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Mexico, 4/76-10/77 (7)
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324801946
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Mexico, 4/76-10/77 (7)
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Arthur F. Burns Papers
Federal Reserve Board Subject Files
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Mexico
International Monetary Fund. (07/1944 - )
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1977-10-31
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1977
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1976-04-01
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1976
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The original documents are located in Box B80, folder "Mexico 4/76 - 10/77 (7)" of the
Arthur F. Burns Papers at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
1977 JAN -4 AMII: 41
January 4, 1977 OFFICE OF RECEIVED THE CHAIRMAN
TO:
Chairman Burns
FROM: Ted Truman
Attached are the latest cables on the Mexican
economic situation.
Attachments: Mexico 16258
Mexico 16285
cc: Governor Wallich
Defense classification of this document is due
to the inclusion of U.S. Government information
officially classified under Executive Order 10501
which provides that "A document... shall bear a
classification at least as high as that of its
highest classified component."
FORD & 938870 LIBRARY
DEPARTMENT OF STATE
nexico
*
Department of State
of I AMERICA UNITED
TELEGRAM
EMT
CaIMF/IBRD
CJS
asp
UNELASSIFIED 6674
85->FT
PAGE 01
MEXICO 16258 302216Z
ACTION ARA-10
INFO OCT-01 ISO-00 SP-02 USIA-15 AID-05 EB-07 NSC-05
CIEP-02 TRSE-00 SS=15 STR-04 OMB-01 CEA-01 CIAE-00
COME-00 ( FRB-01 INR-07 NSAE-00 XMB-04 OPIC-06 LAB-04
130 PA-02 PRS-01 /094 W
3107397 037404 /21
R 301945Z DEC 75
FM AMEMBASS MEXICO
TO SECSTATE WASHOC 9441
INFO TREASURY WASHDC
TO
CENTER
PLEASE DETURN
UNCLAS MEXICO 16258
INTERNATIONAL
NTE
E.O. 11652: N/A
TAGS: FFIN MX
SUBJ: NEW ADMINISTRATION RATIFIES IMF AGREEMENT.
1. SUMMARY: DECEMBER 30 NEWSPAPERS CARRY GOM PRESS
RELEASE STATING THAT THE NEW ADMINISTRATION HAS RATIFIED
THE AGREEMENT SIGNED WITH THE IMF TWO MONTHS EARLIER.
END SUMMARY.
2. PRESS RELEASE STATES THAT RATIFICATION WILL GIVE
MEXICO THREE YEARS IN WHICH TO REESTABLISH EXTERNAL AND
INTERNAL EQUILIBRIUM. PRESS RELEASE NOTES THAT USING
THE EXTENDED FUND FACILITY WILL AVOID THE NEED TO TAKE
MORE RESTRICTIVE MEASURES THAT WOULD BE NECESSARY It
EQUILIBRIUM WERE TO BE RESTORED IN A SHORTER TIME
FRAME. SUCH MEASURES WOULD, IT IS NOTED, "DRASTICALLY
AFFECT PRODUCTION AND EMPLOYMENT."
3. USE OF EFF HAS THREE IMPORTANT ASPECTS, ACCORDING TO
PRESS RELEASE. ONE IS THAT IT AVOIDS THE NEED TO RESORT
TO BILATERAL SUPPORT, OR "SIMPLE SUPPORT FROM MARKETS."
THE SECOND IS THAT IT PERMITS A GRADUAL ADJUSTMENT OF
THE ECONOMIC DISEQUILIBRIUM. THE THIRD IS THAT THE
GERALD FORD LIBRARY
UNCLASSIFIED
0
OF STATE
Department of State
of AMERICA UNITED
TELEGRAM
UNCLASSIFIED
PAGE 02
MEXICO 16258 302216Z
TECHNICAL SUPPORT OF THE IMF WILL INCREASE INTERNATIONAL
SUPPORT OF MEXICAN ECONOMIC POLICIES.
4. PRESS RELEASE CITES THE FOLLOWING AS THE
OBJECTIVES OF THE GOM'S ECONOMIC ADJUSTMENT PROGRAMS:
(A) TO IMPROVE THE ECONOMIC GROWTH RATE: (B) TO INCREASE
EMPLOYMENT OPPORTUNITIES FOR THE GROWING LABOR FORCE;
(C) STRENGTHEN INTERNAL SAVINGS, THEREBY REDUCING THE
NEED FOR RECOURSE TO FOREIGN BORROWINGS; AND (D) FACILIATATE
A RELATIVE STABILITY FOR INTERNAL PRICES AND REESTABLISH
A "DYNAMIC" EQUILIBRIUM IN THE BALANCE OF PAYMENTS
SUSTAINABLE OVER THE MEDIUM TERM.
5. FINALLY, PRESS RELEASE STATES THAT DURING THE
ADJUSTMENT PERIOD, THE GOM WILL SEEK TO REESTABLISH
"FISCAL EQUILIBRIUM", TO REDUCE THE FOREIGN DEBTL TO A
HEALTHY AND SUSTAINABLE LEVEL FOR THE LONG TERM, AND TO
MAKE STRUCTURAL CHANGES THAT WILL PERMIT A MORE DYNAMIC
DEVELOPMENT AND A MORE EQUITABLE DISTRIBUTION OF THE
BENEFITS OF THIS DEVELOPMENT.
JOVA
UNCLASSIFIED
OF STATE
Department of State
of / AMERICA UNITED
TELEGRAM
LIMITED OFFICIAL USE
PAGE 03
MEXICO 16285 3023312
HIGHER IN EARLY 1977 THAN THEY WERE IN 1975. IT IS
VERY LIKELY THAT REAL WAGES IN EARLY 1977 WILL BE
GREATER THAN THEY WERE IN 1975, THOUGH SUBSEQUENT INFLATION
MAY ERODE THIS. THE INCREASE IN THE NATIONAL CONSUMER
PRICE INDEX FROM DECEMBER 1975 TO NOVEMBER 1976 WAS
24 PERCENT. ONE COULD ARGUE THAT NO EMERGENCY WAGE
INCREASE WAS NECESSARY IN LATE SEPTEMBER. IT APPEARS
INEVITABLE THAT THE SEPTEMBER INCREASE COUPLED WITH
THE NEW INCREASE WILL ADD TO INFLATIONARY PRESSURES IN
1977. ONE CAN ONLY PRESUME THAT POLITICAL FACTORS
OUTWEIGHED ECONOMIC CONSIDERATIONS IN THE RECENT
DECISION.
JOVA
FORD & LIBRARY GERALD
LIMITED OFFICIAL USE
6
ARTMENT
OF
DEPART
STATE
Mexico
Department of State
of AMERICA UNITED
TELEGRAM
LIMITED OFFICIAL USE
6729
EMI
SS
PAGE 01
MEXICO 16285 302331Z
ACTION ARA-10
INFO OCT-01 ISO-00 SP-02 USIA-06 AID-05 EB-07 NSC-05
CIEP-01 TRSE-00 SS=15 STR-04 OMB-01 CEA-01 CIAE-00
COME-00 FRB-03 INR-07 NSAE-00 XMB-92 OPIC-03 LAB-04
SIL-01 PA=01 PRS-01 1080 W
30
3107522 038161 /21
R 302301Z DEC 75
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9455
INFO TRSY WASHDC
ALL US CONSULATES IN MEXICO BY POUCH
A
LIMITED OFFICIAL USE MEXICO 16285
E.O. 11652: N/A
TAGS: EFIN ELAB MX
INTERNATIONAL PLEASE INFORMATION CENTER
SUBJ: MINIMUM WAGES
BEGIN UNCLASSIFIED.
1. SUMMARY: NEW MINIMUM WAGES TO BE EFFECTIVE JANUARY
ONE, WILL BE 9 OR 10 PERCENT ABOVE PREVIOUS LEVELS. END
SUMMARY.
2. MINIMUM WAGE COMMISSION ANNOUNCED ON DEC 29 THAT
MINIMUM WAGES BELOW 100 PESOS A ADAY WOULD BE INCREASED
10 PERCENT AND MINIMUM WAGES ABOVE 100 PESOS A DAY WOULD
BE INCREASED 9 PERCENT. INCREASES TO BE EFFECTIVE
JANUARY ONE.
3. NEW MINIMUM WAGE IN URBAN AREAS OF THE FEDERAL DISTRICT
WILL BE 106.4 PESOS PER DAY, 35 PERCENT ABOVE WAGE THAT
BECAME EFFECTIVE JANUARY 1, 1976, WHEN URGAN MINIMUM WAGE
FOR FEDERAL DISTRICT WAS INCREASED 24 PERCENT. RECALL
THAT MINIMUM WAGES INCREASED 23 PERCENT, EFFECTIVE
GERAL FORD LIBRARY
LIMITED OFFICIAL 6 USE
OF STATE
Department of State
of I AMERICA UNITED
TELEGRAM
LIMITED OFFICIAL USE
PAGE 02
MEXICO 16285 3023312
OCT 1, 1976. WHEREAS MINIMUM WAGE IN FEDERAL
DISTRICT DURING 1975 WAS THE EQUIVALENT OF $5.07 PER
DAY (63.4) PESOS), IT WILL BE THE EQUIVALENT OF $5.32
AT AN EXCHANGE RATE OF 20:1. NEW MINIMUM WAGES ARE
SUPPOSED TO BE IN EFFECT UNTIL DECEMBER 31, 1977.
