Lloyd Mexico Economic Report July 2005
Table of Contents
Record tourism numbers
Airport upgrades
Hotel investments
Broadband popularity
Strong beer sales
French glass firm invests
Guadalajara cityscape
Record avocado harvest
Natural gas terminals
More flexibility for municipalities
Soap operas sold to China
Another wind-farm in Oaxaca?
Canadian Investment in Flowers
Record tourism numbers
Mexico's sun, sand and sights have made it the world's 8th most popular destination. The Tourism Secretariat reports that 5.8 million international tourists visited Mexico during the first quarter of this year, 12.3% more than for the same period last year. The increase is partly due to 17.5% more international scheduled flights serving Mexico.
First quarter revenues from tourism jumped to 3.48 billion dollars, 19.4% higher than 2004, with the average expenditure of visitors who stay more than one night rising to 746.20 dollars. The revenues gained from foreign tourists exceeded the expenditures by Mexicans traveling abroad by a healthy 1.72 billion dollars in the first quarter.
Analysts expect Mexico to play host to more than 22 million tourists during 2005. Special efforts are being made to attract more of the 32 million Chinese tourists traveling abroad each year.
Airport upgrades
Work on remodeling and expanding Terminal 1 at Mexico City's congested international airport is almost complete. Construction of a second terminal, and a shuttle train between the two terminals, is due to commence in August.
Terminal 2 is being built south of the airport's runways, together with a 5-star hotel and 3,000-vehicle parking lot. When the 400-million-dollar project is completed, the airport will be able to handle 33 million passengers a year, 10 million more than at present.
Other airports scheduled for upgrades over the next year include Guadalajara, Mexicali, Puerto Vallarta, Veracruz, Cozumel, Torreón, San Luis Potosí, Zihuatanejo and Monterrey.
Hotel investments
Several major hotel investments have been announced. A 650-hectare site with 1.6 kilometers of coast, 40 kilometers south of Cancún, is being transformed into Mayakoba, a 1.4-billion-dollar luxury resort. The resort's first hotel, a Fairmont, is scheduled to open later this year; five others are planned.
Later this year, the first La Quinta hotel in Mexico will open in Ciudad Juárez, in the state of Chihuahua; the U.S.-based chain is exploring additional possibilities in other cities.
Hilton, another major operator, is adding ten hotels over the next twelve months. The new Hiltons, representing an investment of 200 million dollars, will be in Mexico City, Ciudad Juárez, Los Cabos, San Luis Potosí, Saltillo, Toluca and Puebla.
Broadband popularity
According to market research firm Select, 29% of Mexico's 14.9 million Internet users in 2004 connected by broadband (or high velocity) and 49% by telephone modem. The number of users is predicted to reach 17 million by the end of this year, with an ever-increasing percentage of users opting for broadband.
The most popular ISP (Internet service provider) in Mexico is Prodigy, owned by Telmex. Those who want only occasional connections choose either pay-as-you-go service or rely on Mexico's far-reaching network of independent Internet cafes, which offer high speed connections at inexpensive per-minute rates.
Strong beer sales
A report from the national beer industry says that the country's average annual consumption of beer remains about 50 liters per adult, a figure that has not changed significantly in the last 20 years. Total beer sales in 2004 were worth 6 billion dollars, equivalent to 1.6% of GDP. Sales have risen at about 5% a year, due mainly to increased exports; Mexico has become the world's third largest beer exporter.
The first quarter results for the nation's two largest brewers were outstanding. Grupo Modelo (main brands: Corona, Negra Modelo, Pacífico and Victoria) saw production leap to 15.425 million hectoliters of beer, with domestic sales rising 7.6% and exports a whopping 23.6%, compared with the same period a year earlier.
Fomento Mexicano (main brands: Tecate Light, Indio, Sol, Carta Blanca and Bohemia) produced 5.325 million hectoliters in the first quarter, 4% more than a year ago.
