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Mexican Executives Criticize Government for Inoperative Democracy and Step Up Calls to Open Up Energy Industry
September 10th
Source: El Universal & Bloomberg
Mexican executives are stepping up calls for lawmakers to open the energy industry to more private investment to improve the nation's competitiveness.
“Mexico should have the lowest energy costs in the world to be competitive,” Jose Antonio Fernandez, chief executive of Fomento Economico Mexicano SA, the country's largest beverage company, said at a two-day conference last week.
The business leaders, who also included Cemex SA Chairman Lorenzo Zambrano, and Bimbo’s Lorenzo Servitje criticized unions, the government and legislators while stating that opening up the energy industry would boost employment and investment in Latin America's biggest economy.
Laws that give the state control over all oil-related production are dragging on growth because they force Mexico, which exports oil to the U.S. and has untapped natural gas fields, to import gasoline from its northern neighbor, Fernandez said.
Businesses are pressing lawmakers to implement legislation to lower energy costs after Mexico lost its position to China as the second-biggest exporter -- after Canada -- to the U.S. last year. Mexican exporters sold $75.8 billion to the U.S. in the first half of this year, less than China's $85.9 billion, according to the U.S. Commerce Department.
Mexico's congress, controlled by opposition parties such as the Institutional Revolutionary Party, have blocked President Vicente Fox's proposals for ending restrictions on investment in the industry at the expense of Mexico's economy, Zambrano said.
“If I had to give one reason for declining competitiveness, it's our inoperative democracy,” Zambrano, 60, said at the conference in Monterrey, Mexico that ended Friday. “The vast majority agrees on what we need to do. But our political class isn't doing its job.”
Ex-Pemex Head Claims Innocent Of Diverting Funds To Union
September 7, 2004
Source: Dow Jones & Company
MEXICO CITY (AP)--The former director of Mexico's state-run oil company, Pemex, appeared before a federal judge Monday in the capital and declared his innocence, according to the country's news agency.
Rogelio Montemayor was extradited last week from Texas to face charges of diverting funds to a presidential campaign.
Prosecutors say Montemayor helped divert as much as $170 million in Pemex funds to the oil workers union, money that was then allegedly given to the 2000 presidential campaign of the then-ruling Institutional Revolutionary Party, or PRI. Montemayor was among 11 people implicated in the scandal.
He went to the United States in 2002 and had been fighting extradition from Houston. But he recently obtained an injunction to prevent him from being held in a Mexican prison while awaiting trial.
Greenpeace Boats Sail to Islands to Oppose Baja Projects
September 8, 2004
Source: San Diego Union Tribune
CORONADO ISLANDS, Mexico – Greenpeace staged a two-pronged action yesterday, sending boats from Ensenada and San Diego to the Coronado Islands to underscore opposition to two planned liquefied natural gas projects in Baja California. The event was timed to the release of a Greenpeace report arguing that competition to build LNG receiving terminals along the west coasts of the United States and Mexico is needlessly committing California to an energy future linked to fossil fuel.
The two boats brought activists, the media, California officials and area state and elected representatives to the offshore site adjacent to the southernmost Coronado Island where ChevronTexaco wants to place a platform for an LNG terminal. Greenpeace temporarily planted a sign that highlighted the area's rich diversity of plant, bird and sea life.
The action also focused attention on Sempra Energy-Shell Oil Co.'s proposed LNG terminal at Costa Azul 12 miles north of Ensenada. The energy companies say LNG is the cleanest and safest of all fossil fuels.
They warn that North America's traditional natural gas supplies are diminishing and additional sources are needed.
Greenpeace, along with numerous U.S. and Mexican nongovernmental organizations, argues that future energy needs should be met with conservation and renewable sources such as wind and solar power.
The groups contend that LNG releases carbon dioxide that contributes to global warming and that it is a volatile fuel that poses a risk to surrounding communities.
Locals Fight Wal-Mart Store Near Ancient Mexico Ruins
September 3, 2004
Source: Reuters
TEOTIHUACAN, Mexico - In the shadow of colossal pyramids left by a great Mexican civilization, a Wal-Mart rises, and some locals have gone to court to overturn its approval.
The sprawling warehouse-style Bodega Aurrera, a unit of Wal-Mart in Mexico, is due to open in December in Teotihuacan, the site of major archeological ruins outside Mexico City.
Amid rising controversy, Mexico's government said a small pre-Hispanic altar was found buried under what will be the store's parking lot, located in a commercial area within the archeological zone.
The construction lies less than a mile from the gated tourist park housing the main ruins and is visible from atop the Pyramid of the Sun that has defined the skyline for 2,000 years.
