Lloyd Mexico Economic Report March 2002
Table of Contents
UPGRADED RATINGS
STREAMLINING OFFICIAL PROCEDURES
BUSINESS REGISTRATION IN A DAY
BIMBO INCREASES ITS U.S. PRESENCE
EVER-IMPROVING ECONOMIC OUTLOOK
MEXICO - U.S. GAS PIPELINE
TOURISM RECOVERING RAPIDLY
MORE HOTELS IN SONORA
CATCHING MORE FISH
NEW APPOINTMENT
ALLOCATION OF FEDERAL FUNDS
ALLIANCE OF ECONOMIC MEDIA
HELICOPTER ASSEMBLY IN CAMPECHE
YUCATAN SEEKS NEW INVESTMENTS
GRANT FOR PROTECTED AREAS
RELATED NEWS
UPGRADED RATINGS
The world’s major ratings agencies are obviously firmly convinced that the Mexican economy is stronger than ever. Last month, Standard and Poor’s upgraded Mexico's sovereign debt rating to much-coveted investment grade. The nation had already been awarded investment grade by two other ratings agencies: Fitch and Moody's Investor Services.
Praising Mexico’s "sound economic policies", Moody’s recently pushed its rating up a notch higher. Finance Secretariat officials described the improved ratings as a clear sign of investor confidence in the economy and a "confirmation of the solidity of the country's macroeconomic fundamentals." The new ratings should help attract a large number of additional corporate investors.
Last year, Mexico received about 20% of the 115 billion dollars total private sector foreign investment in emerging markets, according to the International Finance Institute. This year, emerging markets are likely to attract more than 140 billion dollars; due to the current economic problems in Argentina, Mexico’s share should increase.
STREAMLINING OFFICIAL PROCEDURES
The streamlining of administrative procedures and requirements is the basis for the current administration’s Program for Regulatory Improvement 2001-6. Last year alone, it allowed the federal government to save 14.5 billion pesos.
Many requests for official documents and information, such as applications for Federal Taxpayer Registration (RFC) and modifications to employees' IMSS information can already be made via www.tramitanet.gob.mx on the Internet. It should soon also be possible to pay some government fees and taxes on-line, submit a passport application, and even view students' high school grades.
The increasing use of the Internet at all levels (federal, state, municipal) in Mexico is vital if the government is to meet its goal of ISO 9000 (international standard for quality) certification for its administrative procedures. Several states, including Sinaloa, Tamaulipas, Jalisco, Puebla and Aguascalientes, are following the federal lead in simplifying bureaucratic requirements.
BUSINESS REGISTRATION IN A DAY
Representatives of the private sector have grumbled for years that it takes too long to register and open new businesses. A recent Harvard University study confirmed that opening a new business (and complying fully with all the documentary requirements) took about 50 days, compared with 4 days in the U.S., 2 days in Canada and only one day in some European countries.
As of March 1, another development of the simplification process is a system known as the Rapid Opening of Businesses. The system allows the registration of any business that does not require an environmental impact study or pose any security risk to be completed in a single day. Only two initial procedures are required: a Federal Taxpayer Registration (RFC) and a Company Permit issued by the Foreign Relations Secretariat.
BIMBO INCREASES ITS U.S. PRESENCE
Mexico's largest bread-maker, Grupo Bimbo, which has plants in 16 countries, is expanding its presence in the U.S. by buying the western U.S. assets of Canada-based George Weston Ltd. for 610 million dollars. The deal includes distribution rights to a market housing 120 million people in 23 states, as well as 5 baking plants located in Forth Worth (Texas), San Francisco and Montebello (California), Denver (Colorado) and Beaverton (Oregon).
As a result of the purchase, Bimbo acquires the distribution rights for brands such as Thomas (English muffins) and Boboli (pizza crusts) and will bake Entenmann's (cakes and pastries) and Oroweat (bread). Bimbo already has plants in California and Texas. The addition of 1,300 more delivery routes and 3,900 workers will make the firm the largest bread-maker in the western hemisphere.
