MexConnect
Business  |  See all articles tagged finance-economics geography or in region Chiapas

Lloyd Mexico Economic Report March 2003

Table of Contents

AGING POPULACE: NEW OPPORTUNITIES?
ETHYLENE IMPORT-SUBSTITUTION PLANT
BIG BOOST TO POWER CAPACITY
NATIONAL TECHNOLOGY PRIZE
GRUPO ACCION BUYS TORRE DEL ANGEL
ENERGY-SAVING REFRIGERATORS
"INVEST IN MEXICO" PROGRAM
EUROPEAN HOTELS ENTERING MEXICO
THE MOVIES GOLDEN AGE RETURNS?
CHICKEN TARIFFS
FORMULA ONE CONTRACT WITH CHIAPAS
CERTIFIED CIRCULATION NUMBERS

AGING POPULACE: NEW OPPORTUNITIES?

For many years, the major demographic concern was the rapid rate of population growth, and whether the increase, especially in numbers of young people, would slow the pace of economic development. Fortunately, programs to reduce growth rates have been very successful.

The "fertility rate" (the average number of children born to women of child-bearing age) fell from 7.3 in 1950 to 4.7 in 1980 and is now 2.4, close to replacement level. This means that the total population (about 100 million at present) should stabilize sometime around 2025.

Meanwhile, improving health standards have helped raise life expectancy from about 50 years in 1950 to 76 years today and a predicted value of 81.2 years by 2025. The net result of all this is that the mean age of the population will rise dramatically from 27 years in 2002 to 38 by 2030 and 45 by 2050, with a correspondingly rapid rise in the population aged over 65, and a sharp decline, after 2030, in the percentage of working-age people.

This change in the population structure will inevitably provoke changes in consumption patterns and in the demands placed on education systems, health-care and a host of other services, presenting both challenges and opportunities.

By 2050, the over-65s will represent 25% of the then-total population of 128 million. These changes in age structure are occurring much more quickly in Mexico than they did, historically, in Europe, meaning that there is already some urgency about adopting measures that will help meet the changing demands of the next 50 years. Concern over population growth rates is giving way to concern over the effects of an aging population.


ETHYLENE IMPORT-SUBSTITUTION PLANT

Pemex Petroquímica, the petrochemicals subsidiary of the state oil giant Petroleos Mexicanos (Pemex), has retained the consulting firm Hogan & Hartson to assess the viability of constructing a new ethylene plant. The proposed billion-dollar plant would have an annual capacity of a million metric tons of ethylene.

Possible sites for the plant include Coatzacoalcos, in the state of Veracruz and Altamira, in Tamaulipas.

Pemex anticipates that construction would begin in 2004 and take three years. The new plant would reduce the quantity of ethylene that has to be imported in order to supply the needs of existing secondary petrochemical plants that make ethylene derivatives such as polyethylenes, ethylene oxide, glycols and styrene for the national market.


BIG BOOST TO POWER CAPACITY

Several new power plants will come on stream this year, increasing the nation's total installed capacity by 4,048 megawatts (9.3% of its current level) to 47,582 megawatts. According to the Energy Secretariat and the Federal Electricity Commission (CFE), the new plants represent a combined investment of 2.5 billion dollars.

The overall demand for power increased 2.7% last year, slightly less than expected, though the Energy Secretariat is still anticipating that some 50 additional plants (producing about 25,000 megawatts) will be needed between now and 2011 to keep pace with future demand.

As one strategy to boost capacity, CFE is seeking agreements with Pemex and some private-sector power plants to purchase their over-production.

In related news, the Hidalgo state government is considering approving a power plant that will be fuelled by cow dung. The fuel required (500 metric tons a day) would come from the 27,000 cows grazing in the Tizayuca basin. The environmentally-friendly plant, proposed by Tratimex de México, would cost 68 million dollars and supply 22 municipalities and some public buildings.


NATIONAL TECHNOLOGY PRIZE

The National Technology Prize for large firms has been awarded to Delphi Corporation's Technical Center, which opened its doors in Ciudad Juárez, Chihuahua, in 1995 and has since expanded to cover an area of more than 40,000 square meters.

