A highly summarized overview of President Peña’s PND, based on the transcript of his remarks at the presentation ceremony and the document itself, includes the following five principal goals and selected key strategy pillars:

1)      Peace

*  Improve coordination between federal, state and municipal law enforcement agencies

*  Respect human rights

*  Restructure and modernize law enforcement and justice system agencies

2)      Inclusiveness

*  Erradicate hunger

*  Improve equality in access to services such as healthcare

3)      Quality education

*  Update curriculum to help students become competitive in the modern world

*  Generate greater and more effective investment in science and technology

*  Support innovation in products and services with high added value

4)      Prosperity

*  Maintain macroeconomic stability to provide a solid basis for growth

*  Support infrastructure development

*  Improve access for SMEs to services such as telecommunications, energy and credit

*  Upgrade regulatory environments and improve conditions for competion

5)      Global responsibility

*  Defend international law

*  Promote free trade

*  Demonstrate solidarity with the world’s peoples

In addition to the five goals, the PND establishes three “transversal strategies” that will apply across efforts in support of the goals.  These three strategies are:

1)      Democratize productivity: Create opportunities for development in all regions, economic sectors, and population groups, as well as establish incentives for workers to migrate from the informal to the formal sectors.

2)      Accessible and modern government: Make government services both more effective and more accessible to all sectors of the population.

3)      Gender perspective: All puplic policies will seek to promote gender equity in an effort to eliminate sex-based discrimination.

Well, that certainly is a full menu of good intentions, the likes of which the road to hell has been paved here in Mexico every six years going back at least to the administration of Miguel de la Madrid (1982 – 1988).  Pundit María Amparo Casar, in a post on the topic to ADNPolítico.com, calls Peña’s PND document “expensive, demagogic and useless,” and we are inclined to agree.  If the current government achieves all these goals over the next six years then we will be happy to admit we were wrong.  Peace and prosperity for all, however, have long been touted among national goals, and it well may be that things have steadily gotten worse over the years for most of the sectors ostensibly targeted for special attention.  We’re willing to give President Peña credit for an enthusiastic and interesting start, and we support his drive for long-overdue structural reforms.  Maybe this will be the sexenio that finally makes a difference, but from the looks of Oaxaca and Michoacán right now, we’re not counting on it.

Step away from the perimeter

Since bursting out of the gates on December 1, 2012, the Mexican administration headed by President Enrique Peña Nieto of the Partido Revolucionario Institucional (PRI) has gone so totally loco with reform initiatives that they’re starting to bunch up in Congress like a Talladega pileup.  As we discussed in a recent post, it’s remarkable how the new government seems to be taking on everyone and everything at once, including long-time PRI allies and interests heretofore so entrenched that they’re considered national institutions, such as Telmex and Televisa.  Of course, once you start combing through the nuts and bolts of the reforms, often they are not as radical as they are portrayed superficially and provide safety nets of sorts for the affected parties.  Peña and his team have intimated that there are no more sacred cows.  Here in Mexico, however, there are sacred cows and then there are supernaturally venerated pulsating bovine deities like the state oil monopoly, and the mere suggestion that perhaps it’s time they visit the slaughterhouse unleashes truly riotous rending of garments.  Peña’s highly anticipated energy reform is still a ways off as the administration heads into its running start, but in the meantime, the PRI is whetting our appetite with the legislative equivalent of a warmup band: a proposal that would amend the Mexican Constitution to allow foreigners to buy beachfront property in their own names.

In the post-Revolutionary period, Mexican law has taken pains to circumscribe opportunities for non-Mexicans to own businesses or property in the country.  This is not just idle crankiness but rather because Mexico historically has been the target of foreign interventions by powers including the Spanish (if you count colonization), the French, and on multiple occasions, the United States.  Once order was being restored in the 1920s following the Mexican Revolution, the founding fathers of the PRI, ironically enough, began to set out a highly nationalistic program designed in part to prevent domination of the nation’s wealth and institutions by foreign interlopers.  But as a great philosopher once said, that was then and this is now.  Mexico is being heralded breathlessly in business media as the “Aztec Tiger,” we urgently need to direct the world’s attention away from the morass of drug trafficking violence, and Enrique Peña Nieto is working hard to establish himself as a “can-do” president following the last six years of unmitigated bummer under Felipe Calderón.

So back to your private beach in Mexico: Article 27 of the Mexican Constitution currently states that “Within a distance of 100 kilometers from national borders and 50 kilometers from national coastline, under no circumstances may foreigners acquire direct title over land or water.”  The proposed constitutional change would allow foreigners to acquire direct title to land within the designated “prohibited zones” as long it is used exclusively for residential use and not for any commercial pursuit, along with some additional conditions.  When the initiative was introduced and approved by the lower house of the Mexican Congress in late April (it is now under deliberation in the Senate), the hue and cry from the guardians of national sovereignty rained down like hellfire from the sky.  As Congressman Manuel Rafael Huerta Ladrón de Guevara of the Partido del Trabajo exclaimed with the measured restraint characteristic of AMLO-suporters, “We will become slaves in our own land.”

