Blog entry November 2009

From El Semanario,
CNNExpansion and Reuters reports

In a speech Sunday marking the mid-point of his term in office, President Felipe Calderón said he will seek measures to allow legislators and mayors to be re-elected and to introduce citizen referendums and initiatives.

Calderon, making the address from the central courtyard of the national palace Los Pinos, said these and other substantive changes are necessary to forge a new relationship between the three branches of government and to change the political dynamic that keeps the country from advancing.

The inability of legislators to seek re-election has been criticized because officials have little desire to serve their constituencies while in office and, instead, focus on building power and wealth.

The reform was among numerous measures Calderon initiated, including giving the Supreme Court the right to initiate legislation, shrinking the size of the congress, amending the law on amparos, and giving the media more access during elections.

He also said more public-finance reforms are needed to offset waning oil revenue and make the country more competitive.

Lawmakers this month passed a 2010 budget with a watered-down version of Calderon's original fiscal overhaul plan, which would have increased the number of people who pay taxes in Mexico.

"While a package was passed that resolves the most immediate problems, it is still far from a long-term solution to the structural problems Mexico faces," Calderon said.

Fitch Ratings cut Mexico's sovereign debt rating by one notch last week, punishing the country for political gridlock that has prevented meaningful economic reforms since seven decades of one-party rule ended in 2000.

Mexican oil production has slipped about a quarter from a 2004 peak as reserves in the Gulf of Mexico dry up, hitting government finances as oil funds more than a third of the federal budget.

Also holding the economy back, monopolies or near-monopolies hold sway over key industries such as energy and telecommunications, keeping costs high for companies.

Calderon said those issues also will be addressed and sectors opened up during the final three years of his presidency.

http://www.elsemanario.com.mx/news/news_display.php?story_id=28856; http://uk.reuters.com/article/idUKN2940846820091129">www.cnnexpansion.com/actualidad/2009/11/30/calderon-anuncia-reforma-para-reeleccion; http://www.elsemanario.com.mx/news/news_display.php

By Barbara Anderson and Adolfo Ortega
CNNExpansion.com

One Sunday last summer, Cemex chairman Lorenzo Zambrano got up early at his home in the San Pedro Garza Garcia neighborhood of Monterrey. For one of the first times the self-confessed workaholic contemplated just going back to bed.

Zambrano had spent the previous night with close relatives. A few hours before the get together, he had received word from his team in Madrid that negotiations to refinance Cemex's debt were not going well.

"It hurt a lot, but it was what was happening, many were even betting against Cemex, and that gave me more courage. We had been told that there were people spreading rumors against the company to cause the stock price to fall and make money doing it," he said.

But then he remembered what one of his advisers told him days before: “The markets don't believe that Cemex can fail."

Eventually, in August, he signed a new agreement with the company's creditors (almost a hundred including banks and private investors) that gave it more time to pay, but also imposed new restrictions.

"This was the first time that we had experienced this situation, and we do not want to live through it again," said Cemex's vice president of finance, Hector Medina.

www.cnnexpansion.com/expansion/2009/11/12/Asi-lo-hice

By David Jones
Reuters

Three brewers are interested in buying Mexico's FEMSA Cerveza in a $7.5 billion plus auction, with SABMiller the frontrunner in a deal likely to be sealed in January, sources close to the situation said Friday.

Europe-based brewers SABMiller and Heineken are both keen to buy one of the last big emerging-market brewers, while Japan's largest brewer, Kirin Holdings Co., has asked for details on the brewer, which was effectively put up for sale last month.

"There are three groups looking at FEMSA. SABMiller and Heineken are in deep discussions, while Kirin has shown some interest," said one source with knowledge of the situation.

American brewer Molson Coors looked at FEMSA's beer operations but backed away, largely reflecting the big loss it made buying Brazilian brewer Kaiser in 2002 then selling it to FEMSA in 2006, the sources said.

In early October, FEMSA said it was in talks with several parties to explore opportunities involving its beer business, and FEMSA's controlling family shareholders have already held talks with SABMiller, according to sources.

All parties declined comment on the matter.

The main stumbling block appears to be price, with FEMSA looking for $9 billion for its beer business while the Miller Lite and Peroni brewer SABMiller and some analysts see a more realistic price around $7.5 billion.

FEMSA Cerveza has operations in two of the world's six biggest beer markets, being the No. 2 player in the Mexican beer market with a share of 42 percent and No. 4 player in Brazil with a relatively small share of around 7 percent.

The so-called FEMSA families own nearly 39 percent of the FEMSA group which owns brewing, soft drinks and retailing interests and controls 75 percent of the voting share, so is key in any talks, and sources say they are looking for a stake in an enlarged group to keep an interest in the beer industry.

www.reuters.com/article/asiaMergersNews/idUSGEE5AQ1X520091127

By Landon Thomas Jr.
The New York Times

Of the many economies that gorged on debt in the boom years, Dubai stood out.