At the center, 2,200 engineers, technicians and assistants design products and processes used by all the major car manufacturers worldwide. Since 1998, the Center has obtained 30 Mexican and U.S. Patents, with another 100 in the pipeline. Delphi has 57 autoparts plants in Mexico and the U.S.


GRUPO ACCION BUYS TORRE DEL ANGEL

One of the largest real estate deals of recent years has just been finalized, with Grupo Acción buying several prime developments from U.S.-based Grupo Hines for 100 million dollars. They include properties in three major cities.

In Mexico City, Grupo Acción now owns the 21-story skyscraper Torre del Ángel, on Avenida Reforma, which houses corporate offices including American Express, Hines Mexico and the Associated Press.

In Guadalajara, it acquired the 10.5-hectare "Logístico" industrial park, and, in Querétaro, it now owns a 100,000 square-meter industrial park and other industrial property, including plants purpose-built for users like Samsung, Magna and Norgren.


ENERGY-SAVING REFRIGERATORS

Beginning in May, all new refrigerators and freezers, whether domestically produced or imported, will have to meet stringent energy efficiency standards, as strict as anywhere in the world. The new NOM (Norma Oficial Mexicana) means that consumers will save 30% or 100 dollars(1,000 pesos) a year in energy costs, compared with a similar-sized appliance bought 8 years ago.

More than 1.5 million refrigerators and freezers are expected to be sold this year alone. According to the National Commission for Energy Savings, 50% of the refrigerators in use are between 7 and 20 years old and are correspondingly inefficient in terms of their energy usage. In tropical parts of Mexico, refrigerators account for up to 30% of the total energy use in households that lack air-conditioning.


"INVEST IN MEXICO" PROGRAM

A pilot program in 3 states (Hidalgo, Puebla and Zacatecas) to channel some of the 9 million dollars in remittances sent home by Mexicans living in the U.S. towards productive projects that have a positive influence in their communities of origin is to be extended to the whole country.

Organized by National Financiera, the program, known as "Invest in Mexico", supports any viable proposal, originating from migrants, about how to improve conditions in their home villages and towns. Nafin says that the program not only promotes regional growth but also provides a boost to the market for Mexican products in the U.S. by strengthening the ties between migrants and their former homes.


EUROPEAN HOTELS ENTERING MEXICO

About 70% of the total 1.5 billion dollars annual investment in tourism infrastructure is of domestic origin, the remaining 30% of foreign origin. Tourism Secretary Leticia Navarro recently announced that two European hotel chains are entering Mexico. They are the Portuguese firm Pentana and Italian chain Voscolo. In addition, the French company Sofitels is continuing to construct hotels and the Canadian firm Four Seasons is planning to add Los Cabos, Baja California to its chain.

Meanwhile, Grupo Empresarial Ángeles has opened its first Camino Real Ejecutivo hotel, designed for top business executives, in Tlalnepantla, in the northern part of Mexico City. The 137 rooms all have high-speed broad-band Internet connections and the 11-million-dollar hotel also offers secretarial service, 24-hour room service and a heliport. Another Camino Real Ejecutivo is already under construction in Torreón, in the state of Coahuila, and further units are planned for Guadalajara and the southern zone of Mexico City.


THE MOVIES GOLDEN AGE RETURNS?

The national film-making business has struggled in recent years. It currently produces about 20 movies a year, well below the 100 or more made annually during the "Golden Age" of Mexican cinema in the 1940s, when Jorge Negrete, Pedro Infante, Cantinflas and María Felix were among the big names.

Part of the reason for the reduced output had been a drop in movie-goers. That trend now appears to be over. In the past five years, ticket sales have surged from about 60 million dollars a year to more than 140 million dollars in 2002. New multiplex chains, representing investments of a billion dollars, deserve much of the credit for the revival. They have helped bring the middle and upper classes back, even though only one in ten Mexicans ever goes to the movies.

