Blog entry December 2009

mexbiznews is taking the holidays off. We will resume publication on Jan. 4.

mexbiznews is taking off the holidays. We will resume publication on Jan. 4.

By Erick Falcon
CNNExpansion

According to an old belief in winemaking, one must struggle a bit to get better grapes for wine. Therefore, it is sometimes beneficial to limit risks.

But in Baja California's Guadalupe Valley, the source of 80 percent of Mexico's wines, a water shortage has pushed risk to the extreme.

David Bibayoff Dalgoff, the owner of the Bibayoff vineyard, has had to halt production on 14 hectares of vineyards due to the lack of water. Five of his six wells are dry. Of the 25 tons of grapes that he expected in 2008, he garnered only six. This year, Bibayoff managed to achieve only 40 percent of his normal production.

For seven years, the Guadalupe Valley aquifer has continued to shrink from overuse making grape production increasingly difficult.

But not only the wells drying up, the lack of water is just one of the problems that Guadalupe vintners have dealt with this year.

Increased taxes and distribution costs wiped out almost half their profits. To make matters worse, the economic crisis depressed sales by up to 20 percent and driven away foreign visitors who have made the valley one of Baja California's top tourist spots.

Both large and small producers are going through one of the most complicated scenarios in recent years.

www.cnnexpansion.com/expansion/2009/11/25/El-peor-ano-de-los-vinedos

CNNExpansion/Reuters

Thousands of people have been filling Mexico's stores for weeks as the country begins to emerge from its worst recession in seven decades. But it seems more an illusion resulting from aggressive holiday discount campaigns than a sign of real economic recovery.

While Mexico's recession officially ended in the third quarter, it has yet to regain growth.

As a result, the main shopping centers are betting heavily on discounts, and the temptation is great.

"There are some days left before Christmas, but I found good sales so I took advantage of them," said Teresa Saldivar, a 76-year old woman who lives on a small pension but was buying multiple gifts at a department store.

"It's Very convenient to buy right now," she said.

The holiday scene contrasts with the festive season last year, when anxious Mexicans spent extravagently in the face of the gloomy economic outlook foretold when the crisis erupted in the United States, Mexico's largest trading partner.

Although the economic slump in 2009 exceeded all expectations - a contraction put at 7 percent by the central bank - residents of the huge metropolitan area of Mexico City seem to have regained the desire to buy.

While retailers in the country are fueling that fever with their deep discounts, it might prove to be a risky strategy in which they are sacrificing profit margins in order to sell the highest volumes possible.

"Now we're offering three-day promotions on items that were sold in previous years without any discounts," said Gustavo San Vicente, a worker in a luxury department store in the western part of the city.

The increased sales do not mean that Mexicans have more money in their pockets.

"Stores can be jammed but what these people are buying? They're buying only items that have super discounts and been super promoted," said Raquel Moscoso, an analyst at Ixe Financial Group.

Although final figures for the Christmas sales won't be released until next year, department stores such as Soriana, the second largest retailer in the country, anticipate austere results.

"We don't see a great improvement" over last year," said Aurelio Adan, the firm's chief financial officer.

Last December ended up being a black month for retailers. A rise in unemployment and declining domestic production resulted in collapsing sales by 10.7 percent during the full holiday season, according to industry figures.

In light of that data and the behavior of the economy, the enthusiastic consumerism being seen this December might be a mirage rather than a sign of significant improvement.

www.cnnexpansion.com/economia/2009/12/18/rebajas-navidenas-tientan-a-mexicanos

By Enrique Duarte
CNNExpansión.com

Despite efforts by President Felipe Calderón to retain jobs in the midst of the economic crisis, the maquiladora industry and export manufacturing operations will close 2009 with a loss of 70,838 jobs.

The Figure represents a slight recovery, said Cesar Castro, president of the National Council of the Maquiladora Industry (CNINME). From October 2008 to October 2009, the industry had lost some 125,838 jobs, but it recovered about 55,000 between November and December.

A total of 50 of the mainly foreign-owned factories out of the 5,268 operating in Mexico closed, while others were merged into existing operations.

"Unfortunately, the recession had a massive impact," Castro said in a meeting with the media.

The number of people employed in manufacturing fell 9.3 percent in the ninth month of this year on an annual rate, according to the National Institute of Statistics and Geography (Inegi).

In February, President Calderon launched a program of technical stoppages that allocated about $2 billion to allow firms to temporarily halt production without dismissing employees. Some 500 firms with half a million workers took advantage of the program.

According to Mexican government figures, slightly more than 450,000 workers had their work suspended temporarily under the program, which allowed the positions to be retained.

the program The latest figures from the Mexican authorities state that the program had benefited technical stoppages little more than 450,000 jobs.

