• Retail: DIY retailer Home Depot announced investment of US$115 million in Mexico in the current year, principally for the opening of five new stores.  The leader in its segment in Mexico, Home Depot projects 85 retail locations in operation by the end of 2010.
• Environmental:  The North American Development Bank (NADBank) has ramped up its financing of environmental and other infrastructural projects in Mexico’s northern border zone over the past three years, local media report.  Projects in Mexico financed by the bank during this period include 32 water treatment plants, 50 drainage and potable water systems and 12 solid waste landfills.
• Telecommunications: Telecom service provider Nextel projects investing up to US$1.5 billion in the construction of new network infrastructure.  Nextel recently won a nationwide spectrum auction in Mexico in partnership with television broadcast giant Televisa.
• Aerospace: U.S.-based aircraft manufacturer Hawker Beechcraft is currently constructing a new production plant in the northern city of Chihuahua.  The US$108 million facility, set to produce aircraft assemblies and subassemblies, will become the company’s second manufacturing plant in Chihuahua, further bolstering Mexico’s robust aerospace sector.
• Automotive: General Motors de Mexico announced projected investment of US$500 million in the northern state of Coahuila to produce a new generation of eight-cylinder motors as well as a new vehicle platform.  Projects supported by the new investment are planned to begin this year with actual production set for 2011.
• Franchising: Fast-food chain Burger King announced 2010 investment of approximately US$15 million in order to open 20 new restaurants in Mexico.  The chain’s Mexico expansion also will include doubling the number of “dessert kiosks” from 18 to 36.
• Automotive:  Automaker Volkswagen announced new planned investments of up to US$1 billion over the next three years in its Mexico operations.  Projects under the program include modernization of the Puebla plant to produce the next generation Beetle and construction of a new plant to produce a new generation of motors for Mexico and U.S. auto production.
• Energy: Mitsui Power America, affiliate of Japanese multinational Mitsui, announced projected investment of up to US$2.5 billion in Mexico over the next five years.  The company recently acquired five electricity generating plants in the country and plans further expansion in the energy sector.
• Automotive: Nissan Mexicana plans to invest US$600 million to begin producing two additional auto models at the company’s Aguascalientes plant in 2011 and 2012.  Mexico was chosen over various Asian countries considered for the production of the new versions of Nissan’s March model.
• Food Processing: Mexican dairy processor Lechera Guadalajara opened the country’s second largest milk dehydrating plant, following investment of approximately US$10 million.  The company is also currently building an additional plant to produce cheese and candy.
• Energy: The western sate of Jalisco will get its first wind energy park by the end of 2011, currently in development by Eoliatec de Mexico.  The US$100 million facility is projected to have a total capacity of 60MW, which will be supplied to the Federal Electricity Commission (CFE).
• Real Estate: AMResorts announced plans to build two luxury hotels in Puerta Vallarta through investment of a projected US$150 million.  The project is hoped to help reactivate long sluggish hotel development in the area.
• Paper: Mexican paper and packaging materials manufacturer Bio-PAPPEL will invest approximately US$250 million over the next four years to build five new production plants.  Formerly known as Corporación Durango (Codusa), the firm plans to incorporate electricity generating plants into each of its new production facilities.
• Infrastructure: The Mexican government is projecting private sector investment in infrastructure development of up to US$34 billion between 2010 – 2012.  The largest share of the investment is expected to be in telecommunications, with roads, ports, water management and airports receiving significant capital as well.

The good news is that for the moment, the worst appears to have passed.  While the economy is by no means charging back, it did register positive GDP growth in the third quarter, following four straight quarters of contraction.  The damage is done, however, and central bank Banco de Mexico is projecting overall GDP growth for 2009 at approximately -7.0%.  The effect on employment has been devastating, with manufacturing chamber Coparmex estimating that some 600,000 jobs were lost during the year.  Inflation was held relatively stable at approximately 4%, although this is projected to rise in 2010 presuming a rebound in internal markets.  Mexico’s currency has hit a volatile patch at year end.  The peso depreciated from about 13.2 to a high of 15.5 in March, before stabilizing at around 13.5 for most of the year.  The dollar suddenly dived against the peso in the last week of November, reaching as low as 12.3 before creeping back up to about 12.9 at the time of this report.

Economic analysts in local media seem to be trying to will the economy back to life, and some small gains are being registered, such as department store sales in the third quarter and new jobs in certain manufacturing sectors.  A stronger recovery, however, will have to overcome some formidable obstacles.  Facing a growing budget deficit, the Mexican government recently passed a 2010 economic package that includes a raft of tax increases on items such as income and retail sales.  This, taken together with proposed hikes in Mexico City on hotel occupancy and public transportation, won’t help domestic consumers loosen the purse strings.  Credit to consumers and businesses has been extremely tight this year, with no apparent trend toward loosening on the horizon.  Ultimately, however, the biggest factor in Mexico’s economy will be the pace of recovery in the United States.  With over 80% of the country’s exports going to the United States, consumption in Mexico’s northern neighbor will have a major impact on job creation and in turn the reactivation of the domestic market.

