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Mexico Economic Updates April 2006

Tony Burton

In memorium: Lloyd Economic Report

Following its recent merger with Actinver, Lloyd has announced that it is halting publication of its popular monthly Lloyd Economic Report pending a full review of advertising and publicity policy. The first issue was published 39 years and three months ago. The Economic Report was the brainchild of Robert Lamont, who edited it for its first 27 years. Sadly, the March 2006 issue may mark the end of one of the longest running English language publications in Mexico.

In the hope that the publication will eventually be revived, and in order to preserve the report's memorable unbroken run, Mexico Connect is pleased to announce that the report's former editor has kindly agreed to provide several special editions of Economic Updates in the coming months, exclusively for Mexico Connect.


Retail developments

Two department store chains are expanding. El Puerto de Liverpool is opening four new stores by the end of this year to bring its nationwide total to sixty. The new stores, located in Jalapa and Coatzacoalcos (both in the state of Veracruz), Colima and Mexico City represent a combined investment of 120 million dollars.

Meanwhile, El Palacio de Hierro, the up market chain based in Mexico City, has opened its first store in the northern industrial center of Monterrey, in a new 158 million dollar shopping center. The firm believes this will convince some of the people who previously crossed the border in search of bargains to shop closer to home. The firm may be right. Last year, a survey of 42 cities in Mexico by Mercer Human Resource Consulting found that Monterrey was one of Mexico's most expensive cities in which to live, followed by Los Cabos and Mexico City.


Changes to the inflation index

The nation's central bank, Banxico, has made some changes to the 60,000 or so articles used in calculating the inflation index. These items now include X-box videogames, Compaq computers and flat-screen TVs, as well as Barbie dolls and Vidal Sassoon hair products. Banxico's periodic reviews of the index are designed to take account of trends in the marketplace and in product lines, which render some former index items obsolete. The data used to calculate the nation's inflation rate is compiled from 46 cities in seven regions.


Ajegrup and Big Chela

Ajegroup, a bottling company based in Puebla (main brands: Big Cola, First), has captured about 5% of the nation's soft drinks sales from Coca Cola and Pepsi over the past three years. It is opening a new bottling plant in Guadalajara later this year, which will raise Ajegroup's installed capacity to 5 million liters a day.

Ajegroup also intends to begin marketing a beer named Big Chela (Chela is a slang word for beer), in direct competition to the nation's two giant brewers: Modelo (main brands: Corona, Modelo Especial, Negra Modelo) and Femsa (Tecate, Carta Blanca, Superior, Sol, Dos Equis). Ajegroup is expected to employ precisely the same strategy it used to successfully break into the soft drinks market and to sell beer in big volume bottles at low prices.


More movie houses

Last year was not a great one for cinemas. Total ticket sales nationwide fell by about 7%. However, Cinépolis, Mexico's leading movie house chain, with screens in 51 cities in 24 states, is confident its revenues will grow significantly this year. Cinépolis holds a 40% share of the market, selling more than 60 million tickets a year. This year, it is investing 100 million dollars to open 180 new screening rooms, bringing its total to 1,950 nationwide. Many of the additional cinemas include VIP lounges: smaller, more intimate showing rooms which command premium ticket prices.


Railroad acquires more tracks

Grupo Mexico, which has mining and railway interests, has acquired Ferrosur, which owns railways in southern Mexico, in exchange for 300 million dollars worth of shares. Grupo Mexico is already a majority shareholder in Ferromex, which controls railways in north western Mexico. The acquisition of Ferrosur means that Grupo Mexico now controls train tracks from the Gulf coast port of Veracruz to Pacific coast ports and the Mexico-U.S. border.

The nation's other main railroad operator is Transportación Ferroviaria Mexicana. Mexico's railroads are now almost entirely devoted to freight. The only major passenger route is that linking the cities of Chihuahua and Los Mochis, the so-called Copper Canyon tourist line.


Maquiladoras and remanufactured items

Existing maquiladora regulations cover only the manufacture and repair of new items, but the Economy Secretariat is revising the regulations to allow maquiladora plants to make and export what are known as remanufactured items. Most remanufactures are electronic items (returned by consumers) which are subsequently overhauled and upgraded for resale. The U.S. is the largest market for remanufactured items, especially DVD players, computers and TVs. The new rules simplify import-export procedures and permit more flexibility in the manufacturing process with regards to the substitution of parts and raw materials.