As patriots queue to leap off Chapultepec Castle wrapped in the national flag, however, there’s a wrinkle to this issue that makes it even more of a head-scratcher.  Foreigners have long been permitted to purchase property in the restricted zones for residential use via a mechanism created for this purpose called a fideicomiso. The fideicomiso is a bank trust through which the bank holds nominal title to the property but the beneficiary of the trust is the foreign buyer of the property.  The property is not considered an asset of the bank and may not be used by the bank for any purpose other than being held legally for the benefit of the trust beneficiary.  Despite sounding like a nail-biter to most foreigners, this mechanism is widely used in Mexico by foreigners to buy residential property in the prohibited zones. Outside the prohibited zones, Mexican law allows foreigners to purchase property directly with no need for a fideicomiso.

So here’s how we see it: Changing the law to allow foreigners to take direct title to beachfront residential property will not lift a prohibition on foreigners buying such property, as many already have done legally.  But changing the law will likely boost investment in residential beachfront property by making the process less scary and costly to foreigners, which is in fact the intent of the initiative.  But those opposed to the change see it in a different light, judging from comments posted to on-line reports on the topic:

• These parasites encrusted in the national budget continue to commit TREASON against the NATION.  We have to stop these TRAITORS.

• The moment foreigners are given the right to own property in a country, we are giving up our sovereignty…Mexico is for Mexicans, not for foreigners.

• Little by little the foreigners are taking over our land, and after the expropriation it’s going to be hard to get rid of them if we ourselves are allowing this…

• Just remember what happened in Texas, they let in foreigners and they took over the whole state, this will be the same story since history repeats itself, the first step to colonization…

• How about we abolish the legal penalties for kidnapping then? (Ed. Note: FTW?)

OK that was just for fun because it’s like holding up a mirror to Fox News.  A case can be made to restrict foreign ownership of land along national coasts and borders, but those in favor of such restrictions in Mexico should have made that case long ago.  Our problem in Mexico is not so much that we have bad laws, but that our judicial system is extremely weak and routinely abused and manipulated by corrupt politicians and corporations, both domestic and foreign.  In our opinion, the lack of rule of law and accountability is a far greater threat to the national interest than some duffer in socks and sandals from Regina buying an ocean-view condo in Nuevo Vallarta.  Let’s get over the slogans and take a hard look at what is really holding us back.

• Hotels: U.S. luxury resort developer AM Resorts plans investment of approximately US$500 million in Mexico over the next three years, the company reported.  Locations for new developments under the company’s brands, which include Secrets, Dreams, Now and Sunscape, include Los Cabos and the Riviera Maya beaches of Akumal and Playa Mujeres. (Reforma, April 1, 2013)
• Airports: Mexican airport operator Grupo Aeroportuario del Pacífico (GAP) will invest US$40 million to upgrade its international airport in the western city of Guadalajara.  Projects include expansion of capacity to receive international flights and two new departure gates, the company reported. (Reforma, April 1, 2013)
• Beverage: Mexican beverage bottler Arca Continental, the world’s third largest bottler of Coca Cola, plans investment of approximately US$340 million this year.  Resources will be dedicated to maintenance and upgrades of bottling plants, and may include acquisitions abroad in the beverage and snack sector, the company reported. (Mexican Business Web, April 19, 2013)
• Aviation: Mexican airlines plan investment of approximately US$20 billion to purchase up to 250 new aircraft, the National Air Transport Chamber (Canaero) reported.  Aeromexico plans purchases from Boeing, Interjet projects buys from Airbus and Sukhoi, and airlines Volaris, VivaAerobus and others also plan acquisitions, Canaero reported. (El Financiero, April 1, 2013)
• Electrical: French electrical engineering multinational Schneider Electric will invest US$80 million in Mexico this year, the company reported.  Projects include completion of a research center in Monterrey as well as work on plants and clean energy projects for state-owned oil monopoly Petroleos Mexicanos (Pemex). (Reforma, April 8, 2013)
• Banking: British bank HSBC announced it will invest approximately US$210 million through 2014 to renovate retail branches and add personnel in Mexico.  The bank, which operates 1,040 branches in Mexico, is upgrading infrastructure to permit a wider array of service payments via automated banking machines. (Reforma, April 9, 2013)
• Biotechnology: U.S.-based Scantibodies Laboratory initiated construction on the company’s second laboratory in Mexico.  The US$16 million facility is planned to produce antibody products and will include a cancer treatment center. (Siglo21, April 15, 2013)
• Hotels: At least 10 new tourism developments planned for the Riviera Nayarit on Mexico’s central Pacific coast will add to the thriving development in the region, the Riviera Nayarit Convention and Visitors Bureau reported.  Projects include a US$120 million boutique hotel with residential villas at Punta Mita. (Mexican Business Web, April 18, 2013)
• Industry: French industrial gas producer Air Liquide plans up to US$100 million worth of investment to expand Mexico operations in 2013, the company reported. Air Liquide recently inaugurated a new air separation plant in the northern state of Coahuila. (Reforma, April 15, 2013)
• Logistics: German courier company DHL Express inaugurated a new operations center in Mexico City built at a cost of US$7.3 million.  The center is part of a larger ongoing US$160 million investment to upgrade and modernize the company’s infrastructure and equipment in Mexico, DHL reported. (El Fnanciero, April 25, 2013)
• Chemicals: Mexican industrial group Cydsa began construction this month on a new US$100 million production facility in the northeastern state of Nuevo León.  The plant is planned to make use of cutting edge technology for the production of bleach and caustic soda. (El Financiero, April 29, 2013)
• Real estate: The border state of Baja California inaugurated a major new convention center near the border city of Tijuana, following investment of over US$50 million to complete the project.  The Baja Center can accommodate 12,000 visitors and will host the National Tourism and Meetings Congress this summer. (El Financiero, April 29, 2013)
• Glass: Mexican industrial glassmaker Vitro announced investment plans totalling approximately US$97 million for this year, a 65% increase over last year, the company reported.  Resources will focus on upgrades to equipment and infrastructure in Vitro’s packaging and automotive glass operations. (Reforma, April 30, 2013)