4. MINIMUM WAGES DIFFER FROM REGION To REGION AND
BETWEEN URBAN AND RURAL AREAS WITHIN REGIONS. THE
HIGHEST IS IN THE STATE OF BAJA CALIFORNIA NORTE
(TIJUANA) WHERE IT IS NOW FIXED AT 133.9 PESOS. THE
LOWEST IS IN THE STATE OF OAXACA WHERE IT IS 51.1
PESOS IN RURAL AREAS. MINIMUM WAGES ARE ALSO SET FOR
A NUMBER OF SPECIALIZED TYPES OF WORK, FOR EXAMPLE,
THE MINIMUM WAGE FOR AUTO MECHANIC IN THE FEDERAL
DISTRICT WILL BE 161 PESOS PER DAY
5. LABOR LEADER FIDEL VELASQUEZ SAID NEW MINIMUM WAGES
WERE ACCEPTABLE AND PERMITTED WORKERS TOT RECUPERATE
LOST PURCHASING POWER. HE SAID THE NEW WAGES WOULD
APPLY TO APPROXIMATELY TWO MILLION WORKERS.
6. EXCELSIOR EDITORIALIZED UNDER HEADING OF
"INSUFFICIENT MINIMUM SALARY". IT SAYS THE NEW WAGE
LEVELS REFLECT THE TENDENCY TO STABILIZE THE ECONOMY
BUT DO NOT PERMIT WORKERS TO ABSORB THE INCREASE IN
THE COST OF LIVING DURING 1976, WHICH IT SAYS EXCEEDS
THE TOTAL OF THE EMERGENCY MINIMUM WAGE INCREASE AND
THE PRESENT INCREASE. EDITORIAL CONCLUDES BY CALLING
FOR BASIC REFORM OF ECONOMIC POLICIES, BUT DOES NOT
SAY WHAT THIS SHOULD BE. END UNCLASSIFIED.
BEGIN LIMITED OFFICIAL USE
7. ASSUMING THAT ALL WAGES HAVE INCREASED MORE OR LESS
IN LINE WITH THE DAILY AVERAGE WAGE IN THE FEDERAL
DISTRICT THE DOLLAR COST OF WAGES WILL BE SOMEWHAT
LIMITED OFFICIAL USE
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
1977 JAN -5 PM 4: 48
January 5, 1976
OFFICE OF RECEIVED THE CHAIRMAN
TO:
Chairman Burns
FROM: George B. Henry
Attached is the latest cable on the Mexican economic
situation.
Attachment: Mexico 58
cc: Governor Wallich
Defense inclusion of U.S. Government 10:01
classification of this document information is due
to the classified under Executive Order bear a
officially provides that "A document... shall of its
which classification a: least as high as that
highest classified component."
GERATE R. FORD LIBRARA
DEPARTMENT on STATE
Mexico
*
*
Department of State
Jase
of STATE AMERICA UNITED
TELEGRAM
EYM
UNCLASSIFIED 9993
EMT
MEXICO 00058 0416362
SS
PAGE 01
ACTION ARA-10
INFO OCT-01 ISO-00 AID-05 CIAE-00 COME-00 EB-07 FRB-01
INR-07 NSAE-00 USIA-15 XMB-04 OPIC-06 SP-02 CIEP-02
LAB-04 SIL-01 0MB-01 PA-02 PRS-01 AGRE-00 FEAE-00
ERDA-07 /076 W
041645Z 068763 /65
R 041520Z JAN 77
FM AMEMBASSI MEXICO
TO SECSTATE WASHDC 9485
INFO TREASURY DEPT WASHDC
INTERNATIONAL PLEASE INFORMATION RETURN TO CENTER
UNCLAS MEXICO 0058
E.O. 11652: N/A
TAGS: EGEN MX
SUBJ: JLP PREDICTS ECONOMIC RECOVERY IN TWO YEARS.
1, SUMMARY. IN TWO RECENT MEETINGS, LOPEZ-PORTILLO HAS
STATED THAT THE MEXICAN ECONOMY WILL HAVE RECOVERED IN TWO
YEARS, AND THAT SOME IMPROVEMENT IN THE SITUATION CAN BE
EXPECTED BY MID-77. END SUMMARY.
2, PRESIDENT LOPEZ-PORTILLO TOLD A DELEGATION FROM THE
MEXICAN CONGRESS ON DECEMBER 31, THAT IT WILL TAKE TWO
YEARS TO "RECONSTITUTE" THE MEXICAN ECONOMY. HE SAID THE
NEXT SIX MONTHS WOULD BE PARTICULARLY DIFFICULT, BUT THAT
BY JUNE OR JULY, ONE WILL BE ABLE TO SEE THE "OTHER FACE"
OF THE DEVALUATION.
3. JLP CALLED THE 1977 BUDGET NEITHER DEFLATIONARY, NOR
INFLATIONARY BECAUSE IT IS AIMED AT INCREASING PRODUCTION.
THIS IS, HF SAID, THE ONLY AND MOST INTELLIGENT WASY TO
OVERCOME INFLATION. HE WENT ON TO NOTE THAT MEXICO CAN
BE SELF-SUFFICIENT IN FOODSTUFFS AND IN ENERGY, AND
THIS PROVIDES THE BASIS FOR A STRONG ECONOMY. HE
RELATED THE RECOVER IN TWO YEARS TIME TO TWO
GERALD FORD LIBRARY
UNCLASSIFIED
D
or STATE
Department of State
AMERICA UNITED
TELEGRAM
STATES OF
UNCLASSIFIED
PAGE 02
MEXICO 00058 041636Z
AGRICULTURAL SEASONS.
4. LOPFZ-PORTILLO CALLED THE "MODEST" MINIMUM WAGE
INCREASE A LESSON IN RESPONSIBILITY THAT BEGINS A
PROCESS OF SOLIDARITY WHICH CAN BREAK THE INFLATIONARY
SPIRAL.
5. JLP TOUCHED GN SIMILAR THEMES IN A MEETING WITH
FEMALE JOURNALISTS SEVERAL DAYS EARLIER. HE TOLD THE
JOURNALISTS THAT THE ECUNOMIC SITUATION WILL BE BETTER
BY JUNE OR JULY, AND THAT MEXICO HAS TO EXPORT CRUDE
OIL IN ORDER TO BE ABLE TO STOP EXPORTING IT AT
A FUTURE DATE.
JOVA
UNCLASSIFIED
BOARD OF GOVERNORS
FEDERAL RESERVE SYSTEM
OF THE
1977 JAN 10 PM 2: 15
January 10, 1977
OFFICE
RECEIVE CHAIRMAN
TO:
Chairman Burns
FROM:
Ted Truman
Attached is the latest cable on the Mexican economic
situation.
Attachment: Mexico 168
cc: Governor Wallich
Defense classification of this document is due
to the inclusion of U.S. Government information
officially classified under Executive Order 10501
which provides that "A document shall bear a
classification at least as high as that of its
highest classified component"
FORDO i GERALD LIBRARY
OF STATE
Department of State
of / AMERICA UNITED
TELEGRAM
UNCLASSIFIED 2706
PAGE 01
MEXICO 00168 060128Z
ACTION ARA-10
INFO OCT-01 ISO-00 SP-02 USIA-15 AID-05 EB-07 NSC-05
CIEP-02 SS-15 STR-04 OM8-01 CEA-01 CIAE-00 COME-00
FRB-01 INR-07 NSAE-00 XMB-04 OFIC-06 LAB-04 SIL-01
PA-02 PRS-01 /094 W
6
0603332 085825 170
R 060011Z JAN 77
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9538
INFO TREASURY WASHDC
UNCLAS MEXICO
168
E.O. 11652: N/A
TAGS: EFIN MX
SUBJ: RECENT ECONOMIC INDICATORS
REF: 76 MEXICO 15716
1. THIS CABLE REPORTS MOST SIGNIFICANT DATA IN BANK OF
MEXICO'S ECONOMIC INDICATORS FOR NOVEMBER 1976.
2. MONEY SUPPLY (UNADJUSTED) AT END OCTOBER WAS 124,539.6
MILLION PESOS, COINS AND BANK NOTES WERE 61,875.4 MILLION
PESOS AND DEMAND DEPOSITS WERE 52,664.2 MILLION PESOS.
SEASONABLY ADJUSTED MONEY SUPPLY AT END-OCTOBER WAS 128,211.5
MILLION PESOS,
3. LIABILITIES OF BANKING SYSTEM CTABLE 1-4) AT END-
OCTOBER WERE 710,512.2 MILLION PESOS OF WHICH 391,517.8
MILLION WERE IN PESOS AND 318,994.3 MILLION IN FOREIGN
EXCHANGE. CONVERSION RATE WAS 25.4. NOTE THAT PESO
LIABILITIES ARE SAME AS END-APRIL LEVEL. INCREASE IN
LIABILITIES IS DUE IN LARGE PART TO REVALUATION OF FOREIGN
EXCHANGE LIABILITIES. BULK OF FOREIGN EXCHANGE
LIABILITIES (251,609.7 MILLION PESOS) BELONG TO NATIONAL
GERALD FORD LIBRARY
UNCLASSIFIED
0
OF STATE
Department of State
AMERICA UNITED
TELEGRAM
STATES OF
UNCLASSIFIED
PAGE 02
MEXICO 00168 060128Z
CREDIT INSTITUTIONS, EX-BANK OF MEXICO. OF THESE,
224,164.2 MILLION WERE LOANS FROM FOREIGN BANKS. DOLLAR
CHECKING ACCOUNTS WERE 11,307.6 MILLION PESOS.