In the space of a few years the emirate’s investment arm, Dubai World, racked up $59 billion in debt, borrowing to build lavish developments like a giant island shaped like a palm tree and to invest in glittery properties abroad like the MGM Grand Casino in Las Vegas.

On Wednesday, Dubai requested that Dubai World be allowed to skip six months of interest payments on its debt.

The resulting fear that Dubai might not be able to pay its bills sent a wave of uncertainty rippling through markets, including Mexico's Bolsa de Valores, just as investors thought the worst of the global financial instability was over.

In a worst-case contagion, Bank of America analysts wrote Friday, “One cannot rule out — as a tail-risk — a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s.”

www.nytimes.com/2009/11/28/business/global/28dubai.html

By Jason Lange
Reuters

Mexican central bank Gov. Guillermo Ortiz soon could be shown the door after clashing with President Felipe Calderon last year on interest rate policy.

Ortiz' six-year term ends on Dec. 31, and Calderon said on Wednesday he had not decided whether the central banker should stay.

The monetary policy chief, who is well-liked on Wall Street for bringing down inflation and bolstering the Banco de Mexico's independence from politicians, has not said publicly whether he wants to stay on for another unprecedented term.

"The presumption is that Ortiz will not stay," said Raul Feliz, an economist and central bank watcher at the Center for Economic Research and Teaching in Mexico City.

"There have been a series of signals that suggest the personal relationship between him and the president is not good," he said.

The rate hikes of 2008 showed Ortiz would not bow to political pressure and Calderon's administration said it would respect the central bank's independence. However, Calderon appeared to throw more jabs at him.

www.reuters.com/article/GCA-Economy/idUSTRE5AP3SP20091126

By Elizabeth Ferguson
CNNExpansión.com

Regaining control of the Asarco mine in Arizona, the possibility of an end to the Cananea mine strike and the start of operations in Peru might give Grupo Mexico a very good 2010.

Operations are expected to occur amidst an increase in the price of copper, which could put the company in a sound financial position over the next year despite having to spend large sums to regain control of Asarco and, if the strike ends, rehabilitate Cananea and put it back into operation.

"The recovery in copper prices and the company's ability to raise production by 40 percent are two key catalysts that make Grupo Mexico one of our favorites for investment," said Actinver Casa de Bolsa analyst Francisco Suarez.

Copper prices have been driven by record imports and low inventories in China.

Grupo México is Mexico's largest mining corporation and the third largest copper producer in the world.

The company was founded by Raul Antonio Escobedo and Germán Larrea Mota-Velasco in 1988. After the government of Carlos Salinas declared the state mining company bankrupt, Larrea, now chief executive and one of Mexico's richest people,  purchased key copper mines in Cananea and Nacozari, Sonora, as well as numerous other mining sites.

In 2004, Grupo México purchased a controlling interest in the Southern Peru Copper Corp.

Grupo México has been in continual conflict with Local 65, the traditionally militant Cananea branch of the Mexican Mine Workers' Union (SNTMMSRM). During miners' strikes in January 2003 and October 2004, Grupo México responded with threats to close the Cananea mines.

If the company can settle the dispute and restart operations at Cananea in 2010, it could in three months time increase its installed capacity by 26 percent, said a report by the Ixe Financial Group.

"Grupo Mexico has all the conditions for a good story in the sense of investment," said Actinver's Suarez. "We're going to see the company targeting what it always has done well, which is to reduce the unit cost of production and establish itself as one of the largest producers (of copper) in the world instead of being distracted by legal issues."

www.cnnexpansion.com/negocios/2009/11/26/gmexico-tendra-final-feliz-en-2010

El Semanario

The journalist Dolia Estevez revealed in her El Semanario column on Thursday what has an been open secret in Mexico: that the U.S. Central Intelligence Agency spied on Mexican political figures, painters and writers.

According to documents Estevez obtained, the CIA in the wake of the assassination of U.S. President John F. Kennedy probed the February 1963 phone records of as many as 31 individuals or institutions, most notably that of former President Lázaro Cárdenas, the painter David Alfaro Siqueiros and writer Enrique Gonzalez Pedrero.

Also among the spying subjects were governmental institutions such as the Confederation of Latin American Workers (CTAL), the National Liberation Movement created by Cardenas in 1961, and the embassies of Cuba, the Soviet Union and Czechoslovakia.