Automakers and auto parts makers were the companies that benefitted the most as they saw demand for cars plummet in the United States, where nearly all of maquiladora products are sold.

Among the companies benefiting are the automakers, mainly from foreign investors, who resented the effect of lower U.S. demand.

The maquiladora and other export manufacturing operations expect to close the year with an overall decrease in exports of at least 20 percent.

Castro will leave the CNIMME presidency of the last day of this year. Mónica González, the first woman to lead the chamber, will replace him.

Gonzalez said that just as the manufacturing was among the first to reflect the impacts of  the economic crisis, it also will be among the first to show a recovery, as the sector is closely related to industrial activity in the United States.

Indeed, she said, it already is exhibiting positive signs.

www.cnnexpansion.com/negocios/2009/12/17/las-maquiladoras-pierden-70000-empleos

By Tu Thanh Ha
The Globe and Mail

The $500,000 monthly bribes, the AK-47s smuggled from Arizona, the hit men with monogrammed flak jackets - none of it turned out to be enough to protect Arturo Beltran Leyva.

One of Mexico's most feared drug lords, Beltran Leyva died in a gun battle after hundreds of elite Mexican troops surrounded him and his entourage in Cuernavaca, a resort town south of Mexico City.

Footage from Mexican TV showed masked navy commandos storming a condo complex on Wednesday night amid shouts and bursts of automatic-rifle fire.

Beltran Leyva, 48, was one of five brothers from the Pacific coast state of Sinaloa. At least three rose to run their own cocaine cartel, surviving turf wars that killed hundreds of victims.

The Mexican gang violence disrupted the flow of drugs along the entire West Coast, its impact felt all the way into the United States and to British Columbia's Lower Mainland.

Beltran Leyva was known by many nicknames, including El Muerte (Death), El Barbas (the Beard) and El Botas Blancas, for the white cowboy boots he was said to prefer. He liked to be called Jefe de Jefes, or Boss of Bosses. The mutilated, beheaded bodies of his victims were frequently found in public places with pieces of paper pinned to them carrying that grim signature.

Using private planes, container ships, even submarines, his cartel smuggled tons of cocaine from Colombia and Panama to the Mexican interior and on to the United States, netting hundreds of millions of dollars in profit.

www.theglobeandmail.com/news/world/payback-comes-knocking-for-mexicos-boss-of-bosses/article1404858/

By Elizabeth Ferguson
CNNExpansión.com

The Mexican pharmaceutical industry in 2009 has faced an increase in demand for drugs, while contending at the same time with a rise in medications sold on the black market.

Counterfeiting, theft and illegal sales of samples make up a market of about $2 billion in Mexico annually, according to Guillaume Corpart, Manuel D'Andrea and Enrique Orellana, researchers at the consulting company Kroll.

"It's a problem that has always existed, but now all eyes are on the pharmaceutical market and the magnitude of viruses such as influenza," said Sergio Garcilazo, research coordinator at the Universidad Panamericana's School of Economics and Business Administration.

Mexico's pharmaceutical market is valued at $15.5 billion, of which 12 percent is sold on the informal market, according to Kroll.

During the peak of last year's flu outbreak, smuggled drugs such as Tamiflu and Relenza, suddenly appeared on the black market, when the real medications were being dispensed only through the Mexican Social Security Institute (IMSS).

"Organized crime often focuses on products whose sale is restricted to the market, such as psychotropic drugs or high-demand products," said researchers at Gartner.

www.cnnexpansion.com/negocios/2009/12/16/el-mercado-negro-reta-a-farmaceuticas

By Alfredo Corchado
The Dallas Morning News

It's that time of year, when largely abandoned communities in Mexico show signs of life with the return of thousands of immigrants bearing gifts and a longing to reconnect with their homeland.

But this year the parties will probably be more subdued than usual.

The struggling economy in both the United States and Mexico and drug-related violence south of the border are expected to keep away many of the 1 million or so expatriates who normally return annually for the holidays.

"I've told my daughter, as painful as it sounds, stay away," said Perla García de Valencia, whose daughter, Isabela, lives near Waco. "Mexico is not safe, and where are the jobs? There's nothing here in Mexico."

Central Guanajuato state has a large population of its sons and daughters living in North Texas. In Dolores Hidalgo, tucked in the hills of Guanajuato, residents are bracing for a lean and lonely winter. In addition to staying away, immigrants are sending less money home through remittances, and civic leaders are concerned.

Mayor Pablo González Cansino estimates that 25,000 former residents of Dolores Hidalgo now live in Texas. The city, along with surrounding communities, has a population of 147,000.