Wal-Mart Mexico has local and state approval for the store. Federal archeologists monitoring construction say it poses no threat to the ruins, and officials say most people welcome the store for the jobs it will bring.
Opponents say Wal-Mart will erode a tradition of family-owned enterprises such as handicrafts and a community lifestyle dating back centuries.
No one knows for sure who founded the ancient seat of power and then abandoned it around 600 AD. The Aztecs later came upon it and named it Teotihuacan (The Place Where Men Become Gods).
Mexico Ranks As U.S. Wal-Mart Main Agricultural and Food Products Supplier
September 6, 2004
Source: Latin America News Digest
Mexico ranks as the chief agriculture and food products supplier of U.S.-based retail giant, Wal-Mart, for its stores in the Americas, Europe and Asia, the company's official Wayne McKnight said on September 5, 2004.
McKnight outlined the high quality of the fruit and vegetables grown in Mexico, including tomatoes, mangoes, bananas, lemons and grapes.
Mexico ranks higher than the other leading Wal-Mart agriculture and food suppliers such as Argentina, Chile and Russia.
Agricultural and food direct purchases by Wal-Mart topped US$150 million in 2003, while purchases through intermediaries stood at US$350 million.
U.S. retailers reported lower-than-expected August 2004 sales. Wal-Mart scaled down its financial forecasts, which were also hit by soaring fuel prices.
Cemex May Limit Business in Philippines After Sales Freeze
September 9th, 2004
Source: Bloomberg
Cemex SA, the world's third-largest cement maker, said it's averse to doing more business in thePhilippines, where the government banned one of its plants from selling for five weeks for alleged substandard cement.
The Philippine government yesterday lifted the ban after retesting products at Solid Cement Corp., one of Cemex's three Philippine units. Cemex has maintained it has no problems. Cemex Chairman Lorenzo Zambrano said the sales ban came without warning. Trade Secretary Cesar Purisima and Undersecretary Adrian Cristobal didn't return calls.
“We never knew, and they never told us where they got the sample, and how they measured it,” Zambrano said during a business conference Thursday in Monterrey, Mexico, where the company is based. “It wasn't from the plant. This lack of legal security makes you not want to do more business there.”
Government and court intervention in the Philippines helped drag net direct foreign investment to $161 million last year from $1.7 billion in 2002. Frankfurt airport operator Fraport AG in March said it “will never invest in the Philippines again” after the Supreme Court voided its contract to build and operate a new Manila terminal.
Fraport is asking a World Bank arbitration panel to force the Philippines pay $425 million for terminal, which is almost completed. The contract annulment followed allegations from President Gloria Arroyo's administration and legislators that the Fraport contract was illegal and “onerous” changes were made
Femsa Producing Sol in Brazil With Partner, Fernandez Says
September 10, 2004
Source: Bloomberg
Fomento Economico Mexicano SA, Mexico's largest beverage company, is producing its Sol brand in Brazil under an agreement with a local brewer as a first step towards expanding its beer business in Latin America, said Chief Executive Jose Antonio Fernandez.
Fernandez, 50, said a “brewer friend of ours” has a license from Monterrey, Mexico-based Femsa, to make Sol in Sao Paulo. Femsa is distributing the beer together with its Coca-Cola products. He didn't name the brewer.
“That's the first step in a series of initiatives toward that region,” Fernandez said during a conference of business executives last night in Monterrey. “Our next step is to integrate beer sales in the Latin American countries where we can.”
Femsa, which sells Coca-Cola in eight Central and South American countries and Mexico, said beer is being distributed along with soft drinks in Brazil, Argentina, Venezuela and now Central America.
Femsa this year signed a three-year agreement to give Heineken NV the right to distribute its beer in the U.S. to help boost sales after it broke off a nine-year partnership with Brussels-based Interbrew SA.
Ads for Mexico’s Biggest Brewers Begin Trumpeting Light Beer
September 7th, 2004
Source: The Miami Herald
Mexico's Corona Light is the most popular imported light beer in the United States, but you can't get it south of the border, where beer drinkers order their brews in pairs yet rarely reach for a low-calorie alternative.
A Mexico City analyst who tracks Mexican brewers, said light beer accounts for less than 2 % of the country's $3 billion domestic beer market.
At the same time, Corona Light had $47 million in sales in the U.S. the first half of 2004, up 9% from a year earlier, said an international marketing researcher.