It is suspected that the operation was undertaken in conjunction with the CIA's probe of Lee Harvey Oswald's activities and possible dealings with the embassies of Cuba and the Soviet Union before the assassination of Kennedy.

www.elsemanario.com.mx/news/news_display.php

By Hiroshi Takahashi
CNNExpansion.com

The prestige of the Atlas soccer club of Guadalajara and renowned coach Enrique "Ojitos" Meza prompted hundreds of investors to give their savings to Diversity Capital, a conglomerate of companies, two San Diego men and and a Mexican before they were charged last summer with committing a $14 million fraud.

The promise of extraordinary returns, bolstered with images of "Ojitos" Meza and former soccer player Omar Blanco and ads linked to the national soccer league were used to steal the life savings of hundreds of U.S. and Mexican citizens.

"Many people lost a lot of money," said Keith L. Miller, a Boston lawyer representing many Diversity Capital victims. "Many sold their houses to invest. Now they have debts, and many have no home and no money to get out of the problem."

On July 29, the U.S. Securities and Exchange Commission revealed that it had charged two individuals from San Diego and one from Mexico and their four Southern California entities with securities fraud for operating a Ponzi-like investment scheme that spanned the U.S.-Mexico border in attracting investors.

According to the SEC's press release, Diversity, the related companies and Damian Meneses, 37, Edward Lantz Ferguson, 37, and Juel S. Ley Jr. promised investors guraranteed returns based on profits from foreign currency trading.

In fact, the agency said, the defendants used investor funds to pay other investors' returns, for their own personal use or to send money to other entitites or persons related to them.

Most of those defrauded in the Diversity scheme, said Miller, are Mexicans or Hispanics from Southern California, Texas and Arizona.

The close relationship with the national soccer league and the stars associated with it were a major lure in persuading investors to give up their savings. They were offered the special privilege of meeting and mingling with the soccer stars.

Meza declined to discuss the alleged fraud or his role in it. "It's a very sensitive issue for me," he said.

www.cnnexpansion.com/expansion/2009/11/12/La-piramide-tapatia

By Elizabeth Ferguson
CNNExpansión.com

The long-awaited tender for wireless frequencies is intended to generate greater competition in the telecommunications sector. But, so far, it is unclear which companies might gain market share and how consumers would benefit.

Mexico on Monday launched an auction for blocks of frequencies for wireless telephone with a spectrum totalling of 120 MHz with the aim of giving new players entry to the wireless market dominated by giant America Movil controlled by billionaire businessman Carlos Slim.

Yet the rules do not provide a glimpse into what will happen when 3G technology evolves, telecom experts noted on Tuesday.

3G refers to the third generation of mobile telephony (that is, cellular) technology. The third generation, as the name suggests, follows two earlier generations.

The International Telecommunications Union (ITU) defined the third generation (3G) of mobile telephony standards – IMT-2000 – to facilitate growth, increase bandwidth and support more diverse applications.

Bids in Mexico's auction will be for a concession that covers 20 years without taking into account developments of new 4G technologies, which already are in development around the world and could begin to be implemented in about two years, according to International Telecommunications Union.

4G technologies could work with Internet applications, combining them with tools like Wi-Fi or WiMax, according to the Wireless World Research Forum.

"The agony is prolonged, because we have not seen anything new, especially in the case of investors who will have to wait two months for the next step," said Erasmo Rojas, a regional director at 3G Americas.

There also are no specifics on the range of the spectrum, he noted.

"The Federal Competition Commission (CFC) considered 80 MHz. The Federal Telecommunications Commission (Cofetel) and the Ministry of Communications and Transport (SCT) considered 90 MHz. But we don't know the bandwidth," he said. "In addition, its unclear if there's is 40MHz set aside for any new entrant."

The top of the range might be key to which companies will enter the competition and how they will structure their bids, he said.

Winners will not be selected until the second quarter of 2010.

www.cnnexpansion.com/negocios/2009/11/24/licitacion-de-espectro-prolonga-agonia

By Richard Marosi
Los Angeles Times

Reporting from Tijuana - Driving into Mexico has been a largely hassle-free experience for decades: There were few customs inspectors, even fewer gates, and for most border crossers, no questions asked.

That's about to change.

The Mexican government is modernizing its ports of entry along the border, including its biggest crossing in Tijuana. The new infrastructure -- which includes gates, cameras and vehicle scales -- is meant to help curtail the flow of drug money and weapons to Mexican organized crime groups.

But bolstered security means more border-crossing logjams, and business and trade groups fear that the new measures will deal another blow to a fragile regional economy.

The System of Supervision and Vehicular Control is still in the testing phase ahead of its scheduled January rollout, but traffic jams already occur regularly at peak crossing times in late afternoon. Cross-border trips from San Diego that once took five minutes can take an hour or more.
www.latimes.com/news/local/la-me-border-crossing25-2009nov25,0,3756431.story