Qué onda

The young administration of President Enrique Peña Nieto –  sworn in December 1, 2012 – has surprised with its zealous effort to push forward major reforms right out of the blocks.  Many of us viewed the return of the PRI with trepidation, considering the party’s long track record of dirty tricks and monkey business through most of the 20th century, but despite our customary distaste for the PRI we support the spirit of Peña’s reforms.  First came a labor reform  proposed by previous President Felipe Calderón and enacted in December.  Then came the education reform, whisked through Congress and signed into law in February against a backdrop of the sensational jailing of nefarious teachers-union despot Elba Esther Gordillo, about which we gloated uncontrollably here.  The big kahuna we are all waiting for is the energy reform, but Peña is working through his battles one by one (so far, mostly with success) and before we get to savor the political theatrics of the energy debate, we will have to resolve the current battle: Telecommunications reform.

Telecommunications covers multiple industry sectors and the technological considerations are so complex, that it is hard to whip crowds into a frenzy with slogans like “Spectrum auctions or death!,”  the way demagogues like Andrés Manuel López Obrador have with cries of “The oil belongs to the people” and whatnot. This has taditionally worked to the benefit of the dominant players because frankly the industry and its corresponding regulatory framework is just too hard to understand for most people.  The result of the early development of the telephone and television industries in Mexico and the cozy relationships between government and corporate leaders is that the original monopolies in these industries still hold extremely dominant market shares, to the detriment of consumers.  But advances in technology over the past 20 years have blurred the once-simple lines between telephone and television, and the internet and satellite television have helped make telecommunications even more broad and complex.  As more developed countries updated regulatory frameworks to keep abreast of technology, Mexico has fallen behind.  Ironically, the political party that worked so hard to create the monopolies in Mexico is now leading the effort that will ostensibly create more competition in the marketplace.  The big players, of course, are hard at work figuring out how to play the eventual reform to their advantage.

The telecommunications reform as presented by President Peña was approved by the Chamber of Deputies and sent to the Senate with observations.  The bill is currently under review by various Senate committees.  Industry specialists are heatedly debating the implications of proposed stipulations regarding arcane but critical issues such as must-carry-must-offer requirements for free-to-air and pay-TV broadcasters and asymmetrical regulations regarding rates charged by Telmex, the dominant fixed-line telephony provider, and smaller service providers.  A hot topic that is easier to summarize, however, is this: América Móvil, the owner of Telmex and mobile telephony leader Telcel, is keen to enter the television market, and television heavyweight Televisa wants to expand its position in mobile telephony.  The reform appears to offer each the opportunity to pursue these aims, in exchange for concessions to reduce their preponderant positions in telephony and television, respectively.  Telmex currently markets pay-TV to its telephone and internet subscribers through an alliance with satellite TV provider Dish, however América Móvil executives have made clear their interest in ditching Dish if regulatory changes permitted them to operate their own pay-TV company.  Televisa, in turn, has a stake in minor mobile telephony operator Iusacell in partnership with its otherwise rival in free-to-air television, Grupo Salinas, owner of the Televisión Azteca network.  Televisa appears similarly attracted to the idea of shedding its strage-bedfellows relationship with Azteca in favor of launching its own mobile telephony business.  Adding more flavor to the television soup, the telecom reform proposes to auction space for two new free-to-air television networks in the country that would be off limits to the two existing networks, Televisa and Azteca.