Mexico's biggest brewers -- Corona's manufacturer, Grupo Modelo, and the brewing unit of the bottler FEMSA -- are trying to convert more Mexicans into drinkers of light beer, with ad campaigns that give the brew a sharper, edgier image and convey the idea that less really is more.
It's quite a challenge. Demand for light beer is so minuscule that Corona Light is produced for export only. Mexico's best-selling light beers are Modelo Light and FEMSA's Tecate Light. “This category of beer is highly associated with a more American style of life,” FEMSA said.
And both Grupo Modelo and FEMSA say an evolving Mexican market, including a growing health and fitness trend, also make it impossible to ignore light beers.
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Banks Feel Heat in Mexico
September 10, 2004
Financial Times
Report Says Foreign Institutions are Charging More Than They do at home and elsewhere.
The long-running war between Mexico's politicians and its bankers took a turn for the worse this week.
For several years, the government has complained that the country's recently revived banking industry - restructured at great cost to the public - was not lending enough to the private sector.
This week, Oscar Levin, the government banking ombudsman, opened a different front, publishing a report claiming that the banks were concentrating on raising commissions to the exclusion of increasing lending.
He said the foreign banks, which account for 81 per cent of banking assets in Mexico, are charging far more than they do for equivalent products in other countries.
Mr Levin said that "curiously, in their countries of origin, the practices of these banks involve better service and lower relative costs". In Mexico, their presence "still has not translated into the concrete establishment of operating and administrative policies that permit a gradual reduction in the costs of various services and products".
He said that commissions had grown from 33 per cent of financial margin four years ago to 50 per cent in June of this year, and complained that the banks had not made the investments necessary to expand Mexico's still under-developed banking system.
Banking has long been a sensitive political subject in Mexico.
In 1982, President Lopez Portillo made it his final act as president to nationalise the banks, in a move that robbed the industry of a generation of talent.
Then, after the recently re-privatised banking system collapsed in the wake of the 1994 exchange rate devaluation, amid revelations that many banks were riddled with fraud, the government spent Dollars 65bn bailing them out - an act that remains deeply controversial.
In the past five years, all the largest Mexican banks have been sold to international financial groups - Citigroup of the US, HSBC of the UK, Spain's BBVA and SCH, and Canada's Scotiabank - making them an easier target for politicians.
The central problem is a lack of credit, which is now widely perceived as a severe impediment to growth.
The most recent survey by the Banco de Mexico, covering the second quarter of this year, showed that 72.5 per cent of Mexican companies do not use bank finance at all and rely on suppliers' credit instead.
This week's events seem to prove that Mexico's banks can expect no let-up in political pressure.
The ombudsman's attack seemed to amplify what President Vicente Fox told a bankers' convention two years ago: "You can do more, much more."
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Mexico Adopts REIT Concept
September 6, 2004
Source: Los Angeles Times
With more than 180 listed in the United States and total assets of more than $400 billion, real estate investment trusts are big business. Now, REITs are heading south of the border. The Mexico City Stock Exchange, known as the Bolsa, hopes to tap into this market by launching the country's first security modeled on the trusts this year. The new securities, to be called Fibras for their initials in Spanish, are a response to growing demand for Mexican real estate. Like REITs, they would mainly invest in real estate, with property prices, as well as flows of rental income, included as share prices.
The Fibras' key advantage would be to offer real estate investors a way to get their money out of fixed assets more easily.
The stock exchange's move follows a recent revival in initial public offering activity in Mexico, spurred mostly by the strength of the housing industry. Mexico has a severe shortage of homes for its fast-growing population, reassuring developers that there will be consistent demand, as well as support from the government.
Most impressive was the June IPO by Desarolladora Homex, a housing developer on the northern border, which had backing from Equity International Properties, a vehicle for Chicago-based investor Sam Zell, and ZN Mexico Funds, a New York private equity group.
The listing, which took place simultaneously in Mexico City and New York, raised $155 million, and the shares have performed well since their flotation.
Recently, the California Public Employees' Retirement System announced that it would invest $150 million in a joint venture set up by Prudential Real Estate Investors of the U.S. and Geo, Mexico's biggest housing developer.
Regulators also hope to give clearance for Mexican private pension funds to invest in Fibras. To date, the tightly regulated funds, known as Afores, still invest more than 80% of their portfolios in Mexican government bonds.
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Mexican Peso Rises as Traders Bet on Higher Treasury Bill Rates
September 7, 2004
Source: Bloomberg
Mexico's peso rose against the U.S. dollar on speculation the country's benchmark interest rate will advance at the central bank's weekly auction of Treasury bills. Higher rates may boost demand for the peso by making Mexican debt securities more competitive with other emerging-market countries for foreign investment. The peso's 0.9% decline last week may push up the yield on the note, which fell 0.03 percentage point to 7.29 percent at last week's sale.