4. TOTAL FINANCING OF BANKING SYSTEM AT END-SEPTEMBER
WAS 622,047.5 MILLION PESOS, AND AT END-OCTOBER, WAS
675,863.8 MILLION PESOS.
5. FEDERAL GOVERNMENT FEVENUE IN OCTOBER WAS 10,779.5
MILLION PESOS. EXPENDITURES WAS 15,393.9 MILLION PESOS.
6. INDUSTRIAL PRODUCTION INDEX DATA FOR 1976 REVISED.
INDEX MEMBERS FOR JANUARY-SEPTEMBER Now AS FOLLOWS:
139.5, 140.7, 151.8, 140.6, 145,9, 147.4 145.1,
143.7, 138.9.
7. NATIONAL CONSUMER PRICE INDEX FOR NOVEMBER IS 249.1,
UP 4.5 PERCENT FROM OCTOBER AND 25.1 PERCENT FROM
NOVEMBER 1976.
8. MEXICO CITY WHOLESALE PRICE INDEX FOR NOVEMBER WAS
425.6, UP 8.2 PERCENT FROM OCTOBER AND 40.1 PERCENT FROM
NOVEMBER 1975,
9. BALANCE OF PAYMENTS DATE UNCHANGED. OCTOBER IMPORTS
WERE 444.5 MILLION; EXPORTS WERE 238.1 MILLION. OCTOBER
TOURIST RECEIPTS WERE 57.3 MILLION AND EXPENDITURES WERE
22.5 MILLION. FRONTIER RECEIPTS WERE 122.0 MILLION
AND EXPENDITURES WERE 74.0 MILLION.
JOVA
NCLASSIFIED
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
January JAM I 1977 1: 15
RECEIVED
OFFICE OF THE CHAIRMAN
TO:
Chairman Burns
FROM: Ted Truman
Attached are the latest cables on the Mexican economic
situation.
Attachment: Mexico 232
Mexico 233
Mexico A-33
cc: Governor Wallich
Defense classification of this document is due
to the inclusion of U.S. Government information
officially classified under Executive Order 10501
which provides that "A document shall bear a
classification at least as high as that of its
highest classified component."
FORD is GERALD LIBRARY
OF
mexico
STATE
*
Department of State
AMERICAN UNITED
TELEGRAM
STATES OF
UNCLASSIFIED 5513
EMT
55
PAGE 01
MEXICO 00232 01 OF 02 0702102
ACTION ARA-10
INFO OCT-01 ISC-00 AID-05 CIAE-00 COME-00 EB-07 FRB-01
INR-07 NSAE-00 USIA-15 XMB-04 OPIC-06 SP-02 CIEP-02
LAB-04 SIL-01 OMB-01 NSC-05 SS-15 STR-04 CEA-01 PA-02
PRS-01 -03 H-02 AGRE-00 1099 W
0714197 098406 /65
R 0700222 JAN 77
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9556
INFO TREASURY WASHDC
SEC 2 ATTACHED
PLEASE RETURN TO
UNCLAS SECTION 1 OF 2 MEXICO 0232
INTERNATIONAL INFORMATION CENTER
E.O. 11652: N/A
TAGS: EGEN MX
SUBJ: PRESIDENTIAL DECEMBER 31 REMARKS ON RECENT LEGISLATION.
REF: MEXICO 58
1. BELOW IS OUR INFORMAL TRANSLATION OF PRESIDENT LOPEZ-
PORTILLO'S REMARKS TO A SENATE DELEGATION ON DECEMBER 31.
PRESS RELEASE CALLS REMARKS "IMPROVISED". INTRODUCTION
PARAGRAPHS ARE DELETED.
2. "WE HONESTLY BELIEVE THAT THE ORGANIC LAW OF PUBLIC
ADMINISTRATION THE LAW OF BUDGET AND ACCOUNTING, THE LAW
OF PUBLIC DEBT AND THE IMPROVEMENTS TO THE ORGANIC LAW,
CONSTITUTE A FUNDAMENTAL BASIS FOR IMPROVING THE ADMINISTRATIVE
FUNCTIONING OF OUR NATION, CONSIDERING THAT OUR COUNTRY,
PERHAPS MORE THAN UNDER-DEVELOPED, MAY BE UNDER-ADMINISTERED
3. "WE HAVE MANY RESOURCES, SOME NON-RENEWABLE, OTHERS
THAT ARE, MANY HUMAN, LIMITED AND CONGESTED FINANCING,
BUT WE HAVE THEM. THENCE IT IS ORGANIZATION THAT MAY BE
THE FACTOR WITHIN OUR HUMAN ABILITIES TO WHICH WE ARE
MOST ACCOUNTABLE PRECISELY BECAUSE IT DEPENDS ON OUR ABILITY.
LIBRARY GERALD FORD
UNCLASSIFIED
PRANTMENT OF STATE
Department of State
of it AMERICA UNITED
TELEGRAM
UNCLASSIFIED
PAGE 02
MEXICO 00232 01 OF 02 070210Z
4. "WE ARE PLACED IN AN EXTRAORDINARY COUNTRY. IT IS
ORGANIZATION THAT TERMINES OUR RELATIONSHIPS, AND THIS COULD BE
SUCCESSFUL OR DEFICINET, IF WE SUCCEED OR NOT IN ORGANIZING
OURSELVES; IF WE SOUCCEED OR NOT IN MEETING OBJECTIVES, IN
FINDING GOALS, AND PLACING THEM IN SPACE AND TIME AND ORGANIZING
THUS OUR RESPONSIBLE ACTIONS.
5. "I APPRECIATE THAT IT IS BY ORGANIZATION, AS THE FUNDAMENTAL
RESPONSIBILITY OF A FREE BEING THAT MAN CAN GOVERN HIS DESTINY
IF HE SUCCEEDS IN PERFORMING WITHIN HIS FREEDOM IN AN ORIENTED
COURSE.
6. "FROM THAT COMES THE IMPORTANCE THAT I GIVE TO ADMINISTRATION,
TO ORGANIZED SERVICE, IN THE FUNCTION OF OUR COMMON DUTIES.
THEREFORE, I AM ESPECIALLY GRATEFUL FOR THE EFFORT, THE COLLA-
BORATION THAT YOU GAVE US IN THE CONCEIVING AND IMPETUS To THE
ADMINISTRATIVE REFORM, THAT SHALL PERMIT US TO BE ABLE TO
COUNT ON SUFFICIENT INSTRUMENTS TO ADVANCE THE PROGRESS OF
THE COUNTRY.
7. "T APPRECIATE AS WELL THE EFFORT MADE TO DEVELOP, TO IMPROVE,
AND TO APPROVE A BUDGET SO DIFFICULT AS THE ONE WE HAVE HAD TO
PRESENT, A BUDGET DRAWN UP BETWEEN TWO ADMINISTRATIONS, BETWEEN
TWO ORGANIZATIONS, THE RESULT OF BASIC ADMINISTRATION REFORM AND
ABOVE ALL. BETWEEN TWO DEVALUATIONS. A BUDGET COMPRISED BY THE RISK
OF POSSIBLY BEING INFLATIONARY, BY THE GRAVE DANGER THAT IT COULD
BE DEFLATIONARY, BY THE POSSIBILITY THAT PERSISTS THAT IF WE ERR
IN ITS MANAGEMENT, WE WILL HAVE THE WORST OF ALL POSSIBLE WORLDS:
INFLATION WITH UNEMPLOYMENT, WHICH IS THE BASIC PROBLEM EXISTING
IN THE COUNTRY AND WHICH WE DO NOT WISH TO SEE GROW.
8. "WE BELIEVE THAT THE BUDGET IS NOT INFLATIONARY, NEITHER FOR
ITS AMOUNT, UNFORTUNATELY ONLY SLIGHTLY ABOVE THE PAST LEVELS AND
POSSIBLY LESS THAN THE POPULATION INCREASE, FOR THE PURPOSE OF
INCREASING PRODUCTION.
9. "I BELIEVE THAT EXPENDITURE ORIENTED TO PRODUCTION IS NEVER
EXCESSIVE, BECAUSE IT IS ONLY PRODUCTION THAT WILL REMOVE US FROM
THE INFLATIONARY RISKS: GROWTH IS THE MOST INTELLIGENT FORM OF
COMBATTING INFLATION. OF COURSE, IT CAN ALSO BE DONE - AND THIS IS
DONE BY MANY RIGOROUS ECONOMIES THAT ALMOST ALWAYS FALL INTO FASCISM-
UNCLASSIFIED
on STATE
*
Department of State
of i AMERICA UNITED
TELEGRAM
UNCLASSIFIED
PAGE 03
MEXICO 00232 01 OF 02 070210Z
BY FORCEABLY REPRESSING THE SAVINGS OF THOSE WITH THE LEAST,
INSTEAD OF ACTING AGAINST THOSE WHO HAVE THE MOST. ONE CAN ALSO
REDUCE DEMAND BY FORCE. THIS IS A MEANS OF CONTROLLING PROBLEMS
SUCH AS WE FACE. BUT IT IS MORE INTELLIGENT AND MORE DESIRABLE TO
ACT IN THE AREA OF PRODUCTION.
10. FOR THIS REASON, THE BUDGET WE HAVE APPROVED HAS TWO BASIC
PRIORITIES: FOOD AND ENERGETICS. A COUNTRY THAT HAS SUFFICIENT OF
THESE TWO PRIORITIES CAN MAKE HEADWAY, AND OURS HAS THEM.