Interestingly, top brass at the dominant companies in the various sectors have so far been mostly muted in their opposition to the reform, and Mexico’s (and Latin America’s) biggest telecom magnate, América Móvil’s Carlos Slim, has even pretended to be pleased by the prospect of reform.  One aspect that has drawn perhaps the most ire is the proposed creation of a new regulatory agency, the Federal Telecommunications Institute (Ifetel), to replace the existing Federal Communications Commission (Cofetel).  In theory, the Ifetel would have vastly expanded powers to issue and enforce rulings to promote competition, compared with the wan milquetoast Cofetel, routinely brushed aside by the powerful corporations.

Numerous points of dispute have already been raised in Congress regarding the text of the bill, and much deliberation in the Senate and again in the Chamber of Deputies remains before the reform gets a chance at finnal passage.  Most observers project that the bill will pass in some form, however, so if Mr. Peña once again gets his way, we could be on the cusp of a welcome new era of competition in the Mexican telecommunications market.

And once we have this complicated telecom thingy out of the way – drool –  bring on the energy reform!  The speechifying is sure to be so very mad.

• Beverage: Mexican beverage producer Organización Cultiba, exclusive bottler for PepsiCo in Mexico, plans investment of approximately US$157 million in Mexico operations this year.  Resources will be channelled into bottling and distribution operations as well as sugar cane production, the company reported.  (Mexican Business Web, March 6, 2013)
• Telecommunications: Swedish telecommunications giant Ericsson opened a new Global Service Center in the central state of Queretaro.  The US$13 million center is one of four such sites worldwide, and will provide planning, design, implementation and support services to customers in the Americas and Europe , according to the company’s announcement. (TMC News, Ericsson, February 27, 2013)
• Automotive: German auto parts manufacturer Hella will open a new production plant in the central state of Guanajuato this year, the company announced.  The US$100 million project is planned to produce headlamps and rear combination lamps for automotive OEMs in the region. (ProMexico, March 5, 2013)
• Financial services: Spanish-owned bank Bancomer will invest approximately US$3.5 billion over the next four years to expand and upgrade operations in Mexico, the company announced.  Plans include renovating all retail branches in in the country,  upgrading technology platforms for data processing and completing construction of two new operations centers and a corporate office complex in the Mexico City area. (CNN Expansión, March 21, 2013)
• Solar energy: Spanish solar energy developer Isofoton has signed an agreement with the government of the southeastern state of Yucatan to design and build a photovoltaic energy generation site in the state.  The US$360 million facility, planned to begin construction in 2014, is projected to produce 150MW once completed. (NAFTA Works, March 2013)
• Telecommunications: Mexican telecommunications services provider Alestra plans to build a new data center in the central state of Queretaro at a cost of approximately US$61 million.  The new center will provide telecommunications and information technology solutions to corporate clients throughout Mexico through state-of-the-art technology, the company reported. (February 27, 2013)
• Automotive: The state of Queretaro plans to establish a Public Automotive University to provide specialized training specifically to support the central Bajío region’s burgeoning automotive industry.  The project is estimated to require investment of approximately US$63 million.  (Mexican Business Web, March 6, 2013)
• Transport: Rail freight operator Kansas City Southern de Mexico plans investment of US$137 million during the current year, the company announced. Projects include building a rail connection to the Interpuerto Monterrey interior port, adding locomotives and related equipment, and installing new operations management systems. (Milenio, March 13, 2013)
• Retail: Mexican retailer Grupo Sanborns plans investment of approximately US$1.4 billion over the next five years to expand the presence of its sales locations nationwide.  The company operates the Sanborns and Sears department store chains as well as the Mixup music shops. (Mexican Business Web, March 22, 2013)
• Transport: Mexican freight transport and vehicle services provider TIP Mexico will invest US$55 million to support operations this year, the company reported.  Resources will support purchase of new trailers and additional vehicles as well as truck maintenance services. (Mexican Business Web, March 14, 2013)
• Entertainment: Recórcholis, a Mexican-owned operator of family entertainment centers, plans investment of approximately US$11 million this year to open new sites in the cities of Mazatlán, León, Culiacán and Mexico City.  The company operates game and food arcades inside shopping centers in various Mexican cities. (Reforma, March 14, 2013)
• Automotive: Japanese auto parts manufacturer Mitsubishi Electric will open a new manufacturing plant in the central state of Queretaro via investment of approximately US$40 million, the company announced.  The facility is planned to produce alternators and starter motors for the region’s automotive industry. (El Diario, march 19, 2013)
• Food processing: Mexican preserved foods processor Carey will invest US$10 million this year in operational upgrades, the company announced.  The producer of canned chiles, beans and sauces plans to acquire new machinery and equipment to expand their line to include products such as as mushrooms, fruit in syrup and jellies. (Reforma, March 19, 2013)
• Automotive: Japanese auto parts manufacturer Nissin Manufacturing plans to begin construction next month on a new production plant in the northeastern state of San Luis Potosi.  The US$90 million site will produce motor and transmission parts for OEMs such as Honda, Suzuki, Yamaha and kawasaki. (Reforma, March 20, 2013)
• Beverage: Mexican beverage bottler Pascual will establish a new production plant in the western state of Jalisco at an estimated cost of US$5 million, the company announced.  Pascual produces popular fruit flavord soft drinks under brands such as Boing, Lulu and Pato Pascual. (Mexican Business Web, March 21, 2013)
• Automotive: Japanese-owned North American Lighting Mexico plans investment of US$55 million to establish a new production plant in the state of San Luis Potosi, the state government announced.  The facility is planned to produce lights for vehicle OEMs Honda, Nissan and Mazda. (Reforma, March 20, 2013)
• Retail: Mexican pharmacy operator Farmacias Guadalajara plans investment of approximately US$135 million this year to expand its retail presence.  Projects include construction of a regional distribution center in Monterrey and an aggressive pace of new branch openings around the country. (El Financiero, March 20, 2013)
• Automotive: U.S.-based alloy wheel manufacturer Superior Industries is currently seeking a site for a new production plant in Mexico, the company reported.  The planned US$125 million facility is expected to produce over two million aluminum wheels per year. (Rubber News, March 4, 2013)