While the story of 2009 is undoubtedly the deep recession, some sectors in Mexico have done remarkably well, and are actually thriving despite current economic conditions.  One such sector is aerospace.  Mexico has become a world-class player in this industry over the past decade, drawing over US$32 billion in aerospace manufacturing investment since 1990.   The number of companies in aerospace manufacturing, maintenance and related support services in Mexico has grown from 61 to 194 over the past four years, and export sales are projected at US$3.4 billion for 2009.

While aviation itself overall slumped in 2009 along with the economy, one subsector has become a growth industry: Private air transport for executives.  This niche is set to buck the trend and post positive growth for the year, with sector leader Aerolineas Ejecutivas (ALE) projecting 12% growth for 2009.

Mexico’s energy industry has long been restricted exclusively to the state, but steps taken in recent years have allowed increasing opportunities for participation by the private sector.  Changes in public policy combined with the global surge in interest in alternative energy sources have made this sector a focus of investment in Mexico.  On the electricity side, major wind generation plants are in development or construction in the southern Isthmus of Tehuantepec region and along Mexico’s northern border with California.  Solar equipment manufacturing and power generation has received considerable attention as well.  Japanese manufacturer Kyocera opened up a second major plant in Tijuana this year to produce solar modules, and the state of Durango presented a proposal to construct a “solar cluster” industrial site to host both equipment manufacturers and solar electricity generation plants.  Biofuels are also drawing interest in Mexico, with research and development underway on fuels produced from materials such as jatropha, sugar cane, corn, palm oil and tallow, among others.

Another industry that has thrived in Mexico despite the recession is software development.  Anchored in the city of Guadalajara and surrounding state of Jalisco, Mexican software engineers both develop their own software and provide “nearshoring” code writing services to software companies in California and elsewhere.  Jalisco boasts over 200 information technology companies, and national IT organizations are projecting 11% growth for the sector in 2009 at a time when most other industries are facing contraction for the year.

For U.S. food and food ingredients exporters, Mexico continues to represent a market of interest.  The national farmers’ confederation (CNC) reported this year that Mexico’s dependency on imported food products is growing, particularly in corn and oilseed products. In 2008 Mexico imported 9.1 million tons of corn and 4.0 million tons of oil seeds.  Corn and oil seed imports are expected to increase by 10% in 2009 due to losses in domestic production caused by a drought earlier in the planting season.

On balance, Mexico heads into 2010 facing enormous challenges, but not without cards to play.  The drug wars continue to consume a significant share of public resources, but ultimately reactivation of internal and export markets will have to drive the recovery.  If the United States is able to accomplish even moderate economic recovery in the coming year, the resulting boost to Mexican manufacturing should provide an important push toward reverting 2009’s downward trend in employment and consumer spending.  And this, in turn, can only benefit trading partners seeking to export industrial On balance, Mexico heads into 2010 facing enormous challenges, but not without cards to play.  The drug wars continue to consume a significant share of public resources, but ultimately reactivation of internal and export markets will have to drive the recovery.  If the United States is able to accomplish even moderate economic recovery in the coming year, the resulting boost to Mexican manufacturing should provide an important push toward reverting 2009’s downward trend in employment and consumer spending.  And this, in turn, can only benefit trading partners seeking to export industrial technology and consumer goods to Mexico.

An organization called Impulso Verde 2.0, with support from a range of public and private agencies and NGOs, has launched a call for projects to turn clean technology ideas into workable businesses.  The program, in the form of a contest, seeks proposals from individuals and micro and small businesses in areas such as renewable energy, energy efficiency, transport, sustainable construction and water and waste management.  The program calls for 64 proposals to be chosen by a panel of experts to compete against one another throughout various rounds, in areas such as concept, business model and marketing strategy.  Participants will receive advising in business development through a series of workshops and seminars, and ultimately one first prize winner and four second prize winners will be selected.  Winners will receive cash grants and opportunities to secure financing from investors.  The stated objective of the program is to support small businesses, entrepreneurs, researchers, students and inventors in developing their new ideas and technologies into functioning businesses to be applied in Mexico.

Full details on the Cleantech Challenge are available here:

www.cleantechchallenge.org

Down with the Gang of Four?