11. "I APPRECIATE THE EFFORTS THAT YOU HAVE MADE IN ORDER TO PASS
THE BUDGET, AS YOU HAVE MADE IN THE AREA OF TAX REFORM, WHICH
HAS JUSTIFIABLY BEEN CALLED WEAK, BUT IT IS A TAX REFORM BECAUSE
IT HAS A STRUCTURE.
12. "WE HAVE VERY LITTLE ROOM FOR MANEUVERS. BOXED IN BY THE
INERTIA OF EVENTS, WE DON'T HAVE MUCH AREA TO MOVE IN, WE DON'T
HAVE TIME TO RELAX; BUT THE LITTLE AREA WE DO HAVE PERMITS US TO
BEGIN, AT LEAST IN AN INDICATIVE WAY, AND I HOPE NOT ONLY SYMBOLI-
CALLY, AN AUTHENTIC TAX REFORM, BY WHICH WE FREE LOW-INCOME GROUPS
FROM THE INCOME TAX. OF COURSE WE HAVE NOT BEEN FREE FROM
CRITICISM FOR SOME HAVE SAID THAT THIS MEASURE TENDS TO INCREASE
THE IRRESPONSIBILITIES OF A MAJORITY OF THE POPULATION.
BERALD FORD LIBRARY
UNCLASSIFIED
OF STATE
*
*
Department of State
UNITED OF
TELEGRAM
it
UNCLASSIFIED 5514
PAGE 01
MEXICO 00232 02 OF 02 071328Z
ACTION ARA-10
INFO OCT-01 ISO-00 AID-05 CIAE-00 COME-00 EB-07 RB-01
INR-07 NSAE-00 USIA-15 XMB-04 OPIC-06 SP-02 CIEP-02
LAB-04 SIL-01 OMB-01 NSC-05 SS-15 STR-04 CEA-01 PA=02
PRS-01 L-23 H-02 AGRE-09 1099 W
0714202 103304 /65
R 0700222 JAN 77
FM AMEMBASSY MEXICO
TC SECSTATE WASHOC 9557
INFO TREASURY WASHDC
UNCLAS SECTION 2 OF 2 MEXICO 0232
13. "STRICTLY SPEAKING, WHAT WE ARE DOING IS STRENGTHENING JUSTICE
BY INCRESING THE CONSUMPTION CAPACITY AND DEMONSTRATING THE
DISPOSITION OF TAX AUTHORITIES TO SACRIFICE AN IMPORTANT SOURCE
OF REVENUE IN ORDER TO ALLEVIATE PRESSURES ON PRICES AND THEREBY
PERMIT THAT, IN RELATION TO WAGES, THE PRICE-WAGES POLICIES MAY BE
LESS MALIGNANT.
14. "AND HERE I WANT TO REPEAT VERY BRIEFLY TO YOU SOMETHING I
HAVE JUST SAID TO THE REPRESENTATIVES OF THE CHAMBER OF DEPUTIES:
THAT LESSON, THAT BEATIFUL LESSON, THAT RISKY LESSON OF HISTORIC
RESPONSIBILITY, THAT OF THE WORKING CLASS OF MEXICO IN UNANIMOUSLY
ACCEPTING such A MODEST INCREASE IN THE MINIMUM WAGE. A SACRIFICE
THAT BEGINS A PROCESS OF SOLIDARITY THAT I HOPE WILL BE CONFIRMED
BY OTHER SOCIAL CLASSES.
15. "IT IS IN THIS MANNER THAT ONE CAN BREAK THE INFLATIONARY SPIRAL,
WITH such RESPONSIBLE AND HAZARDOUS ACTS, BY COMPROMISES - THE
PURELY NOMINAL DEMOGOGUERY IS EASY - THAT CAN RESOLVE THE CRITICAL
SITUATIONS THROUGH WHICH WE LIVE.
16. "WHAT I JUST SAID A MOMENT AGO TO THE DEPUTIES, MANY STILL
HERE, NOW I REITERATE BEFORE THIS COMMISSION BECAUSE IT SEEMS TO
ME AN HISTORIC EXAMPLE, THE FORCE, THE SACRIFICE OF THE WORKING
CLASS.
17. "WITH THESE MEANS IT IS BELIEVABLE THAT WE CAN GOVERN EVENTS.
T AM SURE THAT WE WILL BE ABLE TO DO so IN THE COMING DIFFICULT
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*
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PAGE 02
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DAYS. WE ARE GOING TO BEGIN THE CLIMB IN JANUARY, A CLIMB THAT HAS
BEEN IGNORED BY MANY BECAUSE OF THE DECEMBER HOLIDAYS; BUT THIS
CLIMB BEGINNING IN JANUARY IS GOING To BE DIFFICULT, VERY DIFFICULT.
IT WILL BE, AS WE HAVE SAID ON OTHER OCCASIONS, A VERY DIFFICULT
SIX MONTHS, BECAUSE IT WILL NOT BE UNTIL JUNE OR JULY WHEN WE BEGIN
TO SEE THE OTHER FACE OF THE DEVALUATION, UNTIL NOW BITTER.
BEGINNING IN THESE MONTHS, WE WILL BEGIN TO SEE POSITIVE ASPECTS.
18. "THESE SIX MONTHS WILL FORM PART OF WHAT I BELIEVE WILL BE
TWO YEARS DURING WHICH WE WILL BE ABLE TO RECONSTITUTE OUR ECONOMY.
TWO YEARS, I SAY, NOT AS A MAGIC OR ARBITRARY NUMBER, TWO YEARS
BECAUSE THESE ENCOMPASS TWO AGRICULTURAL CYCLES DURING WHICH
WE CAN ORGANIZE PRODUCTION IN THE COUNTRY. BEGINNING WITH THIS
EFFORT, ONE INITIAL, ANOTHER CONTINUED, SELF-SUFFICIENCY IN FOOD
WILL ENABLE US TO CEASE IMPORTING GRAINS AND OILSEEDS THAT MAKE
UP THE DEFICIT WHICH DE-BALANCES US IN THIS AREA.
19. "IF WE SUCCEED, THE COUNTRY AFTER TWO YEARS WILL BEGIN TO SEE
BETTER TIMES. I DO NOT DOUBT THAT IF WE ACT WITH THE RESPONSABILITY
SHOWN BY THE WORKERS SECTOR, WITH THE COLLABORATION OF WHICH YOURS
HAVE BEEN AN EXAMPLE, THE COUNTRY WILL FACE UP TO ITS RISKS AND
OVERCOME THE CRISIS.
19. "I AM CERTAIN OF IT. THE COUNTRY IS YOUNG, IT IS FLEXIBLE,
IT IS POWERFUL. IT IS DISORGANIZED. WE ARE GOING TO ORGANIZE IT
BETTER, WITH COURAGE, OCCASIONALLY WITH SACRIFICES, BUT ALWAYS
WITH A FIRM WILL.
20. "I THANK YOU FOR YOUR VISIT, YOUR ASSISTANCE, AND WISH TO YOU
AND YOUR FAMILIES A PLEASANT NIGHT AND THAT THE NEXT YEAR BE HAPPY
FOR ALL.
21. "THIS WISH WILL BE RENEWED NEXT YEAR IN ORDER THAT 178
SHOULD BE BETTER.
22. "I WISH THAT MEXICO SHOULD BEGIN TO LIVE EACH DAY BETTER THAN
THE NEXT. I WISH THIS FOR YOU; ON OUR PART WE WILL MAKE EVERY
EFFORT THAT WE CAN IN ORDER THAT THIS WILL BE SO."
JOVA
NCLASSIFIED
as
STATE
mexico
Department of State
of STATES AMERICA UNITED
TELEGRAM
LIMITED OFFICIAL USE
5813
EMT
PAGE 01
MEXICO 00233 071548Z
ACTION ARA-10
INFO OCT-01 ISO-00 SP-02 USIA-06 AID-05 EB-07 NSC-05
CIEP-01 SS-15 STR-04 OMB-01 CEA-01 L-03 H=01 PA-01
PRS-01 CIAE-00 COME-00 FRB-03 INR-07 NSAE-00 XMB-02
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071629Z 104883 153
R 071520Z JAN 77
FM AMEMBASSY MEXICO
TO SECSTATE WASHOC 9558
INFO TREASURY WASHOC
PLEASE RETURN TO
LIMITED OFFICIAL USE MEXICO 0233
INTERNATIONAL INFORMATION CENTER
E. 0. 11652: N/A
TAGS: EFIN MX EALR MX
SUBJECT: KEY MINISTER'S ECONOMIC VIEWS.
1. SUMMARY: MINISTER OF NATIONAL PROPERTIES AND INDUSTRIAL
DEVELOPMENT TOLD PRESS CONFERENCE THAT FURTHER REDUCTIONS
IN CONSUMPTION WERE NOT POSSIBLE AND ONLY THROUGH INCREASED
OUTPUT COULD INFLATION BE OVERCOME. HE ALSO SAID THAT
GOVERNMENT WOULD NOT INTERFERE WITH PRIVATE INDUSTRY.
END SUMMARY.
2. JOSE ANDRES DE OTEYZA, MINISTER FOR NATIONAL PROPERTIES
AND INDUSTRIAL DEVELOPMENT, HELD A PRESS CONFERENCE ON
JANUARY 5. DE OTEYZA IS THE YOUNGEST MINISTER CAT AGE 34),
AND HIS MINISTRY'S RESPONSIBILITIES FAVE BEEN EXPANDED TO
INCLUDE THE GOVERNMENT'S INDUSTRIAL DEVELOPMENT EFFORTS AS
WELL AS MANAGEMENT OF MOST GOM-OWNED INDUSTRIAL PROPERTIES.