• Automotive: Japanese bearings maker NSK will invest approximately US$70 million to construct a new manufacturing plant in the central Mexican state of Guanajuato, the company announced.  The new facility, to begin production in 2014, is planned to supply the regional automotive industry in the face of rising demand from the NAFTA zone auto market.  (Reforma, February 5, 2013)
• Animal feed: MaltaCleyton, subsidiary of French animal feed maker InVivo, opened a new pet food production plant in the southern state of Morelos.  The US$18 million facility, the company’s tenth in Mexico, will require corn, wheat, sorghum, vitamins, fat, chicken meal and meat, the company reported. (El Financiero, February 21, 2013)
• Biotechnology: Mexico’s CIMMYT Maize and Wheat Improvement Center inaugurated a US$25 million advanced bioscience research center in the central State of Mexico.  The foundations of magnates Bill Gates and Carlos Slim contributed to the project, which will conduct research in support of seed improvement. (CIMMYT, February 13, 2013)
• Transportation: The Mexican government plans to issue tenders this year for construction of two major new passenger rail lines at a total estimated cost of approximately US$3.2 billion, the Transport Ministry (SCT) announced.  The lines would run from Mexico City to the central industrial city of Queretaro and from the Yucatan state capital of Merida to the Riviera Maya region on the Caribbean coast. (El Financiero, January 29, 2013)
• Retail: Coffee shop chain Cielito Querido Cafe, owned by Mexican inter-city passenger bus operator ADO, will invest approximately US$8 million this year to expand operations.  Plans include the opening of 24 new sales locations in the Mexico City metropolitan area. (El Financiero, February 18, 2013)
• Solar power: Mexican solar panel maker Solartec is investing approximately US$63 million to bring equipment and technology from Belgium to Mexico to produce photovoltaic panels in the central state of Guanajuato.  Outlays will cover purchasing the assets of Belgian manufacturer Photovoltech and relocating them in Mexico to create a new firm to be called Solarcell. (Milenio, February 21, 2013)
• Automotive: Japanese automotive component manufacturer Jatco, a subsidiary of Nissan, announced it will establish a new production plant in the western state of Aguascalientes.  The new facility, Jatco’s second in Mexico, is planned to produce transmissions for Nissan’s new vehicle plant under construction in the state.  (Just-Auto, February 7, 2013)
• Biogas: British renewable energy developer ENER-G signed an agreement with the city of Celaya, Guanajuato to build a biogas plant to produce electricity at the municipal landfill, the city government announced.  ENER-G has already opened a US$5.8 million landfill biogas plant in the city of Aguascalientes and is currently developing another such faclity in the northern city of Durango, according to the company’s own media releases. (El Financiero, February 11, 2013; ENER-G, January 28, 2013)
• Aerospace: France-based helicopter manufacturer Eurocopter formally inaugurated its new production plant in the central state of Queretaro.  The US$100 million facility will join the state’s booming aerospace cluster, producing tail booms and cargo and emergency exit doors, the company reported. (Flightglobal, February 14, 2013)
• Automotive: Japanese auto parts manufacturer Nishikawa Cooper inaugurated a new production plant in the central state of Guanajuato.  The US$35 million site will produce rubber seals for Mazda, Honda and Nissan. (El Financiero, January 30, 2013)
• Ports: The Port of Guaymas on the Gulf of California coast of the northwestern state of Sonora will launch major expansion this year to accommodate rapidly increasing demand for cargo handling.  An initial stage including dredging, signage, landfill, roads and utility infrastructure is slated to begin in April at a cost of over US$200 million. (Mexican Business Web, February 8, 2013)
• Automotive: Japanese auto parts manufacturer Tachi-S began construction on a new production plant in the central state of Guanajuato.  The US$30 million facility will produce car seats principally for the Honda vehicle plant in nearby Celaya. (El Financiero, February 11, 2013)
• Steel: South Korean steel processor POSCO initiated construction of a new plant in the central state of Guanajuato, the company reported.  The US$25.4 million facility is planned to provide steel processing and related services to the region’s automotive and appliance manufacturing industries. (El Financiero, February 5, 2013)
• Automotive: Japanese hydraulic pump maker Kayaba Industry Co. (KYB) announced it will build a new manufacturing plant in the central Mexican state of Guanajuato via investment of approximately US$54 million.  The plant is planned to supply pumps to the Nissan-owned Jatco trransmission plant in nearby Aguascalientes state.  (Kayaba Industry Co., February 7, 2013)
• Aerospace: U.S. corporate group General Electric (GE) plans investment of US$20 million this year to expand operations at its Advanced Engineering Center (GEIQ) in the central state of Queretaro.  The center includes a software validation laboratory and carries out test analysis. (El Financiero, February 14, 2013)
• Steel: Transnational steel giant Ternium began initial production testing at its major new complex in the northeastern state of Nuevo León.  The US$1.1 billion facility will produce advanced cold rolled steel sheet and galvanized steel to supply Mexico’s booming automotive industry. (Reforma, February 19, 2013)
• Energy: Sempra Mexico, subsidiary of U.S. energy multinational SempraEnergy, plans investment of US$1.5 billion in Mexico over the next three years, the company revealed.  Upcoming projecs include various gas and ethane pipelines, a gas storage plant and a wind power park on the U.S. border planned to export electricity to California. (El Financiero, February 19, 2013)
• Automotive: Japanese auto parts maker NSK announced it will establish a new plant to manufacture automotive bearings in the central state of Guanajuato.  The US$70 million facility is planned to open in 2014 to meet growing demand from the region’s surging auto industry. (American Machinest, January 17, 2013)
• Beverage: The Coca-Cola Company will invest US$1 billion in Mexico this year, in areas such as infrastructure, technology and refrigeration systems, the company announced.  Coca-Cola’s Mexico operations include 68 bottling plants and 356 distribution centers. (El Financiero, February 20, 2013)