Amidst the wailing, gnashing of teeth, rending of garments and general raging rumpus that gushed forth in the wake of the liquidation of Luz y Fuerza del Centro (LyFC) last week, one interesting detail escaped us, until now: a rather modest paid advertisement in Reforma taken out by the Mexican Wind Energy Association (AMDEE).  The ad states simply, “Muchas Felicidades Señor Presidente.”  Now, unless President Calderón and his wife were celebrating their anniversary last week, we presume the congratulations refer to the dissolution of the electric company.  Seems straightforward enough, but the more we think about it, the little ad reads like a Mao-era Chinese wall poster.  The congratulations without any mention of the topic (birthday? Tae Kwon Do medal?) is uncharacteristically coy for this form of communication, even though the message is presumably implicit under the circumstances.  Mexico’s major wind farms, located far from the capital, certainly don’t compete with LyFC in power generation, and LyFC bought most of its power from the CFE anyway.  If the ad appeared only in Reforma (we don’t know if it appeared elsewhere), was it intended as an intimation of fellow-travelership aimed at the paper’s pro-business, pro-private sector readership?  But word, of course, gets around in this talky town.  If the ad appeared in the Pravda-like La Jornada, it would be perceived as a deliberate poke in the eye by that paper’s readership.  One would think the AMDEE would take pains to keep its image associated with more progre-friendly concepts such as “green,” “eco,” “carbon-neutral,” and whatnot, so why stick their necks out when danders are up?  We found no mention of the LyFC topic on the organization’s web site.  Considering that AMDEE’s membership includes numerous multi-national energy companies, we can only surmise that the cryptic ad is a winking affirmation of AMDEE members’ support for eventual privatization and opening up of Mexico’s energy sector in general.  But then again, to borrow a phrase from Ed Grimley, it’s difficult to say.

The union and its supporters have every right to protest, and surely they will continue to do so for the foreseeable future.  Mexico City Mayor Marcelo Ebrard, a member of the union-supporting political party PRD, even took the disgraceful decision of evicting the International Book Fair from the city’s central Zócalo plaza in order to turn it over to the union for their protest.  This outrageously partisan political act by the mayor is particularly contemptible considering that Mexico’s low educational level is likely the single most debilitating obstacle to the country’s development.

We feel that the president’s decision to dissolve LFC was a difficult but very necessary measure.  Those opposing the move are raising a range of furious arguments in seeking to block and annul the decree, however none of these arguments is related to the actual provision of electricity to Mexico City.  Opponents argue that the government is exercising unacceptable interference in an autonomous union; that it is putting workers out of a job in the midst of an economic crisis; that the move will lead to privatization of the energy supply; that it is a manifestation of the oppression of the working class by the bourgeoisie; and other hoary canards used regularly here to justify corrupt unions and incompetent state-owned industries.  No one, not even opposition icon Andrés Manuel López Obrador, disputes that LFC is riddled with corruption, requires taxpayer subsidies of over US$2 billion annually and is one of the most infrastructurally backward electricity providers in the Western Hemisphere.

Mexico City is one of the largest cities in the world, the capital of an OECD-member country.  If we had efficient electricity service at competitive rates provided by a profitable and proficient public utility, we would be happy to support the union in opposing undue intervention by the federal government.  But what we have is constant interruptions to the electricity supply, electrical workers demanding bribes for the simplest of services, onerous electricity rates and extremely damaging unstable electric current, all provided by a company operating at billion dollar losses run by a crooked union.  Such a system does not serve the interests of the community, The People, or the country.

In response to those who argue that President Calderón unfairly targeted the electricity workers union while ignoring other notoriously corrupt unions such as the SNTE teachers union or the STPRM oil workers union: we couldn’t agree more.  It’s time to go after them as well.

To be or not to be?

The Secretaría de Energía’s lofty proposed goal that 25% of Mexico’s installed electricity generation capacity be provided by renewable energy sources by the end of 2012 looks to be just a touch out of reach.  But unachieved goals notwithstanding, there is no question that topics related to renewable energy and clean technology in general are enjoying unprecedented levels of attention right now.  The surge of interest in bio-ethanol a couple years ago not only fanned the flames of the local food vs. fuel debate but also stimulated the proposal or development of a number of experimental bio-fuel projects in Mexico.  The initial frenzy over bio-fuel seems to have cooled somewhat since 2007, fortunately, but interest in well grounded projects and the potential for alternative fuel production in the country remains.  This week three events are being held at the María Isabel Sheraton here in Mexico City:  Carbon Markets Mexico & Central America, Biofuels Markets Mexico and Central America, and Jatropha Markets Americas, information on which can be found at www.greenpowerconferences.com .

Other upcoming events related to sustainability topics include:

V Congreso Internacional de Transporte Sustentable
October 12 – 14, 2009, World Trade Center, Mexico City
Info: www.congresotransportesustentable.org

XVI Border Energy Forum
October 15 – 16, 2009, Houston, Texas
Info: www.glo.state.tx.us/energy/border/forum/16/

Tercer Congreso Nacional de Suelo Urbano
October 28 – 30, 2009, Mérida, Yucatán
Info: www.cmq.edu.mx/documentos/Convocatorias/prourba/convocatoria_Suelo_2009.pdf

1er Congreso Internacional sobre Ciudades Sustentables
October 25 – 26, 2009, Morelia, Michoacán
Info: www.ciudadessustentables.org