HE IS CAMBRIDGE-EDUCATED AND HIS VIEWS APPEAR TO REFLECT
THE SO-CALLED CAMBRIDGE SCHOOL OF ECONOMICS. HE IS SAID
TO BE INFLUENTIAL IN THE NEW ADMINISTRATION WE ARE,
THEREFORE, REPORTING THE VIEWS HE EXPRESSED AT A PRESS
GERALD FORD LIBRARY
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UNITED
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it
OF
LIMITED OFFICIAL USE
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MEXICO 00233 071548Z
CONFERENCE IN THE FOLLOWING PARAGRAPHS WHICH ARE BASED
ON NEWSPAPER ACCOUNTS.
3. THE ONLY MANNER TO BREAK THE INCREASE IN PRICES IS
TO INCREASE SUPPLY BY INCREASING OUTPUT. UNFORTUNATELY,
MEXICO IS A RELATIVELY POOR COUNTRY AND IT IS NOT
POSSIBLE TO BRAKE DEMAND OR REDUCE CONSUMPTION.
4. IN SEVERAL YEARS, THE BASIC INVESTMENTS IN SUCH AREAS
AS STEEL, ENERGY AND FERTILIZER WILL BEGIN TO PAY OFF IN
TERMS OF INCREASED OUTPUT. THE NATURE OF INVESTMENTS IN
THESE AREAS ARE SUCH THAT THERE IS A LONG LEAD TIME BEFORE
FULL PRODUCTION CAN BE ATTAINED. THIS SAME TIME SPAN IS
NECESSARY TO RESTRUCTURE AND ORGANIZE
AGRICULTURAL PRODUCTION. (COMMENT: THE PAST
ADMINISTRRATION JUSTIFIED INCREASES IN PUBLIC SPENDING
AND SUBSEQUENT INFLATION BY MAINTAINING THAT EVENTUALLY
THE FRUITS OF PUBLIC SECTOR INVESTMENTS WOULD REDUCE
INFLATION. THE NEW GROUP SEEMS TO BE SAYING THAT THIS IS
STILL SEVERAL YEARS OFF.)
5. THE GOVERNMENT WILL NOT INTERFERE WITH PRIVATE SECTOR
PLANS, EVEN IF THIS MEANS INVESTEMENTS IN NON-PRIORITY
AREAS. THE PRIORITY AREAS ARE FOODSTUFFS, ENERGY, STEEL,
PETROCHEMICALS, FERTILIZERS, CAPITAL GOODS AND BASIC
CONSUMPTION GOODS.
6. REGARDING OIL, MEXICO IS EXPORTING 150,000 BARRELS
A DAY, THEREBY EARNING $700 MILLION A YEAR, WHICH IS
HELPING THE BALANCE OF PAYMENTS AND FINANCING IMPORTS
OF ESSENTIAL GOODS. OIL IS NOT BEING EXPORTED
INDISCRIMINATELY, BUT RATHER OIL IS A RESOURCE THAT
MUST BE USED RATIONALLY. IT IS NOT BEING WASTED, AND
THE COUNTRY WILL NOT BE IMPOVERISHED IN THE FUTURE.
7. PUBLIC SECTOR AS WELL AS PRIVATE ENTERPRISES SHOULD
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STATE
Department of State
AMERICA UNITED
TELEGRAM
STATES of
LIMITED OFFICIAL USE
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MEXICO 00233 0715482
BE PROFIT-MAKING. PROFITS ARE THE BASIS OF CAPITAL.
HOWEVER, PUBLIC SECTOR ENTERPRISES HAVE BROADER
RESPONSIBILITIES THAN PRIVATE ENTERPRISES. IN ANY CASE,
SUBSIDIES FOR PUBLIC SECTOR ENTERPRISES SHOULD BE
TRANSITORY AND OPEN, RATHER THAN PERMANENT AND HIDING
INEFFICIENCIES.
8, COMMENT: DE OTEYZAIS VIEWS ON OVERCOMING INFLATION
THROUGH INCREASED OUTPUT AND THE NEED FOR TWO YEARS BEFORE
ANY SIGNIFICANT PROGRESS IS MADE ECHO THOSE
OF THE PRESIDENT (SEE MEXICO 58), AND VERY LIKELY
INFLUENCED THESE.
JOVA
BERALD FORD LIBRARY
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770001-1004
RS/R
REP
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ARA
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Original to be Filed in
Decentralized Files.
FILE DESIGNATION
EUR
FE
NEA
CU
UNCLASSIFIED
A-33
INR
E 2
a
10
HANDLING INDICATOR
TO
:
US DEPARTMENT OF STATE, WASHDC
FBO
AID
INFO:
EMI
US DEPARTMENT OF COMMERCE, WASHDC
AMEMBASSY, MEXICO
SS
AMCONSUL, GUADALAJARA
INTERNATIONAL MINE CENTER
AGR
COM
RB
INT
FROM
AMCONSUL, MONTERREY
DATE: December 21, 1976
E. O, 11652: NA
LAB
TAR
TR
XMB
TAGS:
PINT, ECON, MX
SUBJECT
:
MONTHLY HIGHLIGHTS REPORT, DECEMBER, 1976
AIR
ARMY
NAVY
OSO
REF
MONTERREY A- 32 OF NOVEMBER 23, 1976
USTA
NSA
CIA
SUMMARY
Monterrey area residents reacted favorably to
SUGGESTED DISTRIBUTION
President López-Portillo's call for hard work,
his lack of rhetorical excess, and his favorable
JAN 6 AM 11 43
comments on private investment.
PRI candidate César Santos has been declared winner
of the Monterrey mayoral election but his PAN
opponent Pablo Emilio Madero continues to charge
election fraud.
POST ROUTING
TO:
Action
Info.
Initials
Land expropriations by the Government last month
AMB
PO
in Sonora led to a wave of land invasions in the
DCM
Monterrey consular district and to a one day
HOL
"businessmen's strike" that attracted widespread
support.
ECON
CONS
Protesting higher fares, Monterrey area students and
ADM
posesionarios seized over one hundred privately-
AID
owned busses, provoking a brief suspension of
USIS
service by bus owners.
ARTMENT OF STATE
Nuevo León Governor Zorrilla Martínez has been
subjected to increasing criticism on issues such
DEC 20 AM 9:19
as the municipal elections, bus seizures, and his
FILE
precipitate dismissal of the head of Monterrey's
FAORC /DAY WC
water company.
Date:
FORM
UNCLASSIFIED
For Department Use Only
Initials:
10-64 Ray DS - 327
In
Out
Drafted by:
Drafting Date:
Phone No.:
Contents and Classification Approved by:
ECON/COMM: THCarter/RLGlass: mlg
12/17/76
CG: FXLambert
Clearances:
BERAMO FORD TIBRARY
Pa 2 of 7
NCLASSIFIED
A-33 from MONTERREY
December 21, 1976
REACTION TO LOPEZ-PORTILLO
Monterrey businessmen, industrialists and political columnists
breathed a sigh of relief when José López-Portillo assumed the
Presidency on December 1. The tone of his inaugural address
was well received, particularly his favorable comments on private
investment. Local editorial opinion lauded both the style and
substance of his comments and particularly welcomed his lack of
rhetorical stridency, which distinguishes him so clearly from
his predecessor. The new administration's firmness in dealing
with invasions of private land by squatters was well received.
Important business groups have supported López-Portillo's public
call for a wage policy based on actual cost of living increases
and they are watching carefully to see what action he will take
when minimum wages are adjusted in January. Another plus for
the new President is his appointment of a respected regiomontano
as foreign minister and his selection of Monterrey's popular
lame-duck mayor to a senior post in the national administration.
Overall, Lőpez-Portillo's inaugural call for hard work as the
solution to Mexico's problems fell on very receptive ears in a
region which prides itself on its industriousness.
ELECTION OF SANTOS RATIFIED, PANISTA PROTESTS CONTINUE
Two weeks after the December 5 election, Partido Acción Nacional
(PAN) mayoral candidate in Monterrey, Ing. Pablo Emilio Madero,
continues to claim that he was fraudulently deprived of victory
by the machinations of the ruling Partido Revolucionario Insti-
tucional (PRI). In what many local observers consider the most
corrupt municipal elections in recent memory, the PRI has been
accused of widespread abuses, including double and triple voting
by príistas, threats and intimidation against PAN poll-watchers
and sympathizers, and the sudden reappearance of "lost" ballots
and tally sheets at hastily-called meetings of the local Juntas
Computadoras (JC).
PAN's strategy has been to appeal directly to Federal authorities
to seek a recount of what the PAN has characterized as the "spu-
rious, illegitimate, bastard vote count" of the Junta or a complete
annulment of the elections. PAN and various private citizens
and groups have sponsored advertisements and open letters to
President José López Portillo as well as to Gobernación Secretary
Lic. Reyes Heroles. Concurrently, the panistas are mounting an
extensive publicity campaign within Monterrey, aimed both at
UNCLASSIFIED
GERRLD FORD LIBRARY
Pa 3 of 7
UNCLASSIFIED
A-33 from MONTERREY
December 21, 1976
presenting what the party considers conclusive proof of a
Madero victory and at challenging the vote claims of the PRI.