Mexican wins world software prize

A 27-year-old Mexican with no formal schooling has won a world software prize in the International Obfuscated C Code Contest. The contest rewards programs which work perfectly, but which use innovative programming code that even established experts find difficult to decipher!

Oscar Toledo Gutiérrez, now recognized as one of the world's top computer programmers, began using computers and learning Basic programming language at home at the age of 5. His winning entry was a chess playing program of small size but unusual complexity.


Competing convention centers

Mexico's largest exhibition space at present is Expo Guadalajara, which hosts up to 100 major shows each year. It will soon face some stiff competition. The Santa Fe Convention Center, owned by Expo México, in Mexico City, hopes to capture 10% of the estimated 2.5 billion dollar national market for conventions, congresses and exhibitions. Expo México is investing 130 million dollars in Santa Fe to turn it into the largest exhibition space in Latin America, with a floor area of 150,000 square meters, and the capacity to handle 30,000 visitors a day. The investments include a 186 room hotel, due to open next year.


Telmex rates to remain unchanged

Teléfonos de México (Telmex) has announced that its rates will remain unchanged this year. The firm claims that improved productivity and efficiency have resulted in benefits for all its clients.


Bottled water

Worldwide, the consumption of bottled water has soared 57% over the last five years. The U.S. based Earth Policy Institute recently released a report showing that Mexico consumed 18 billion liters of bottled water in 2004, making it the second biggest consumer of bottled water in the world, surpassed only by the U.S. (26 billion liters).

The report focuses on the serious implications for energy consumption and waste disposal. The highest per capita consumption of bottled water is reported to be in Italy (184 liters), followed by Mexico (169) and the United Arab Emirates (164).


Computers in grade schools

The Education Secretariat is working hard to get computer technology into the majority of fifth grade and sixth grade classrooms in public schools around the country. In late February, it awarded a 400 million dollar contract to Sun Microsystems for more than 27,000 Sun Ultra 20 AMD-based workstations, including five years of service and support. The workstations will be linked to electronic whiteboards and projectors for classroom presentations.


Brand recognition

The 2005 Brand Impact report from the on-line magazine Brandchannel asked more than 2,500 executives and advertising agents in Latin America to name those brands which had had the greatest impact on them during the past twelve months. As in previous reports, Mexican firms did exceedingly well. The beer-maker, Corona, came top, followed by Bacardi (rum), with Cemex (cement) taking fifth place and Bimbo (bread) seventh.


ICA buying airport shares

Ingenieros Civiles Asociados (ICA)is purchasing an additional 49% of Grupo Aeroportuario Centro Norte (GACN) from the government. GACN was awarded the concession in 2000 to manage thirteen airports in central and northern Mexico, including Monterrey, Guadalajara, Acapulco, Mazatlán, Zihuatanejo, Zacatecas, Culiacán, Ciudad Juárez and Chihuahua. At present, the government controls 85% and a joint venture, ICA y Aeroports de París, holds 15%. ICA's plan is still subject to approvals at various levels within the government.


Steel production down

National steel production fell slightly in 2005, compared with the previous year. Preliminary figures reveal that production fell 1.8% last year to 16.4 million metric tons. However, industry specialists are confident that steel production this year will rebound to exceed 17 million metric tons.


Acapulco theme park

Aca Extremo has been granted a permit to construct a 63-acre theme park, complete with dolphin tank, climbing wall, cabins, cafeteria and gift shop, on La Roqueta Island, off the Acapulco coast. In response to criticism from environmentalists, the company has claimed that one of its main objectives is to conserve the island's natural attractions.

 


The text of this report was not submitted to any Federal Mexican Authorities or approved by them prior to publication. It is based on sources we believe to be reliable, but its accuracy is not guaranteed.

Published or Updated on: April 20, 2006 by Tony Burton © 2008
Contact Tony Burton

Author of Mexican Kaleidoscope: myths, mysteries and mystique (Sombrero Books, 2016),  Western Mexico, A Traveler's Treasury (4th edition, Sombrero Books, 2013) and "Lake Chapala Through the Ages; an anthology of travelers' tales" (Sombrero Books, 2008), available from all good book stores, and via his author's page at Amazon.com. Co-author of "Geo-Mexico, the geography and dynamics of modern Mexico" (Sombrero Books, 2010). His blog is at geo-mexico.com.

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