Usually about 3,000 people return for Christmas, but this year the mayor expects only half that number. The area is already hurting financially because of the drop in remittances, he said, and worries about drug violence are keeping many away.

"Having people return to their land helps families and their pain of separation, and it helps our economy, too," González said.

The government announced this month that money sent from abroad through remittances plunged 35.8 percent in the third quarter from a year earlier, to $1.6 billion from a record $2.6 billion in 2008.

In Dallas, authorities say the stream of immigrants seeking permits to return home is steady. But in Mexican states with large immigrant populations in North Texas, the holiday boost is expected to be smaller this year.

"We expect less people and less money this year," said Victoria Labastida, mayor of San Luis Potosí. "And that's unfortunate because these migrants aren't just our pride and joy, but they also represent Santa Claus for so many families who anxiously wait for the holidays to see their loved ones."

During the Christmas season, it's not unusual for immigrants to return driving new vehicles packed with everything from bicycles, TVs, computers and cash.

"There will be other holidays," said Lucia Jimenez. "But no one is happy about being apart this year."

www.dallasnews.com/sharedcontent/dws/news/world/mexico/stories/DN-stayingaway_17int.ART0.State.Edition2.4bf4ce9.html

By Enrique Duarte
CNNExpansión.com

The reduction in the number of deputies and senators proposed by President Felipe Calderón not only would prompt changes in the democratic regime but also significantly reduce spending, observers say.

As part of a sweeping policy reform Calderon proposed on Tuesday, the number of members of the Camara de Diputados from 500 to 400 and of the Senate from 128 to 96.

This would translate into less spending on legislators' salaries as well as such perks as cars and drivers, staff and consultants, telephone and other communications services, entertainment expenses and others as well as the money spent on campaigns.

Jose Luis de la Cruz, a professor at Tecnológico de Monterrey, estimated that reducing the size of the legislature would save between $157 to $236 million.

In exchange for reducing their numbers, deputies would be eligible for up to three additional three-year terms in office and senators could be re of-elected to an additional six-year term, for a limit of 12 years for both, under Calderon's proposal.

Earlier this week it was revealed that each senator will receive around $18,360 in bonuses for each of the six years in office. Senators have a base salary of $12,607 a month.

Deputies, meanwhile, receive some $5,121 in bonuses and a salary of at least $148,000 a year.

www.cnnexpansion.com/economia/2009/12/15/ahorro-en-gastos-con-menos-legisladores

By Elizabeth Ferguson
CNNExpansión.com

The holiday season is here and with it Mexico's airlines are making a final push to try to offset a horrible year in which they encountered a fuel increase, the economic crisis, an erosion of Mexico's image because of the drug war and the A/H1N1 flu outbreak.

To mitigate their losses, airline companies have created promotional strategies to increase passenger flow during the December holidays and into next year.

Aeroméxico, for example, has launched several reduced fare promotions throughout December called "Celebrating Christmas with your Family is Irresistible." It also is offering lower-cost tickets good for three to 10 months if purchased before Dec. 18.

Mexicana, at the same time, has launched a "Grand Christmas Sale" offering 40 percent discounts on flights from international destinations like Los Angeles, La Vegas, Chicago, San Francisco and San Antonio.

"The market for commercial airlines in Mexico was depressed by the high costs of fuel a few years ago and this impacted the prices charged customers," said Gerardo Aparicio, a specialist in economics and finance at the Universidad Panamericana.

Foreigners who travel to Mexico to escape the cold, Mexicans returning home and the holiday season are the targets of numerous promotions that airlines are introducing, said industry analyst Fernando Gomez.

In the past six months, airlines also have been adding additional routes, which should help them gain more passengers with vacation packages in hopes of bringing ridership up to levels before the spring influenza outbreak, Banamex Accival noted in a report.

In 2010, the report said, the stabilization of the domestic airline industry and the absence of another flu outbreak could help the sector's recovery.

Mexico's airlines are expected to lose a total of $11 billion in 2009, according to the International Air Transport Association (IATA). Next year, the loss might decrease to $5.6 billion, mainly because of high fuel costs.

As of October this year, Mexico's airlines have transported 20.31 million passengers on domestic flights and international routes, according to the Directorate General of Civil Aviation of the Ministry of Communications and Transport.

The airlines "have to continue to attract the traditional market that appears at the end of the year," said Gomez. "And they need the new partnerships they have formed recently with groups of international airlines to give them better prospects next year than last year."

The analyst said that the current promotions should help capture an international market that Mexico lost this season to  countries like Brazil, Costa Rica and even Argentina.

www.cnnexpansion.com/negocios/2009/12/15/aerolineas-despegan-con-las-ofertas