Bumper stickers reading "I voted for Madero" abound. In
attacking the Junta, Madero and the PAN have been joined by
a number of newspaper columnists, who have taken great pains
to argue the mathematical improbability of the Junta's vote
count. PAN is also protesting the awarding of mayoral victories
to the PRI in the Monterrey suburbs of Garza García and Santa
Catarina. In Garza García, which has had PAN mayors for the
past nine years, PAN complaints center on two precincts in which
ballots disappeared from the polling places on the day of the
election and mysteriously reappeared at a hastily-called meeting
of that town's Junta Computadora to which PAN representatives
were not invited. PAN candidate (and former Mayor) Junco
accompanied Monterrey PAN mayoral nominee Madero to Mexico last
week to present his case to the Gobernación Secretary. Garza
García panistas have mounted a series of mass demonstrations
in the municipality, both in front of the residence of State
Governor Zorrilla Martínez and in various local plazas. PAN
is also contending that widespread PRI intimidation of its poll-
watchers and sympathizers is sufficient to invalidate the PRI
victory in the Santa Catarina suburb.
The PAN was successful in retaining the mayoralty of the indus-
trial suburb of San Nicolás de los Garza, where Ing. Jesús
Hinojosa T., was elected decisively on December 5. However,
the PRI won in all outlying towns in the State.
LAND SEIZURES
President Echeverría's expropriation of 100 thousand hectares
of farmland in Sonora prompted a quick and coordinated response
from this area's business community. Leaders of Monterrey's
Cámara Nacional de Comercio (CANACO), Cámara de la Industria de
Transformación de Nuevo León (CAINTRA) and the Centro Patronal
exhorted businessmen to close their doors on November 24 in a
one day "sympathy strike" in support of the Sonora landowners.
Businessmen's organizations in Saltillo and Torreón made similar
appeals. Spokesmen of the businessmen's associations called the
expropriation a "flagrant violation" of the constitution and
claimed that the Sonora incident "proved that the executive
branch is all-powerful, with a servile legislature and an impotent
judiciary".
UNCLASSIFIED
BERALD FORD CARADA
UNCLASSIFIED
Page 4 of 7
A-33 from MONTERREY
December 21, 1976
Response to the strike call was impressive. Downtown Monterrey
was deserted with nearly all retailers shut down. All the
industrial conglomerates in Monterrey closed their doors to
the public, except the Fundidora steel mill, which is part
government-owned, Banks and gas stations stayed open. Eighty
percent of commercial establishments were reported shut down
in both Saltillo and Torreón.
Echeverría's land expropriations in Sonora triggered campesino
organizations in the consular district to initiate "occupations"
of private landholdings. The Federación de Obreros y Campesinos
in Durango seized more than 100 thousand hectares of cattle
land alongside the Panamerican Highway on November 29. The
squatters explained that their action was timed for the last
days of the Echeverría administration because they feared López
Portillo might not tolerate such land invasions. Most of the
squatters were peacefully expelled hours later. Evictions
of illegal squatters also took place in rural Nuevo León and
in urban Saltillo and Torreón.
GOVERNOR ZORRILLA DRAWS INTENSIFIED CRITICISM
Criticism directed at Nuevo León Governor Pedro Zorrilla Mar-
tínez intensified during the month. Local newspapers increas-
ingly provided a public forum for accusations against the
Governor, with representatives of bus owners blaming him per-
sonally for some 27 million pesos in losses suffered as a result
of bus seizures, spokesmen for the PAN blaming him for "cooking
up the monumental electoral fraud" perpetrated against their
party, and various private sector sources faulting his frequent
absences from the state, his "unconstitutional" conduct in
replacing the manager of the local water company, and his
failure to defend regiomontanos against Echeverría's verbal
attacks. The Governor, a protegé of Echeverría, always staunchly
defended the former President in his frequent confrontations
with "regiomontano" business leaders. Now that Zorrilla Mar-
tínez has lost his patrón in Mexico City, his numerous local
opponents feel free to attack him without restraint.
BUS DISPUTES AGAIN
Urban transportation disputes broke out once again in Monterrey
with the seizure of busses by dissident students and posesiona-
rios Close to 150 busses were seized in protest against
higher bus fares. Bus owners retaliated by withdrawing their
UNCLASSIFIED
TIBRASY GERALD Fard
UNCLASSIFIED
Page 5 of 7
A-33 from MONTERREY
December 21,1976
remaining busses from service. Public schools closed for
several days during the stoppage and absenteeism and tardiness
mounted in business enterprises. On December 9 University
Rector Todd helped mediate an agreement which included the
return of all but eight of the seized busses, which were
retained as "hostages", a freeze on the new bus fares, a
restoration of student discounts, and an improvement of bus
maintenance and routes.
POLITICAL MISCELLANY
The Saltillo and Torreón campuses of the Autonomous University
of Coahuila (AUC) appear to be back to normal after the peaceful
resolution of student seizures of several university buildings
and the settlement of a strike by State education employees.
In Saltillo, the ten-day student occupation of the rectory
building ended on November 21 when the University Rector agreed
to discuss the reinstatement of several professors who had been
suspended. Also in Saltillo, striking AUC administrative workers
were dislodged from the School of Nursing by students who were
concerned over the loss of the fall semester. In Torreón,
medical students seized the administrative building ir protest
of the choice of the director of the AUC's Children's Hospital.
A pledge by the Rector to reconsider the appointment led to the
students' decision to leave the building after 24 hours.
ECONOMIC MISCELLANY
Rapid inflation continues. The Economic Research Center of the
State University estimates a six percent hike in the local
consumer price index for the month of November alone. The
Center calculates that consumer prices rose 25.5% between November
1975, and November, 1976. Food prices rose 19%, lodging 19%,
clothing 31%, and transportation 56%.
Leaders of three influential Monterrey business organizations
have publicly recommended a new system of wage control based
on actual cost of living increases. They propose establishing
a system wherein labor contracts will contain a clause for a
cost of living escalator computed on a quarterly or semiannual
basis. They claim their proposal will eliminate wild estimates
and predictions of inflation which are used to justify unreason-
able wage demands. What they are advocating seems to be a
detailed version of the vague proposal in López Portillo's
inaugural address calling for a link between salaries and the
cost of living.
UNCLASSIFIED
GERALD FORD LIERANT
ge 6 of 7
UNCLASSIFIED
A-33 from MONTERREY
December 21, 1976
Local auto sales are at rock bottom. The director of the
local association of auto dealers stated that 20 car
distributorships in the area had sold only seven 1977 cars
during the month of November. The cheapest 1977 model costs
85 thousand pesos and credit is still tight. Meanwhile, auto-
motive repair and maintenance shops are reported doing a
booming business. To stimulate new car sales, the auto associa-
tion has recommended that part of the Central Bank's reserves
be devoted to rediscounting car loan paper.
An agricultural team from the Soviet Union studying Mexican
programs for the biological control of plant diseases visited
the La Laguna region (centered around Torreón, Coahuila) for
one week in late November. Heading the Soviet delegation was
the USSR's Agricultural Attaché in Mexico, Dr. Anatoli Kiruschev.
The group visited a number of ejidos and the Mexican Center
for the Reproduction of Beneficial Insects.
Outgoing Monterrey Mayor Leopoldo González Sáenz has been
appointed Subsecretary for Public Works in the López Portillo
administration. In a statement to the press following his
appointment, "Polo" noted that the functions of the Secretariat
of Public Works would be substantially upgraded in the government
reorganization plan espoused by López Portillo in that respon-
sibility for "Asentamientos Humanos" would be incorporated into
the new "superagency". Public Works would also absorb or over-
see a number of heretofore independent decentralized agencies
and commissions.
The rapid growth in size of the Autonomous University of Nuevo
León (UANL) in recent years may soon be reversed. Rector Luis
E. Todd has asked the University Council to begin limiting
enrollment in August, 1977. Todd has also approached State
Governor Pedro Zorrilla Martínez with the idea of creating both
a new state university and a "colegio de Bachilleres". Meanwhile,
the university continues in financing difficulty. Blaming
delays in the receipt of some 16 million pesos from the state
government, Todd recently stated that the university has
insufficient funds to pay the Christmas bonuses due to its more
than three thousand employees.
Area citrus farmers are distressed because of overproduction
and attendant weak prices. They also claim distress because
of restricted exports to the United States. The local citrus
organizations estimates 650 pesos per ton as the industry's
break-even price, while current prices per ton have fallen to
300 pesos. The citrus organization also concedes that the
high quality of U.S., Spanish, and Israeli oranges militates
against Mexican export prospects.
UNCLASSIFIED
GERALD FORD LIBRARY
UNCLASSIFIED
Page 7 of 7
A-33 from MONTERREY
December 21, 1976
The directors of the Public Health Service and the Family
Planning Program estimate that the birthrate of 44-45 per
thousand which prevailed until 1974 fell to 40.8 in 1975.
They explain that the Mexican Institute of Social Security
alone has thus far inserted over 2000 loops, prescribed pills
for close to 6000 patients, and sterilized nearly 2000 men
and women.
LAMBERT
UNCLASSIFIED
FOR & 076330 BRARY ar
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
1977 JAN 25 AM 10: 02
RECEIVED January 24, 1977
OFFICE OF THE CHAIRMAN
FROM: TO: Ted Chairman Truman Burns EMT
Attached is the latest cable on the US/Mexican Relations.