Gordillo, the longtime head of the 1.5-million member National Education Workers Union (SNTE) is charged with systematically diverting funds from union coffers into personal accounts overseas: that part is no surprise to anyone.  Since her rise to the top of the SNTE through an internal coup in 1989, Gordillo’s ruthless wielding of power, ostentatious flaunting of personal wealth and untouchability despite endless allegations of corruption, influence peddling and even murder have made her a symbol of all that is putrid in the Mexican political system.  In a nation renowned worldwide for corrupt politicians, her sheer venality towers above most others.  And to make horror perfect, the fact that Gordillo ran the nation’s massive public education system untrammeled like a medieval lord – sending millions to Swiss bank accounts while children went without schooling in much of the country – made her and the SNTE perhaps the single greatest impediment to the country’s development (see one of our past posts on this topic here).

The part that comes as a surprise is that new President Enrique Peña Nieto is truly going all-in and throwing Gordillo in the slammer in a preemptive move against the SNTE’s imminent campaign of disruption in opposition to education reform.  The education reform, the first of its kind in decades, was signed into law this past Monday and is seen as an attempt to weaken the vice-grip of the SNTE over the entire education system.  The reform calls for wild-eyed innovations such as teacher evaluations and merit-based hiring that are unacceptable to the union, which operates an entrenched system of hereditary positions and the buying and selling of teaching salaries, which in many cases do not require the ‘teacher’ to go anywhere near a classroom.

The move could be a risky one for Peña, particularly considering the Mexican judiciary’s newfound enthusiasm for releasing detainees based on procedural irregularities.  But Mr. Peña, although youthful, is no innocent schoolboy when it comes to the dark side of Mexican politics.  Going after the likes of Gordillo is like grabbing a crocodile by the tail, and whoever does so better be sure they are not fannying about once the thrashing starts.   We cannot help but imagine that the secret planning sessions between Peña and top henchmen Miguel Angel Osorio Chong, Jesús Murillo Karam and Emilio Chuayffet  to set up the sting were held with the gravity of those called by Hua Guofeng to bring down the Gang of Four in 1976.  The government knows well that if Gordillo is released, her wrath will make the Sixth Seal look like a morning with Barney the Dinosaur, so we can only presume they will use their extroadinary powers to prevail upon the judiciary to see things their way.  Failing that, we’ll have quite the pig’s breakfast on our hands.

