MexConnect
Business  |  See all articles tagged finance-economics finance-personal or in region Monterrey, Nuevo León Guadalajara, Jalisco

Mexico Economic Updates September 2006

Tony Burton

Rapid GDP growth

According to the Finance Secretariat and the National Statistics Institute (INEGI), the nation's GDP rose 4.7% in the second quarter (compared to the equivalent period of 2005) to a record 875.1 billion dollars. Services accounted for 49.5% of GDP, followed by industry (26.6%), retail, restaurants and hotels (21.2%) and agriculture (3.9%).


Pre-payment of foreign debt

Mexico has sold peso bonds worth 12 billion dollars in order to pre-pay 9 billion dollars of its 12.4-billion-dollar debt to the World Bank and the Inter-American Development Bank (IADB). The floating-rate federal development bonds (Bondes D) were issued by the Treasury and sold to investors via the Central Bank.

The issue sends a clear message to investors that the economy is doing well and that even the uncertainty (at press time) of the final outcome of the presidential election will not have any significant effect on future investment or confidence.

The pre-payment has reduced the ratio of Mexico's foreign debt to its GDP from 7% to 5.4%. Of the nation's total debt load, about 73% is domestic and 27% foreign.


Popularity of cell phones

The number of fixed telephone lines in service fell by 0.5% in the second quarter, from 18.8 million to 18.5 million, but the number of active cellular phones continues to rise at a rapid rate.

There are now about 50 million active cell phones in Mexico. The market leader, by a wide margin, is Telcel, with 39.2 million users, a 79.3% market share, followed by Telefónica Móviles México (13.7%), Iusacell (4%) and Unefon (2.6%).


Air traffic up

The Mexico City international airport reports that passenger movements were up 3.3% to 14.4 million during the fist seven months of the year, compared with the same period in 2005. The pattern is repeated for other major airports in the country. Guadalajara airport received 1,997 more flights (66% international) in the first six months of the year than in the equivalent time last year, while Puerto Vallarta had 513 more flights, 68% of which were international.

In related news, Delta Air Lines is aggressively pursuing the ever increasing spending power of the Hispanic population residing in the U.S. by opening up several new routes to Mexico in the next few months. The routes will link Las Vegas, San Francisco, Sacramento, Oakland and San José to Los Angeles for direct flights to Acapulco, La Paz, Loreto, Mazatlán, Culiacán, Manzanillo, Zacatecas, Hermosillo and Torreón.


States with remittances

According to the central bank, remittances sent home by Mexican workers overseas reached a whopping 11.425 billion dollars during the first half of the year. The figure underlines the continuing importance of remittances in the national economy. The state which captured most remittances was Michoacán (11%), followed by Jalisco and Guanajuato (9% each).


Multivalores to begin banking operations

Multivalores Grupo Financiero, which previously specialized in investment services, has now received approval from federal authorities to add banking operations to its services. The new bank will be known as Banco Multiva.

Grupo Empresarial Ángeles, the majority shareholder of Multivalores, is also reported to be close to incorporating its insurance firm, La Peninsular Seguros, into the Multivalores group as well.


Higher pay in Monterrey

An American Chamber of Commerce survey of 181 corporations in Mexico's three major cities reveals that the best paid executives in Mexico work in Monterrey. The survey compared rates for 107 distinct positions in 11 strategic areas of each corporation. Monterrey paid best for more than half (56%) of all the positions surveyed, while Mexico City had the highest rates for 29% of the posts, and Guadalajara for 15%. However, Monterrey's dominance in terms of pay has been reduced significantly since last year's report.

Before setting out to move to Monterrey for work, it should be pointed out living expenses in the city are among Mexico's highest.


Short liters in gas stations

Last month, the Consumer Protection Agency published a list of the 6,901 gas stations across the country, highlighting those that had failed to meet established norms for service. Savvy consumers have long known that some gas stations consistently try to undersupply and overcharge, usually through manipulating petrol pumps to deliver less than full liters.

Profeco gave stations with defective service a red light, with am amber light for those with some irregularities and a green light to those with no irregularities. The power of the gas stations is considerable. Within hours of the list appearing, Profeco's website (www.profeco.gob.mx) had been hacked, to prevent access to the pages in question.

Profeco estimates that the total cost to consumers of these underhand gas station practices is over 800 million dollars (9 billion pesos) a year, and promises to update the list on the 25th of every month.


Autopista del Sol runs into problems

The federal Transportation and Communications Secretary, Pedro Cerisola, has admitted that the Autopista del Sol linking Cuernavaca to Acapulco, was badly built, and that some sections require urgent stabilization and improvements.