Attachment: Mexico 804
cc: Governor Wallich
Defense classification of this document is due
to the inclusion of U.S. Government information
officially classified under Executive
which provides that "A documen,
alassification BI thest as
Highest classifier
LIBRARY GERALD ? FORD
PUPARTMENT
OF
1a
STATE
MEXICO
Department of State
OF AMERICA UNITED
TELEGRAM
CONFIDENTIAL 9627
EMT
PAGE 01
MEXICO 00804 01 OF 02 212324Z
ACTION ARA-10
INFO OCT-01 EUR-12 ISO-00 CIAE-00 DODE-00 PM-04 H-01
INR407 L-03 NSAE-00 NSC-05 PA-01 PRS-01 SP-02 SS-15
USIA-06 AID-05 COME-00 EB-08 FRB-03 TRSE-00 XMB-02
OPIC-03 CIEP-01 LAB-04 SIL-01 OMB-01 SCA-01 SCS-03
DEAE-00 SNM-02 FEA-01 INT-05 OES-06 AGRE-00 VO-03
INSE-00 STR-04 /121 W
2123532 004259 /64
R 2122317 JAN 77
return to
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9836
international ase Information Center
INFO AMEMBASSY OTTAWA
ALL US CONSULATES IN MEXICO POUCH
zatt,
C 0 N F I D E N T I 1 SECTION 1 OF 2 MEXICO 804
EO 11652 : GDS
TAGS : PFOR US MX
SUBJ : US/MEXICAN RELATIONS
SUMMARY a SUBSECRETARY OF POREIGN AFFAIRS, LIC JOSE JUAN
DE OLLOQUI, MET WITH THE MEMBERS OF THE FSI SENIOR SEMINAR
ON JANUARY 17, TO PROVIDE AN OVERVIEW OF US/MEXICAN
RELATIONS. DEOLLOQUI SPOKE EXTEMPORANEDUSLY, INFORMALLY
AND OFF-THE-RECORD FOR NEARLY FORTY-FIVE MINUTES AND ANSWERED
QUESTIONS. SUMMARY FOLLOWS. END SUMMARY.
1. HE BEGAN BY NOTING THAT MEXICO WAS ENCOURAGED BY RECENT
INDICATORS THAT THE US ECONOMY IS STRENGTHENING, PARTICULARLY
AS REFLECTED IN A LOWER RATE OF INFLATION AND DECREASED UNEMPLOYMENT.
NOTING THAT NEW MEXICAN AND US ADMINISTRATIONS ARE ASSUMING
POWER NEARLY SIMULTANEOUSLY, HE EMPHASIZED THAT NOW IS THE
TIME FOR A NEW START IN DEVELOPING CLOSER POLITICAL AND
ECONOMIC TIES BETWEEN THE US AND MEXICO. AS A CLOSE
NEIGHBOR, DEVELOPMENTS IN THE US HAVE AN IMPORTANT IMPACT
ON MEXICO. FOR PRAGMATIC REASONS, THEREFORE, MEXICO
DECLASSIFIED
E.O. 12958 SEC. 3.6
MR07-117, #20; state lts 2/22/08
LIBRARY GERALD R. FORD
BY dal NARA DATE 3/10/08
CONF IDENTIAL
you
FORM
DS-1652
9.66
DEPARTMENT
OF
STATE
UNITED
and
Department of State
/
TELEGRAM
OF
CONFIDENTIAL
PAGE 02
MEXICO 00804 01 OF 02 212324Z
CONSIDERS IT IMPORTANT TO MAINTAIN AND STRENGTHEN ITS
RELATIONS WITH THE US. ALONG WITH CANADA, HE SAID,
MEXICO "BELONGS TO NORTH AMERICA. " HE IMPLIED THAT THIS
REALITY SHOULD BE REFLECTED IN SOME FORM OF CLOSER
UNION OR RELATIONSHIP BETWEEN THE US AND ITS CLOSEST
NEIGHBORS. MEXICO AND CANADA, AS BORDERING COUNTRIES,
HAVE COMMON INTERESTS AND CONCERNS IN DEALING WITH THE
US. AS A RESULT, DE OLLOQUI INDICATED, IT WOULD BE TO
THE BENEFIT OF ALL THREE COUNTRIES TO DEVELOP A TIGHTER
RELATIONSHIP IN THE FUTURE, RECOGNIZING, OF COURSE,
THAT MEXICO IS ALSO A LATIN AMERICAN COUNTRY AND A MEMBER
OF THE THIRD WORLD.
2. IN ITS FOREIGN RELATIONS DE OLLOQUI SAID MEXICO
SHOULD TAKE ITS ATLANTIC POSITION MORE SERIOUSLY. ONE
OF OUR COASTS OVERLOOKS THE CARIBBEAN WHICH IS AN
IMPORTANT US SECURITY BELT, HE SAID, MENTIONING PUERTO
RICO AND THE CANAL ZONE. SINCE MANY OF THE NEWLY
INDEPENDENT ENGLISH-SPEAKING NATIONS HAVE NOT YET FOUND
THEIR PLACE IN THE HEMISPHERE, MEXICO CAN EXERT A
POSITIVE INFLUENCE IN THIS AREA LOOKING ALSO TOWARD ITS
RELATIONS WITH THE PACIFIC AREA, MEXICO IS PARTICULARLY
INTERESTED IN MAINTAINING CLOSE TIES WITH THE PHILIPPINES,
JAPAN AND INDIA, IN THE WESTERN HEMISPHERE, MEXICO UNDER
THE NEW ADMINISTRATION OF LOPQZ PORTILLO, WILL
PLACE INCREASING EMPHASIS ON STRENGTHENING TIES WITH
THE OTHER NATIONS OF LATIN AMERICA. (NOTE : DE OLLOQUI
DID NOT INDICATE HOW MEXICO WOULD RECONCILE SOME FORM
OF SPECIAL RELATIONSHIP WITH THE US AND CANADA WITH
ITS DESIRE TO DEVELOP CLOSER TIES WITH LATION AMERICA.
OTHER MEXICAN CONTACTS, HOWEVER, HAVE SUGGESTED IN
RECENT DAYS THAT MEXICO, BECAUSE OF ITS UNIQUE GEOGRAPHIC
AND ECONOMIC TIES WITH THE US, COULD PLAY AN IMPORTANT
POLITICAL ROLE AS A MEDIATOR AND INTERPRETER BETWEEN THE
USG AND THE REST OF THE HEMISPHERE.) DE OLLOQUI OBSERVED
THAT MEXICO DURING THE LAST SIX YEARS HAS DOUBLED ITS
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DIPLOMATIC RELATIONS THROUGHOUT THE WORLD AND PURSUED
A MORE ACTIVE FOREIGN POLICY. HE FELT THIS WAS A
POSITIVE DEVELOPMENT AND DID NOT SEE ANY CONTRADICTION
BETWEEN THIS LARGER WORLD ROLE AND MEXICO'S DESIRE FOR
CLOSER RELATIONS WITH THE US.
3. DE OLLOQUI EXPRESSED CONFIDENCE THAT THE POLITICAL
AND ECONOMIC FUTURE OF MEXICO, NOTWITHSTANDING ITS
CURRENT FINANCIAL PROBLEMS, IS BRIGHT. EMPHASIZING THAT
THE COUNTRY IS POLITICALLY STABLE, HE EXPRESSED HOPE THAT
THE GOVERNMENT WOULD BE SUCCESSFUL IN EMERGING FROM ITS
PRESENT ECONOMIC PLIGHT BY CONTROLLING INFLATION THROUGH
STRICTER CONTROL OF EXPENDITURES, INCREASING ITS
EXPORTS TO THE us, AND ATTRACTING MORE us TOURISM.
4. DE OLLOQUI WAS QUITE CONCERNED AT WHAT HE
DESCRIBED AS THE DISTORTED COVERAGE OF MEXICO IN THE
US PRESS AND SPECIFICALLY CITED THE SENSATIONALIST
TREATMENT OF LAST NOVEMBER'S COUP RUMORS AS AN EXAMPLE.
HE MENTIONED THE DECLINE IN TOURISM AS A PARTICULAR
CONCERN ATTRIBUTABLE IN LARGE PART TO UNFAIR PRESS
PUBLICITY. INDEED, HE WENT EVEN FURTHER, SUGGESTING
THAT THE SEPT. 1 DEVALUATION WAS LARGELY DUE TO THE
ADVERSE PSYCHOLOGICAL IMPACT OF A SINGLE US NEWSPAPER
REPORT (I.E. THE WALL STREET JOURNAL)AND NEGLECTING
TO MENTION THE UNDERLYING FINANCIAL FACTORS.
5. REGARDING TOURISM HE PROFESSED ANNOYANCE AND
CONCERN AT THE STATE DEPARTMENT'S DECEMBER ACTION IN
RELEASING, ALLEGEDLY WITHOUT CONSULTATION, A STATEMENT
TO TOURISTS ABOUT THE DANGERS OF TRAVELING IN MEXICO.
CHE DID NOT MENTION THAT STATEMENT DEALT ONLY WITH
SINALOA.) HE ALSO EXPRESSED CONCERN THAT MEXICAN
EFFORTS TO INCREASE EXPORTS MIGHT PROVOKE US CHARGES
THAT MEXICO IS DUMPING INTO THE us MARKET. IN A MORE
POSITIVE NOTE, HE EXPRESSED OPTIMISM THAT MEXICO HAS NEARLY
&
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ALL THE ECONOMIC RESOURCES REQUIRED FOR DEVELOPMENT. FOR
EXAMPLE, HE SAID, OIL IS NOT A LIMITING FACTOR AND
CONTRIBUTES IMPORTANTLY TO MEXICO'S ECONOMIC GROWTH.
HE SAID MEXICO HAS NOTHING TO GAIN FROM BECOMING A
MEMBER OF OPEC, SINCE IT CURRENTLY DERIVES ALL THE
BENEFITS WITHOUT ANY OF THE LIABILITIES OF MEMBERSHIP.
