlos Slim, due to the handling of privileged information in the purchase of Unefon debt. TV Azteca shareholders knew in advance that they would have the cash in order to repurchase Unefon's debt, as a result of renting frequencies to Telcel.

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Workers at Volkswagen's Mexico plant agreed to end a three-day-old strike Saturday and accept a pay package very close to the company's original offer, officials said after talks that stretched into the early hours of Saturday morning.

The plant's 9,500 workers had requested an 8.5 percent salary increase, but finally accepted the company's offer of 4.5 percent, plus a 1.6 percent increase in benefit vouchers, which can be exchanged for food and other items. That was an improvement on the company's original offer of a 0.9 percent benefit increase.

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After only 2 years participating in the Mexican market, the Japanese auto-builder Toyota is already ranked first in client satisfaction, also outstanding in maintenance cost, as well as in quality and reliability according to J.D. Power and Associates.

Ranked second was the also Japan's Honda, which arrived to the Country in 1995, excelling in appearance and service satisfaction.


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Hipotecaria Su Casita and GMAC placed US$102.69 million in guaranteed mortgage titles, during their second debt issuance, which is also the biggest in the history of the Mexican Mortgage market.

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The Panasonic Tijuana Plant after a three-year slump, is hiring again. Retooled at a cost of $10 million, the factory created 400 jobs this year to prepare for Christmas sales.

Across Tijuana's vast industrial parks, the export assembly plants known as maquiladoras are thriving, posting giant "help wanted" signs. In June, an industry group estimated that the Tijuana plants needed to fill some 15,000 jobs. The government announced recently that it expected $300 million of investments in Tijuana this year that would mean another 15,000 jobs; the boom is being repeated all along the border.

It is a sharp change. Three years ago, as American consumer demand shriveled and plants shut or moved to China, maquiladoras lost 280,000 jobs. In Tijuana, more than 60,000 factory jobs evaporated. But this year the tide is turning. Maquiladora exports rose 22.4% in June, driving a more general export surge for Mexico. The nation expects economic growth of 4% this year, the strongest since 2000.

Analysts say that is not the only factor in the maquiladora recovery. Stung by Chinese gains, many executives have decided that Mexico must sell efficiency, flexible engineering and quick turnaround time, not just cheap labor.

Kyocera has hired 1,575 people since April 2003 as it opened its cellphone plant and demand recovered at another plant. Some 40% of the 1,100 workers in the cellphone factory have some technical training, higher than the 20% typical in maquiladoras.

Tijuana and other border cities have another advantage. Big items that are manufactured in their new plants - refrigerators, for example, cost more to ship from Asia. And to avoid holding expensive inventory, American retailers like Home Depot demand that factories supply them continuously, which is easier to do by land.

Another niche for Tijuana is in producing medical supplies, which need tight quality control.

Tyco's health care division operates a Tijuana maquiladora that makes medical devices like catheters, trays and suction tubing for operating rooms. The plant is regulated and inspected by the United States Food and Drug Administration, and the factory must be able to trace every item in case of a malfunction; because of distance, that is much harder to do for devices made in Asia.

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The jury of a South Texas state Court ordered a US $20 million compensation in favor of the family of the Mexican immigrant, Jesus Barrera Vasquez, who died June 1st, 2003 when a farm employee shot him after mistaking him for a porcupine. The decision was made in Laredo, at the end of a 2-week trial promoted by the family of the immigrant against Juan Mendoza Heron, who shot the Mexican, when he was hunting in the Hurd-Villegas Farm. The complaint also included the owner of the farm, John R. Hurd, and his company Hurd Ranch Company Ltd.

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Ricardo Monreal, Governot of Zacatecas stated in his last report to the Commission for Migrant Attention at the National Governor Conference that in its policy to dissuade migrants, the U.S. has committed 209 aggressions to Mexicans seeking to go to that country to work. He indicated that the U.S. is undertaking a xenophobic policy and that, therefore, the Mexican Government should deal with this matter in all seriousness. Jorge Santibañez Romellon, President of the Northern Border College, warned that the agreement does not propitiate the use of rubber bullets. What it did state was the use of non-lethal arms.

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A group of Mexican businessmen residing in Dallas, Texas, will constitute a private foundation to promote projects that benefit the immigrant community settled in the north of the State. The foundation, to be named Mexico Dallas-Fort Worth Fund, will be the first altruistic organization of its kind in the U.S. The Mexican Consul in Dallas, Carlos Garcia de Alba, one of the main promoters, said that he hopes that the Fund would serve as a model to others throughout the country. The Fund will be constituted in a dinner gala on September 17th, after celebrating Mexico's Independence Day.

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Remittances from Mexican migrant workers are on course to set another record this year, according to the Bank of Mexico. Total second-quarter remittances reached Dollars 4.5bn, an increase of 29.1 per cent over the second quarter 2003, according to a report by the bank.

The numbers are likely to intensify competition among US banks for a share of the remittance market, which is seen as the best way to improve their marketing to Hispanics.

Total remittances for the first half of the year were up 25.9 per cent to Dollars 7.87bn, equivalent to 2.4 per cent of gross domestic product - more than the country makes from tourism. Last year, official figures showed remittances of Dollars 13.3bn for the full year.

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Mexican authorities detained eight people from Armenia, Iran and Iraq at a Mexicali hotel yesterday after exchanging information with the FBI, Mexican police said. Six men and 2 women were found by members of the State Preventive Police in the city's center.

Mexican immigration officials are interviewing the detainees and examining their documents to determine whether they are in the country legally. U.S. authorities are interested in learning if any have ties to groups' intent on harming the U.S. Based on initial interviews, most of those being held appear to have come from Armenia after fleeing religious persecution in Iran and Iraq. The group appears to have flown from Moscow to Mexico City and then to Mexicali.