Apart from long-term benefits, Bimbo's annual sales will increase from 3.5 to 4.1 billion dollars, with about 30% of this figure coming from its U.S. operations.
EVER-IMPROVING ECONOMIC OUTLOOK
The latest monthly Banco de México survey of private sector analysts found that about half of all the analysts believe that the economic outlook for Mexico will improve over the next six months, with a further third believing that the outlook will remain unchanged. The analysts concur that the likely year-end numbers will be very close to official targets.
The analysts believe that inflation over the year will be 4.79%, with interest base rates of 7.77% at year-end and an exchange rate of 9.75 pesos to the dollar. They expect Gross Domestic Product (GDP) to grow by 1.36%. The analysts agree that the exact figures will depend on how quickly the U.S. emerges from recession and on world prices for petroleum.
MEXICO - U.S. GAS PIPELINE
The California state government has approved the construction of a massive new pipeline capable of carrying 500 million cubic feet of natural gas a day. The 30-inch diameter pipeline crosses part of the state on its 344-kilometer (215 mile) route between Arizona and Rosarito in Baja California. A later phase of the project will extend the pipeline to Ensenada.
The purpose of the new pipeline, expected to be operational by later this year, is to supply numerous companies in Baja California, including Termoeléctrica de Mexicali, Sempra, La Rosita and Integren. Their plants all meet, or exceed, the emissions controls standards set in California. The new pipeline, known as Baja Norte-SE, will be the largest one connecting the U.S. to Mexico. It is being constructed by a joint venture of Sempra Energy and Pacific Gas and Electric Company.
Partners in the 250 million dollar project include Corporation National Energy Group and Próxima Gas. Mexico and U.S. have four connecting natural gas pipelines at present, three of which only permit a unidirectional (U.S. to Mexico) flow of gas. The new pipeline will be useable in either direction.
TOURISM RECOVERING RAPIDLY
According to Tourism Secretary, Leticia Navarro, 2001 was less profitable than expected, but still better than 2000, despite the worldwide problems in the industry stemming from the events of September 11. Mexico was visited by 19.6 million visitors last year, 5% fewer than in 2000, though revenues were 0.7% higher at 8.35 billion dollars. Tourism accounts for about 8.3% of GDP.
The Secretariat's budget for promotional activities has been increased substantially this year to 87 million dollars. Special emphasis will be focussed on attracting more overland travelers from the U.S., as well as more visitors from Japan. More than 18 million Japanese travel overseas each year, but most of them visit only the U.S. Domestic tourists are also very important; it is estimated that they contribute 5 dollars for every dollar spent by foreign visitors.
The XXVII Tianguis Turístico will be held in Acapulco April 21-24. It is expected to attract 500 tourism "wholesalers" from 20 countries. An increasing number of the tourists coming to Mexico are exploring the country's extraordinarily diverse natural ecosystems and this year is International Ecotourism Year. While ecotourism contributed only about 20 million dollars to the economy in 2001, this figure is expected to grow very rapidly over the next decade.
MORE HOTELS IN SONORA
Grupo Posadas has inaugurated a Fiesta Inn (the 32nd of the chain) in the city of Hermosillo, Sonora. The company plans to construct more than a dozen additional hotels, elsewhere in Mexico, within the next 3 years, at a cost of about 150 million dollars. Also in Sonora, in Puerto Peñasco, Grupo Vidafel and other developers are building several luxury hotels, an exclusive residential zone and three golf courses. The total cost of projected investments in Puerto Peñasco is more than 2 billion dollars.
CATCHING MORE FISH
Mexico's 11,512-kilometer coastline is one of the world's longest, yet its fish catch ranks only 16th in the world. Almost three quarters (72%) of the total annual catch of 1.5 million metric tons, worth 1.2 billion dollars a year, comes from ports on the Pacific (west) coast such as Guaymas, Mazatlán and Manzanillo. Gulf coast ports like Tampico, Veracruz and Campeche, together with Caribbean coast ports, such as Puerto Morelos and Progreso, account for a further 25% of the catch.