The move we are anxious to see now is the response by the SNTE.  At this moment the remaining union leadership is surely locked in frantic debate over what to do next.  The union and its followers were poised to launch a nationwide campaign of protests and disruption in opposition to the education reform.  They now face a high stakes choice: Throw all their resources into a furious defense of Gordillo, including a nationwide strike that would close public schools indefinitely (something that surely would warm the heart of former presidential candidate Andrés Manuel López Obrador), or make the strategic determination that Gordillo’s day is done and effectively abandon her to save what they can of their own instutional influence (while of course sending up smokescreens of hyperbolic protestation).  Unless Gordillo is released soon, we’re betting on the latter.

So let’s bust out the popcorn and see what happens next.  And may the schoolchildren of Mexico win, for once.

Lookin' good

As we have crabbed before in this space, for the longest time it seemed like all you ever saw in the press about Mexico was nasty news about drug trafficking violence.  But at some point in 2012, it was like a new memo went out (and maybe one did), and all of a sudden stories started popping up about Mexico’s economic progress, bright future, and flashy manufacturing industries.  It’s not like our problems have gone away – they certainly have not – but it is nice to see something more positive in the media for once.  After a while we started collecting these stories to enjoy time and time again, so we thought we’d share them so that you can enjoy them as much as we have.

Go on, have a look.  Let’s savor our spell in the golden light of favor while it lasts:

MoneyWeek: Why you should be excited about Mexico

New York Times: Mexico: The New China

Forbes: For American Exporters, Mexico Is The China Next Door

City A.M.: Mexico and Indonesia to eclipse UK’s GDP by 2050

What Investment: Mexico tipped over Brazil for 2013

World Politics Review: At Long Last, Mexico’s Bright Future

Reuters: Credit Suisse bankers see iconic IPOs in Mexico next year

The Economist: From darkness, dawn

Nearshore Americas: Presidential Election is a Win for Mexico

Fox News (!): Study Ranks Mexico as World’s Fourth Best Investment Destination

Foreign Policy Blogs: Mexico’s Growing Middle Class

Wall Street Journal: The Next Emerging Tech Powerhouse: Latin America

Financial Times: Made in Mexico gains ground on China

Reuters: Mexico could pass Brazil as top LatAm economy in 10 years

MoneyMorning: Why Mexico’s Economy Could Be One of the Most Attractive Emerging Markets

Mexico’s construction industry is among the country’s largest industries by value, contributing close to 7% of national GDP through mid-2012.   With an estimated value of US$83 billion in 2011, the sector is the sixth largest by contribution to GDP.   The industry was hit hard by the 2008-2009 recession and did not fully return to growth until late 2010.  After a period of fairly robust growth through 2011 and into early 2012, the pace of expansion slowed in the second half.

Nonetheless, the CMIC is projecting final sector growth of approximately 4.1% for 2012 and up to 5.7% in 2013.  The policies of the incoming government of President Enrique Peña Nieto, who took office on December 1, 2012, are expected to have a major impact on the performance of the sector over the next five years.  If areas such as housing and infrastructure are given priority and resources, the construction industry and its suppliers will benefit from a larger number of projects stimulating demand for materials, equipment and services.  As it is too early to foresee how strongly the new government will support construction, the CMIC is projecting annual growth rates through 2016 in the range of 3.8%, with the possibility that these could rise to 5-6% if the Peña government prioritizes infrastructure projects.

Although the new government’s final National Infrastructure Plan has not yet been presented, Communications and Transport (SCT) Minister Gerardo Ruíz Esparza has identified certain areas planned to receive particular attention.  Most of these focus on large scale transport and logistics projects such as airports, inter-city trains and ports, however Peña Nieto himself and others in his campaign previously have stated his intention to strengthen programs to develop low income housing.  In his inaugural address, the new president also stressed his intention to pursue increased private sector investment in infrastructure development through the recently instituted Law of Public–Private Associations (LAPP), intended to stimulate investment in public works.

In comments published recently on Mexican Business Web, CMIC president Luís Zárate projected that overall investment in construction during the six-year Peña administration could end up doubling that of the recently concluded Calderón government, with 60% of the total coming through LAPP investment.  Construction analysts Bimsa Reports presented a more guarded outlook in recent comments published in El Financiero, however, asserting that 85% of Mexican builders lack a working knowledge of the new LAPP legislation and regulations.  Bimsa asserts that the construction industry is likely to grow at a more moderate pace of 3.5% this year.