French glass firm invests
The French glass-maker, Saint-Gobain, is investing 100 million dollars in a new flat-glass production line in Mexico. The facility will be built at the group's site in Cuautla in the state of Morelos. Production, due to begin in the second half of next year, will be for both the domestic market and for export to the U.S., Central America and the Caribbean.
Guadalajara cityscape
The Guadalajara skyline will be radically altered within the next couple of years. In the Plaza del Sol area, a 336-meter-high telecommunications building, Torrena, will tower over the long-established shopping center.
Elsewhere, on the northern edge of the city, plans are being drawn up for a satellite branch of New York's famous Guggenheim Museum of modern and contemporary art.
The competition for designing the Guadalajara museum was won by Mexican architect Enrique Norten, whose proposed 250-million-dollar building will rise, like "a brilliant white spire", from the edge of the spectacular 610-meter-deep Oblatos Canyon. Norten's other projects include the Coral Diamante Housing Complex in Acapulco, and the Visual and Performing Arts Library in New York.
Record avocado harvest
Exports of avocados have risen very rapidly from 6,000 metric tons in the 1997-1998 season to 42,000 metric tons in 2003-2004. The 2004-2005 season is breaking all records. At last count, some 67,000 metric tons of avocados, worth 140 million dollars, had been exported, and the season still had a few weeks left.
Mexico's 21,000 avocado growers cultivate 94,000 hectares, mainly in the state of Michoacán, harvesting 900,000 metric tons a year.
Several firms are now exploring ways of adding value to the exports. For instance, one Uruapan-based company is processing 400 tons of avocados a week into a fresh, preservative-free guacamole, which has a refrigerated shelf life of 55 days, and sells for a premium price north of the border.
Natural gas terminals
As many as four more LNG (liquefied natural gas) terminals will be built in the next five years to help the country reduce its dependence on the U.S. for supplies of the fuel. Two LNG terminals are currently under construction: one near Ensenada in the state of Baja California, and the other at Altamira in Tamaulipas.
Mexico has to import natural gas because domestic production has been unable to keep pace with the tremendous rise in demand over recent years. The terminals will allow LNG imports at competitive prices from fields in Australia, Indonesia, Russia and elsewhere.
More flexibility for municipalities
Despite a constitutional reform in 1999 designed to give municipalities more power, they have continued to be controlled almost totally by state legislatures. However, a recent ruling by the nation's Supreme Court has determined that municipalities have more flexibility than previously assumed in addressing their own local problems.
Among activities or issues likely to be affected by future municipal regulations (and subject to municipal fees) are street markets, public festivals, nightlife, sporting events, street lighting, and stray animals.
Soap operas sold to China
A subsidiary of media giant Grupo Televisa, Televisa Networks, responsible for the commercialization of Spanish language channels for Pay-TV, is entering new markets this year: Canada, Australia and China. It is also considering Poland, Israel and Indonesia. Televisa believes that the sizeable Spanish language population in all of these countries will make its programming attractive to suppliers of Pay-TV.
Televisa programs are already viewed virtually everywhere in Latin America, as well as in many European countries. Its most successful programs are its wide-ranging, and often innovative, soap operas.
Another wind-farm in Oaxaca?
The Spanish energy firm Gamesa Energía is planning to build a large wind farm in Oaxaca as part of Spain's commitment to meeting the terms of the Kyoto treaty on climate change. The 200-megawatt wind farm, named "Bii Nee Stipa" ("wind that brings energy" in the local language), would mean an estimated reduction of 400,000 tons a year in the carbon dioxide entering the atmosphere, compared with the effects of producing the same amount of electricity in a conventional power station. Construction should begin early next year.
Canadian Investment in Flowers
Canadian investors are participating in the development of a 600-hectare high- technology flower farm in Ajuchitlán in the state of Querétaro. The project, organized by a company called GEOS, will specialize in ornamental plants and cut flowers. It requires an investment of 280 million dollars and will generate 9.500 direct jobs. Mexico is the third largest ornamental plant producer in the world.
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.
2005 Operadora de Fondos Lloyd, S.A.
© 2005 Allen W. Lloyd, S.A. de C.V.