The peso rose 0.2% to 11.5578 in New York, from 11.5755 late yesterday. The peso has lost 5.8% in the past 12 months, the only one of 16 major currencies to decline against the dollar.
A large number of bets by speculators counting on a gain in the peso may weaken the currency as they sell pesos to hedge their bets.
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Quest For Cheaper Drugs Can End in a Mexican Jail
September 5th, 2004
Source: Los Angeles Times
TIJUANA - Californians shopping for cheaper prescription drugs may have gotten a break when the Legislature voted to ease access to low-cost medicines from Canada, but south of the border, bargain-hunters can pay an unexpected cost-time in a Mexican slammer. Since early last year, at least 67 Americans have been jailed here for buying medicines without a prescription from a Mexican doctor.
Drug shoppers in Mexico are on the quest for discounts where prices can be dramatically lower, up to 75%, thousands of Americans, mostly senior citizens, cross the border daily to buy prescription drugs at Tijuana and Algodones on the California border, Nogales south of Arizona and Ciudad Juarez opposite El Paso. Some Tijuana pharmacists are mounting a campaign to warn visitors of the hazards of buying drugs without prescriptions.
Law-abiding druggists along Pharmacy Row will either refuse to sell the drugs or send consumers to one of the many doctor's offices here where physicians are known to write prescriptions for $40.
Some of the buyers arrested here obviously intended to traffic the suspiciously large quantities of drugs they bought, officials at the U.S. Consulate here said.
Although police are likely to look the other way a case of elderly Americans, they can come down hard on those who buy controlled substances, such as those known by their U.S. brand names Valium, Ritalin, Percodan and Darvon.
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Mexico, U.S. Environmental Officials Take First Step to Clean Up Mountains of Old Tires at Border
September 9, 2004
Source: San Diego Union Tribune
Mexican and U.S. environmental officials, facing an uphill battle to clean up one of the border's most urgent environmental problems, were to announce the tire accord on Thursday in Ciudad Juarez. They also want to strengthen Mexican environmental standards for the millions of junker cars brought over from the U.S.
Mexico's secretary of environment and natural resources said Ciudad Juarez and Grupo Cementos de Chihuahua have agreed to dispose of 800,000 used tires each of the next five years.
The city will pay the cement-maker 3.5 pesos (31 cents) for every tire burned and in turn, Cementos de Chihuahua will use the tires as fuel, investing US$2.5 million in equipment at the Samalayuca cement factory, 25 miles (40 kms) south of Ciudad Juarez.
The agreement will only make a dent in the estimated 5 million used tires at the city's collection center. Two million more are scattered in dry gullies and clandestine dumping sites throughout the city, where residents simply throw out tires to avoid paying the fee the city requires to get rid of them.
In addition, as part of the accord, tires from Tijuana and Mexicali, will be sent to nearby cement factories to be used as fuel.
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Supreme Court Clears Way to Mayor’s Impeachment Process
September 8, 2004
Source: Houston Chronicle
Mexico's Supreme Court dismissed a legal challenge to impeachment proceedings against populist Mexico City Mayor Andres Manuel Lopez Obrador on Tuesday, clearing the way for a vote in Congress on whether to strip the mayor of his immunity from prosecution. The justices voted 7-3 to dismiss an appeal filed by the Mexico City Legislature, which argued the impeachment proceedings infringed on the responsibilities of local lawmakers. Federal prosecutors are considering bringing charges against Lopez Obrador over the city's failure to obey court orders halting construction on land whose owners have been challenging expropriation of their property. Lopez Obrador calls the charges the result of a conspiracy by federal officials to knock him out of the 2006 presidential race.
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Mexico’s Ex-Ruling Party Hoping to Keep Veracruz Leadership
September 6, 2004
Source: Associated Press
Mexico's former ruling party hoped to keep control of the governor's seat in the Gulf Coast state of Veracruz as election officials tallied votes Sunday evening.
With 2 percent of the votes counted, it was difficult to tell which party was in the lead. Fidel Herrera of the former ruling Institutional Revolutionary Party had 31 percent of the vote compared with 30 percent for Gerardo Buganza Salmeron, a 48-year-old industrial engineer and former senator who is a member of President Vicente Fox's National Action Party.
Surprisingly, Dante Alfonso Delgado Rannauro, who is running under the banner of United for Veracruz, a coalition of three smaller parties, had 36.5 percent of the votes.