The remaining 3% comes from inland lakes, rivers and fish farms. In terms of value, the most important species are shrimp (525 million dollars), tuna (89.4 million dollars), and sardines. Total exports are worth 660 million dollars a year. The National Chamber of the Fishing and Aquaculture Industries (Canainpesca) believes that the nation's fish catch can be tripled within 5 years.
One necessary step is placing restrictions on shallow water fishing, so that the small, immature, fish found in such areas are allowed time to grow. In addition, more financing assistance is needed. International agreements would enable fishermen to modernize their boats and refrigeration technology. One proposal being discussed is to allow some Chinese boats to catch tuna in Mexican waters for immediate freezing and export to the Far East. Another option is to expand and diversify fish farming to increase the production of trout, white fish, Nile perch, tilapia and other species.
NEW APPOINTMENT
For the first time in 20 years, Mexico holds a rotating seat on the United Nations Security Council. Adolfo Aguilar Zinser, formerly a National Security Adviser, has been named the country’s permanent representative on the Council. Taking his seat, Zinser said Mexico's goals for its two years on the council are to improve the transparency of the council's work and to improve the relationship between the council and all other United Nations organs.
ALLOCATION OF FEDERAL FUNDS
The Finance Secretariat has published this year’s allocation of federal funds to the various states for locally administered education, health, and public security programs. Nationwide, the average allocation per person is 2,137 pesos, but figures vary widely from state to state. On a per capita basis, the state receiving the most support is Baja California Sur (4,389 pesos per inhabitant), followed by Campeche, Guerrero, Colima, Nayarit, Oaxaca and Chiapas. At the other end of the spectrum are the Federal District (513 pesos per inhabitant) and the states of México, Nuevo León and Jalisco.
ALLIANCE OF ECONOMIC MEDIA
The Mexico City-based financial daily El Financiero has reached an agreement with the world-renowned Intelligence Unit of the U.K-based weekly magazine, The Economist, to publish material derived from the Intelligence Unit on a weekly basis, accompanied by additional reporting. The Intelligence Unit of The Economist has more than 500 correspondents worldwide in 100 different countries.
HELICOPTER ASSEMBLY IN CAMPECHE
Avia-Baltica, a subsidiary of Lithuanian firm Kazan Helicopters, is investing 30 million dollars in a plant to assemble military helicopters. The plant, to be located in the state of Campeche, will employ 300 workers and produce several models of the Mil Mi-8/17 family of helicopters. Kazan is also reported to be considering building further plants in Zacatecas and Morelos.
YUCATAN SEEKS NEW INVESTMENTS
The state of Yucatan in southeast Mexico has launched an extensive advertising campaign aimed at attracting new industrial development to the state. Its ads list 7 key reasons for choosing the state: its strategic location, perfect for transport to the U.S., Canada, Europe and Central and South America, its excellent infrastructure, competitive land and labor costs, ample natural resources, its productive, stable and well-qualified workforce, the quality of life enjoyed by residents of the state and (last, but not least) financial incentives offered by the state government.
GRANT FOR PROTECTED AREAS
The World Bank has awarded a grant of 750 million dollars over the next three years to promote conservation projects, particularly in privately owned areas. About 14 million hectares, or 8% of Mexico’s total land area, is currently protected. The new grant will add 32,000 hectares in 5 different regions to that figure.
The regions involved range from Cuatrociénegas, an arid region in the state of Coahuila, to an old-growth pine-oak forest in Huichol Indian country, to cloud forest in Veracruz, and tropical forest in Chiapas.
RELATED NEWS
Thirty years ago, Mexico was the first country in the world to establish an ocean reserve for whales, in the Laguna Ojo de Liebre in Baja California Sur. Now, more than 100 non-government organizations, headed by Greenpeace, have proposed the creation of the world's largest whale sanctuary, to cover 3 million square kilometres and include all Mexico's exclusive economic maritime zone.
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.
2002 Operadora de Fondos Lloyd, S.A.
© 2002 Allen W. Lloyd, S.A. de C.V.