Interested in the Mexican market for building materials and equipment?  Drop us a line at info@bdp-americas.com

• Wind power: Japanese investment group Mitsui & Co. announced plans to take a 50% ownership stake in the Mexican wind power generation facility Bii Stinu, currently under construction by a subsidiary of French energy developer EDF Energies Nouvelles.  Mitsui specified the total cost of the project at approximately US$400 million.  (Mitsui & Co., January 9, 2013)
• Construction: Mexican industrial real estate developer Vesta plans to invest approximately US$90 million to construct industrial buildings for Nissan at the Japanese auto maker’s new production site in the western state of Aguascalientes, the company reported.  (Mexican Business Web, January 14, 2013)
• Retail: Mexican grocery and general merchandise retailer Grupo Chedraui plans investment of approximately US$185 million in Mexico operations this year, the company revealed.  Projects include the opening of 20 new stores in the country. (Mexican Business Web, January 14, 2013)
• Health care: Mexican private hospital operator Grupo Star Médica opened a new hospital in the central state of Queretaro, built at a cost of approximately US$47 million.  The facility includes state-of-the-art technology in areas such as medical imaging and obstetrics and gynecology, among others.  Star Médica currently has three other new hospitals under construction. (El Financiero, January 14, 2013)
• Automotive: German auto maker Volkswagen inaugurated a new production plant in the central Mexican state of Guanajuato following investment of US$500 million.  The plant becomes the company’s 100^th factory worldwide and is projected to produce 330,000 motors annually. (El Economista, January 16, 2013)
• Retail: Mexican grocery and general merchandise retailer Soriana plans investment of approximately US$315 million in expansion and upgrades this year, the company announced.  Projects include the opening of 60 new stores, remodeling and expansion of existing stores, property acquisition and logistics upgrades. (Reforma, January 16, 2013)
• Food processing: Swiss processed foods giant Nestlé will invest approximately US$9 million in research and development in Mexico this year, the company reported.  Nestlé executives also noted the company’s clean energy efforts, ultilizing biodigestors and wind energy to power some of its Mexico operations. (Reforma, January 17, 2013)
• Industrial parks: Mexican industrial real estate developer Finsa plans to invest approximately US$137 million in new industrial parks this year.  Projects include infrastructure development in support of the automotive and aerospace industries in the central and northern zones of the country. (Reforma, January 17, 2013)
• Retail: U.S.-based coffee shop chain Starbucks, operated in Mexico by Alsea, plans to open 45 new stores in Mexico this year via investment of US$40 million.  Alsea also operates franchises including Domino’s Pizza, Burger King, Chili’s, California Pizza Kitchen and P.F. Chang’s in the country. (Reforma, January 18, 2013)
• Steel: Mexican corporate group Industrias Lenox began construction of a new steel producing plant in the northeastern state of Nuevo León, the company announced.  The US$200 million facility is planned to respond to increasing demand from Mexico’s booming automotive industry. (El Financiero, January 20, 2013)
• Telecommunications: Mexican telecom service provider Alestra plans investment of approximately US$132 million across its operations in the country, the company announced.  Resources will be put toward infrastructure expansion and upgrades by the operator of services such as telephony, data processing and integrated IT solutions for business. (Reforma, January 22, 2013)
• Chemicals: Swiss specialty chemicals producer Clariant opened a new production plant in the eastern state of Veracruz, the company reported.  The US$20 million facility is planned to produce chemical components for use in the manufacure of consumer goods such as skin creams, shampoos and home cleaning products. (Reforma, January 24, 2013
• Retail: Mexican commercial real estate developer Grupo Inmobiliario Monterrey (GIM) will begin construction this year on a major new shopping center in the northeastern city of Monterrey.  The complex is planned to include leading retailers such as H&M, Crate & Barrel, Emporio Armani and Forever 21, as well as restaurants The Cheesecake Factory and P.F. Chnag’s, the company reported. (Reforma, January 28, 2013)
• Hotels: Mexican hotel operator Hoteles City plans to open 15 new hotels this year in Mexico and Central America, the company announced.  The new sites are slated for cities including Mexico City, Cabo San Lucas, Oaxaca, Puebla, Toluca and others. (Mexican Business Web, January 29, 2013)
• Agriculture: A group of citrus producers will invest approximately US$16 million to build a large scale juice processing plant in the northeastern state of Nuevo León, the state government reported.  The facility is planned to process 800 tons of oranges daily for juice production for export to the United States. (Reforma, January 30, 2013)
• Food processing: A private investment group is investing approximately US$8 million in Mexican food processor Procesa, based in the southern state of Chiapas.  Resources will be channeled to support the company’s operations for packing tuna in bags rather than cans.  (Reforma, January 30, 2013)