In addition, domestically-made releases now account for 15% of total box-office revenues, up from a paltry 2% five years ago. One of the reasons for this about-turn has been a new wave of quality films such as Amores Perros and the Global Globe award-winning Y Tu Mamá También (And Your Mother Too).

In the latest effort to boost the movie industry, a one peso tax has been added to tickets. The funds raised, about 15 million dollars this year, will be used to help subsidize (via the Mexican Institute for Cinema) the production and distribution costs for films made in 2004.

Many producers are also targeting another market: the 21 million residents of the U.S. who are of Mexican descent. Their buying power is much greater, on a per capita basis, than that of Mexicans back home. Venevision is one distributor that has pushed aggressively into the U.S. market, promoting Mexican films on the art house circuit and at select locations (170 screens) in California, Texas and other "Latino" areas.


CHICKEN TARIFFS

Though there are more than 400 poultry producers in Mexico, the three largest firms - Bachoco, Tyson and Pilgrims Pride - account for more than 50% of the domestic market. Their share is expected to reach 80% within the next 5 years.

The combined value of annual production in the poultry sector tops 3.5 billion dollars. The national market is buoyant. Over the past decade, per capita consumption of chicken has risen from 15.8 to 16.7 kilos a year. Futhermore, according to figures released by the National Poultryfarmers Union, the price of chicken has decreased in real terms (after inflation is taken into account) by almost 20% over the past five years, to about 2 dollars a kilo.

To help guarantee the market for domestic poultry, the government recently introduced a provisional 98.8% tariff on imports of chicken legs and thighs from the U.S. The tariff will be phased out over a 5-year period, ending in 2008. Exempt from the tariff are the first 50,000 metric tons of imports destined for the zone along the Mexico-U.S. border.

In exchange for protection from imports, domestic producers have promised to invest 200 million dollars a year over the next 5 years to modernise the industry and make it more competitive. So far, only a few, larger, poultry farms in three states - Sinaloa, Sonora and Yucatan - have been approved as "export quality" but 200 more firms are expected to modernise their infrastructure and attain this status by 2008.


FORMULA ONE CONTRACT WITH CHIAPAS

Formula One (Fórmula Uno), the motor racing organization, has signed an agreement with Los Altos, a village in Chiapas, to pay the villagers to preserve the surrounding forest to capture an amount of carbon equivalent to the carbon dioxide produced by Formula One events worldwide.

The agreement is to satisfy European countries, signatories of the Kyoto accord, that Formula One is taking steps to mitigate the possible effects of its production of carbon dioxide, one of several "greenhouse" gases blamed for global warming.

Jorge Soberón, the secretary of the National Biodiversity Commission believes that many more corporations will opt to follow a similar route in the future and that Mexico will become a major recipient of conservation funds as a result. The Los Altos villagers will receive 66,000 dollars for preserving an area of forest capable of capturing 5,500 tons of carbon a year.


CERTIFIED CIRCULATION NUMBERS

In 2002, paid advertising in print media totaled 650 million dollars, 90% of it in newspapers and 10% in magazines. Now, the government has introduced rules that prevent any federal advertising being placed in magazines or newspapers that do not have independently certified circulation numbers. The new regulations take effect in July this year.

One of several agencies accepted for the certification process is the Media Verification Institute (MVI), using a methodolgy in line with international standards and already approved by 45 countries worldwide. MVI examines print-runs, distribution figures, returns and paper purchases over a minimum six month period before awarding a certificate of circulation.





The text of this report was not submitted to any Federal Mexican Authorities or approved by them prior to publication. In preparing it, we have done our own research, using sources we believe to be reliable. However, we do not guarantee its accuracy. Neither the information contained herein nor the opinions expressed, constitute a solicitation by us of the purchase of any security.

Mirrored with permission from Lloyd S.A. de C.V.
See their Page on Mexico Connect.

2003 Operadora de Fondos Lloyd, S.A.
© 2003 Allen W. Lloyd, S.A. de C.V.

Published or Updated on: July 20, 2006
All Tags