Contracts totaling 110 million dollars (1.2 billion pesos) have been awarded to nine companies: Asfaltos y Triturados del Sur, Wat Construcciones, Olfo Construcciones, Constructora Villamar, Constructora Torre Blanca, Pavimentos y Construcciones de Guerrero, Nacional de Puentes y Estructuras, Desarrollos Urbanos Integrales and Tecnosuelo. The work is scheduled to be completed by December, in time for the heavy vacation traffic.


More cars

Car manufacturing was up 35.8% in the first six months of the year in relation to the same period a year earlier. The sector is on course to reach 200,000 vehicles a month by the end of the year, and to surpass the 2 million mark for the year, according to the Mexican Automotive Information System (SISAM).


Software Center in Guadalajara

A software center is opening this month in the Plaza del Angel, Guadalajara. The center is the first of its kind in Latin America. It will link some 500 computer engineers, primarily software experts in their respective fields, to small and mid-sized businesses seeking the latest technologies in network and computer solutions.


New mining projects

Alfonso Martínez Vera, the president of the Mexican Association of Mining Engineers, Metallurgists and Geologists, has announced that five major mining operations will begin next year. Located in the states of Chihuahua, Guerrero, Sonora and Zacatecas, they represent a combined investment of 500 million dollars.

The largest project is El Peñasquito, in Guerrero, which has potential ore reserves (gold, silver, lead, zinc) exceeding 466 million metric tons. The projected yields are 0.4 grams of gold, and 30.8 grams of silver, per ton of ore.

Mining in Mexico generated 5.954 billion dollars last year, but Martínez Vega believes that this figure could easily be doubled within the next few years.


More wind power

Cemex, the country's largest cement-maker, has been granted a permit to construct a wind-power plant in the Isthmus of Tehuantepec, Oaxaca. Low lying and flat, the Isthmus of Tehuantepec enjoys annual wind speeds (at a height of 30 meters above ground, the height of a modern windmill) averaging more than 9 meters per second.

The earliest wind power demonstration project here was at La Venta, in 1994. This region may be too far from the U.S. to make any contribution to power exports, but wind power advocates claim that a major "wind farm" in the area could supply the domestic grid with up to 2,000 megawatts (MW) a year.

Wind power projects already operating include those owned by the Federal Electricity Commission (CFE) at La Ventosa (Oaxaca) and Guerrero Negro (Baja California Sur) and a generator owned by Cementos Apasco at Ramos Arizpe (Coahuila). Windfarms cost about a million dollars for every MW of installed capacity; this is close to the current costs of building a combined cycle, thermo plant.

The Cemex plant, due to be completed by 2010, will incorporate up to 300 wind turbines, with a total capacity of 250 MW. Currently, less than 0.1% of all Mexico's electricity comes from wind power.


Telmex denies high rates

Telmex has categorically denied that its rates are higher than those of most of its competitors. A recent OECD report suggested that Telmex rates were, as many Telmex consumers would suspect, unusually high. Claiming that the OECD study relied on totally out-of-date exchange rates, Telmex commissioned an independent study from NERA Economic Consulting, an international monitoring firm.

NERA looked at 28 countries (including 22 OECD members) and found that Telmex rates occupied position number 10 (for low volumes of usage) and 14 (for high volumes), meaning that the rates were close to the average for all the countries sampled.

Clients of Telmex will be delighted to learn that the firm believes it will not be necessary next year to raise rates. Telmex rates have remained unchanged for several years.


New head of Concamin

Ismael Plascencia will take office next month as the new head of the Conferation of Industrial Chambers (Concamin). Concamin represents the interests of 65 chambers of industry and 43 industrial associations for different sectors.

Plascencia is best known for his interests in the leather industry and real estate. During his tenure, Concamin is expected to push for much needed structural reforms that would benefit all investors and industrialists.


Record natural gas production

Petróleos Mexicanos (Pemex) has announced that its production of natural gas during the first seven months of the year averaged 5.208 billion cubic feet a day, a new record, 10% higher than during the same period of 2005. The increased yield results from the incorporation of new wells in Veracruz and in the Burgos Basin field in northern Mexico.


Burger King expands

Burger King has a presence in 29 of Mexico's 32 states and opened its 300th restaurant in Mexico last month, in Zapopan, Jalisco. The chain plans to add a further 45 outlets within the next twelve months.

 


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: September 1, 2006 by Tony Burton © 2006
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.

All Tags