Four apparently are legal residents of the United States, and Mexican authorities were preparing to arrange interviews for the FBI.

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Worried that oil facilities are potential terrorist targets, Mexico has added two warships with missiles to guard its offshore oil platforms, the navy said on Monday.

Mexico has had ships, jets and helicopters patrolling oil platforms in the Bay of Campeche - the source of 80% of the country's crude oil output - since the Sept. 11, 2002 attacks on the United States.

Mexico is a top supplier of crude oil to the United States through state oil and gas monopoly Pemex. About a third of the Mexican government's revenues comes from oil sales.

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Mexican authorities on Monday announced the arrest of one of Mexico's most-wanted drug-trafficking suspects without a shot fired. The arrest of Gilberto Higuera Guerrero at a safe house in Mexicali on Sunday is a major victory in President Vicente Fox's campaign against Mexico's major drug cartels. Leaders in each of the four largest drug cartels have been arrested in recent months.

Gilberto Higuera is accused of being a leader of a crime organization responsible for nearly half the cocaine and marijuana entering the U.S. Attorney General Rafael Macedo de la Concha described Higuera as a principal operative and hit man in the cartel run by Ismael Zambada who was responsible for receiving drug shipments from Tijuana, storing the drugs in Mexicali and supervising their transport to the United States.

Authorities in the United States, where Higuera is also wanted for conspiracy and money-laundering, had offered a $2 million reward for his capture.

The arrest of Mr. Higuera on Sunday "solidifies the determination of the Mexican and U.S. governments to finish the job of dismantling the Arellano Félix organization," said Michele Leonhart, deputy administrator of the U.S. Drug Enforcement Administration.

After the arrest of Gilberto Higuera Guerrero, "El Gilillo", they are only five drug trafficking leaders who still remain to be arrested, and the U.S. is offering a two to five million dollar reward for any information leading to their capture. The heads of the Arellano Felix organization, along with Vicente Carrillo Fuentes, are on the "most Wanted" list of the U.S. Drug Enforcement Agency.

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Mexico's President Vicente Fox yesterday launched the second attempt in a year to reform the national tax system, unveiling the results of the seven-month National Tax Convention.

After suffering embarrassing defeats of proposed value-added taxes on food and medicine in 2001 and 2003, the Fox administration is hoping for more moderate proposals, already endorsed by powerful state governors.

The convention did not reach an agreement on taxing food and medicine. Instead the group recommended a sweeping revision to the list of exempted products, which is likely now to be closely debated in Congress.

The main tax convention proposals included devolving tax-raising powers to the states by reducing the current national VAT rate from 15 per cent to 12, and allowing the states to tax the remaining 3 per cent.

Another key proposal was to "change the tax regime of Pemex" to encourage the national oil monopoly - which currently accounts for more than a third of the government's tax receipts - to open more wells.

Any reforms must be approved by year-end if they are to take effect in 2005.

Mexico needs to increase its tax base substantially in order to invest in infrastructure needed to maintain its competitiveness. Mexico's tax base is only about 12 per cent of gross domestic product - a third of the average for Organization for Economic Co-operation and Development countries, and among the lowest in Latin America.

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The government said Wednesday that it would scale back plans to reform the energy sector, giving up on sweeping changes that require constitutional amendments.

"We have to acknowledge reality and understand that agreements cannot be reached," Energy Secretary Fernando Elizondo said. Instead, the Fox administration has decided to push reforms that do not require congressional approval, such as changing the sector's state-controlled regulatory system.

The opposition-controlled Congress has repeatedly rejected constitutional changes that would give private capital more access to the state-run energy sector.

Mexico, the world's eighth largest oil exporter and among U.S. top suppliers, lacks refining capacity to meet domestic demand for gasoline and diesel, forcing it to import 25% of its annual fuel consumption.

Proven reserves of natural gas, on the other hand, total 20.7 trillion cubic feet, but constraints on investment stemming from the heavy tax burden on the state-run oil company Pemex have forced the country to import 30 percent of its total consumption.

Elizondo expressed hope that recent agreements on public financing will translate into reducing taxes to Pemex, which is bound by law to turn over about 60 percent of its revenue to the government.

The Fox administration would like to see Pemex reinvest the greater part of its profits in a sector marked by under investment and an inability to meet domestic demand.

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President Bush's young, Hispanic nephew and his bride are on the campaign trail - in Mexico, where they are joining the increasingly vigorous battle for the votes of 1 million U.S. citizens living south of the border.

George Prescott Bush - whose father is Florida Gov. Jeb Bush and whose mother, Columba, is originally from Mexico - was to arrive late Friday for a four-day tour in support of his uncle's re- election campaign. The trip was paid for by the political nonprofit Republicans Abroad.

The campaign for Democrat John Kerry also is courting American voters in Mexico - and relying on family to deliver the message. Kerry's sister Diana, chairwoman of Americans Overseas for Kerry, came to Mexico City in July.

Organizers of George P. Bush's visit are emphasizing the Bush family ties to the country, believed to be home to the largest population of U.S. citizens living abroad.

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Most Mexicans found disappointing results from the nation's Olympic team participating in Athens 2004, ranging from men's soccer and boxing which were two events which had promised better results all the way to sailing and equestrian events.

The few triumphal moments were delivered by Ana Gabriela Guevara who won the silver medal in the woman's 400, Belem Guerrero silver medal woman's track cycling and Oscar and Iridia Salazar, brother and sister, who won silver and bronze medals in Tae Kwon Do. Mexico ranked in 46th place overall at the Athens Olympics and despite the disappointment, resulted in better performance than in Seul, Barcelona and Atlanta. Along the years, Mexico has obtained 10 gold, 18 silver and 23 bronze medals.

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