Delgado, a former PRI member, took over as governor from 1988 to 1992 after Fernando Gutierrez Barrios left office to serve as interior secretary under former President Carlos Salinas de Gortari.
Shortly after splitting from the PRI, Delgado was arrested in 1996 on charges he misused the equivalent of $57 million in state funds and for failing to fully declare his personal wealth. He has maintained his innocence, saying the investigation was punishment for leaving the PRI.
The PRI lost the presidency four years ago after holding the office for more than seven decades. But the party has shown signs of a rebirth, and pre-election polls showed Herrera, a 55-year-old lawyer and senator, with a lead before Sunday's election.
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Rivals Still Claiming Veracruz Poll Win
September 8, 2004
Source: Financial Times
Both leading candidates for the governorship of Mexico's Veracruz state have vowed to defend their "victory", with final results from Sunday's election due to be announced today.
Fidel Herrera, candidate of the Institutional Revolutionary Party (PRI), which held the country's presidency for seven decades until 2000, produced a pile of official electoral returns which he said would confirm his victory.
Meanwhile, preliminary results showed Gerardo Buganza, the candidate of President Vicente Fox's National Action Party (PAN), losing by less than one percentage point. Mr Buganza vowed to defend his victory.
Mr Herrera conceded the close vote - in which the PRI also lost its overall majority in the Veracruz state legislature for the first time - was a "call for renewal". "We have to look at what isn't working and do something about it," he said.
A third candidate, Dante Delgado of the Democratic Convergence party, who appears to have finished third, also promised to contest the results. "The process doesn't end with the count," he said. "We cannot validate a situation based in illegality."
State governors have grown in power under Mr Fox, who faces an opposition-dominated Congress. Winning governorships is central to the PRI's strategy to regain power.
The situation in Veracruz seems certain to present a strong test for Mexico's electoral authorities. Many Mexicans continue to distrust elections after decades of electoral fraud under the PRI.
The contest marks the second governor's election in less than two months to be decided by the courts.
In the southern state of Oaxaca, which held its election in early August, Gabino Cue, the losing candidate, who represented an alliance including the PAN and the Party of the Democratic Revolution, Mexico's main leftwing party, is holding a "march-caravan" through the state to protest against irregularities.
The PRI has never lost the Oaxaca governorship, and there were numerous allegations of polling-station intimidation by pro-PRI forces.
A federal election tribunal will now decide the Oaxaca election.
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Annan: Much Work Ahead for Democracy
September 9, 2004
Source: Houston Chronicle
The U.N. leader says progress in Latin America is tempered by poverty and doubt
MEXICO CITY - The spread of democracy through Latin America has failed to significantly help reduce poverty in the region, U.N. Secretary-General Kofi Annan said Wednesday.
"Democracy has still not efficiently responded to the aspirations of the region's poor," Annan noted as he inaugurated an international seminar on strengthening Latin American democracy.
There have been some advances - an infant mortality rate that is nearly half what it was 25 years ago as well as increasing education levels and greater equality for women, he said. "But why the mood of self-doubt?"
That doubt stems in part from the growing pains that accompany democracy, he said.
"Today in some quarters (democracy) is even challenged for being part of the problem," Annan remarked, referring to recent conflicts in Venezuela - where opponents of President Hugo Chavez accused him of widespread fraud after he survived a referendum calling for his removal - and in Bolivia, where mass protests against piping gas through Chile led to the ouster of President Gonzalo Sanchez de Lozada in July.
Annan appeared Wednesday with Mexico Foreign Secretary Luis Ernesto Derbez and President Vicente Fox.
Fox, whose election in 2000 ended 71 years of single-party rule in Mexico, acknowledged publicly in his state of the union address last week that Mexico needs to "consolidate" democracy with greater wages and opportunities.
Annan said Latin America needs more responsive democracy to help people identify and participate in social and economic reforms.
"Citizens must see that . . . their most fundamental needs are the highest priorities of those who govern," Annan said. "They must have reason to believe that their vote will translate into improvements in their daily lives."
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Mexico Is a Priority: Bush & Kerry
September 7, 2004
Source: El Universal
For the U.S. Presidential candidates, the relationship with Mexico is a priority. According to President George W. Bush, both nations have developed a historic level of mutual trust and respect, which is why he proposes raising this collaboration at all levels. The Democratic hopeful, John Kerry, has proposed reviewing the NAFTA, in order to seek the inclusion of stronger stipulations regarding environmental and worker protection. He has also proposed a program legalizing migrants “through merit”, as opposed to the proposal by his Republican opponent who is involved with a plan of guest workers.
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