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ACTION ARA-10
INFO OCT-01 EUR-12 ISO-00 CIAE-00 DODE-00 PM-04 H-01
INR-07 La03 NSAE-00 NSC-05 PA-01 PRS-01 SP-02 SS-15
USIA-06 AID-05 COME-00 E8-08 FRB-03 TRSE-00 XMB-02
OPIC-03 CIEP-01 LAB-04 SIL-01 OMB-01 SCA-01 SCS-03
DEAE-00 SNM-02 FEA-01 INT-05 DES-06 STR-04 AGRE-00
VO-03 INSE-00 /121 W
212353Z 004417 /64
R 212231Z JAN 77
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9837
INFO ALL US CONSULATES IN MEXICO BY POUCH
AMEMBASSY OTTAWA
c
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N
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N
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SECTION 2 OF 2 MEXICO 0804
6. COMMENTING ON US POLICY TOWARD LATIN AMERICA UNDER
THE CARTER ADMINISTRATION, DE OLLOQUI EXPRESSED THE
HOPE THAT THE USG WOULD REFRAIN FROM FORMULATING NEW
SLOGANS WITHOUT MEANING AND ADOPT A MORE OPEN AND
FRANK RELATIONSHIP TOWARD MEXICO, WHICH ISTHE US'S
FOURTH LARGEST MARKET. HE SAID THAT THERE IS A FEELING
IN MEXICO THAT THE US TAKES IT FOR GRANTED. GIVEN
THEIR GEOGRAPHIC PROXIMITY AND THE IMPORTANT ECONOMIC
TIES BETWEEN BOTH COUNTRIES, THIS SHOULD NOT BE THE CASE.
MEXICO IS PARTICULARLY CONCERNED ABOUTITS "THREE
BILLION DOLLAR TRADE DEFICIT WITH THE US". AND BELIEVES THAT THE
USG MUST DO SOMETHING TO CLOSE THE GAP. IN THIS CONTEXT,
HE AGAIN CITED THE NEED FOR GREATER ACCESS TO US MARKETS
AND FEWER TRADE RESTRICTIONS ON MEXICAN EXPORTS.
7. TURNING TO THE ISSUE OF MIGRANT WORKERS, DE OLLOQUI
SAID THAT SERIOUS ECONOMIC PROBLEMS IN MEXICO CAN ONLY
AGGRAVATE THE SITUATION. MEXICO, HAVING IDENTIFIED THE
AREAS OF PRINCIPAL OUTWARD MIGRATION, NEEDS TO DEVELOP
WAYS TO INVEST IN AGRO-INDUSTRIES THAT WILL PROVIDE
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GREATER DEMPLOYMENT AND REDUCE THE INCENTIVE FOR SUCH
MIGRATION. DE OLLOQUI, HOWEVER, DISPUTED THE ATTITUDE
OF THOSE IN THE us WHO SEE MEXICAN MIGRATION TO THE US
AS A NEGATIVE FACTOR. HE CLAIMED THAT THE US ECONOMY
IN THE SOUTHWEST NEEDS MIGRATORY WORKERS WHO ARE WILLING
TO TAKE LOWER PAYING JOBS. HE DENIED THAT THESE
WORKERS CONSTITUTE A SERIOUS BURDEN ON US WELFARE
SERVICES OR THE ECONOMY, INDEED, HE CLAIMED THAT THEY
HELP PUT MARGINAL LANDS IN PRODUCTION AND CONTRIBUTE
TO THE US SERVICE INDUSTRY. IN SUM, HE
URGED THAT THE US REFRAIN FROM ANY STEPS THAT MIGHT
RESULT IN A MASSIVE DEPORTATION OF MEXICAN WORKERS.
8. IN A RELATED COMMENT, DE OLLOQUI EXPRESSED THE
HOPE THAT THE US WOULD NOT TAKE ANY MEASURES THAT WOULD
PROVE HARMFUL TO BORDER INDUSTRIES IN MEXICO BECAUSE
THE ECONOMIC IMPACT OF CLOSURE COULD INDIRECTLY
LEAD TO A LOSS OF SOME 35, 000 JOBS ON THE US SIDE OF
THE BORDER (PRESUMABLY DUE TO A REDUCTION IN PURCHASE
OF US GOODS BY MEXICAN WORKERS).
9. DE OLLOGUI SAID THAT MEXICO WELCOMES FOREIGN,
PARTICULARLY US, INVESTMENT UNDER REASONABLE RULES,
ADDING THAT IN CONTRAST TO OTHER COUNTRIES MEXICO DOES
NOT CHANGE THE RULES OF THE GAME ANDINDEED HAS BEEN
QUITE FLEXIBLE IN THE APPLICATION OF THESE RULES TO
MAINTAIN NECESSARY INVESTMENT.
10. IN SUMMARY, DE OLLOQUI SAID THAT THE USG COULD
PLAY AN IMPORTANT ROLE IN STRENGTHENING RELATIONS WITH
MEXICO BY (A) HELPING TO CORRECT THE CURRENT TRADE IMBALANCE,
(B) FACILITATING MEXICO'S ACCESS TO FINANCIAL
MARKETS (HE SPECIFICALLY CITED A FLEXIBLE US ATTITUDE
IN THE IDB AND OTHER INTERNATIONAL LENDING ORGANIZATIONS,
(C) AVOIDING MEASURES THAT WOULD HARM BORDER
INDUSTRIES, AND (D) MAKING GREATER EFFORTS TO SEE
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THAT THE US PRESS HAD A BETTER INFORMED AND OBJECTIVE
ATTITUDE TOWARD DEVELOPMENTS IN MEXICO. WHILE OUR
INTERESTS DO NOT ALWAYS COINCIDE, DE OLLOQUI SAID,
THE US AND MEXICO ARE ALLIES ON BASIC ISSUES AND MUST
HAVE A BETTER RELATIONSHIP.
11. COMMENT:
WHILE DEOLLOQUI SPOKE PERSONALLY AND INFORMALLY,
IT IS PROBABLE THAT HIS GENERAL VIEWS REFLECT OFFICIAL
GOM THINKING WHICH IN ONE FORM OR ANOTHER MAY SURFACE
DURING PRESIDENT LOPEZ PORTILLO'S ANTICIPATED VISIT TO
WASHINGTON. MOST OF THE BASIC THEMES TOUCHED UPON BY
DE OLLOQUI WERE PREDICTABLE AND CONSISTENT WITH THOSE
EXPRESSED BY OTHER GOM OFFICIALS OR THE PRESS.
12. NOTEWORTHY AND INTRIGUING, HOWEVER, WAS HIS EARLY
AND POINTED REFERENCE TO SOME FORM OF SPECIAL BOND OR
RELATIONSHIP BETWEEN THE UNITED STATES AND ITS TWO
NEIGHBORS -- MEXICO AND CANADA. IT IS DIFFICULT TO
FATHOM WHAT DE OLLOQUI HAS IN MIND. THE CANADIAN DCM
RALPH BRANSCOMBE (PROTECT SOURCE) SUBSEQUENTLY CONFIRMED
THAT DE OLLOQUI HAD SURFACED THE SAME VAGUE CONCEPT OF
A NORTH AMERICAN UNION DURING A RECENT MEETING HE
REQUESTED WITH CANADIAN AMBASSADOR LANGLEY. THE CANADIANS,
SURPRISED BY THE MEXICAN APPROACH, ARE BAFFLED BY WHAT KIND
IF INTERPRETATION THEY SHOULD GIVE IT IN THEIR REPORTING
TO OTTAWA. WE WILL BE DISCUSSING THE QUESTION WITH THEM
FURTHER. AT THE AMBASSADOR'S JANUARY 17 RECEPTION FOR
THE SENIOR SEMINAR, FONSEC AMBASSADOR GONZALEZ DE LEON
INDICATED THAT THE CONCEPT OF A SPECIAL RELATIONSHIP
BETWEEN THE US AND MEXICO/CANADA DATES BACK TO THE EARLY
50'S AND COMMENTED THAT IF PACKAGED PROPERLY, IT COULD BE
REVIVED AND MADE POLITICALLY ACCEPTABLE IN MEXICO.
13. AT THIS POINT WE ARE NOT IN A POSITION TO JUDGE
R.
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WHAT, IF ANYTHING, IS BEHINDDE OLLOQUI'S INITIATIVE IN
RAISING THE IDEA OF A NORTH AMERICAN UNION. IT MAY BE,
HOWEVER, THAT MEXICO VIEWS THIS APPROACH AS A POSSIBLE
POLITICAL BASIS FOR REQUESTING AND JUSTIFYING SPECIAL us
ECONOMIC TREATMENT FOR MEXICO, PARTICULARLY IN THE AREA
OF EXPORTS. WHATEVER MAY BE BEHIND DE OLLOQUI'S REMARKS,
THE FACT THAT HE RAISED THE POSSIBILITY OF A SPECIAL
RELATIONSHIP CERTAINLY INDICATES THE SHIFT IN MEXICAN
OFFICIAL THINKING WHICH HAS OCCURRED SINCE FORMER
PRESIDENT ECHEVERRIA LEFT OFFICE,
THOMPSON
leteckvw
CONFIDENTIAL
FORM
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9-56
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
1977 JAN 26 PM 5: 06
RECEIVED
January 26, 1977
OFFICE OF THE CHAIRMAN
TO:
FROM: Ted Truman
Chairman Burns EMT
Attached are the latest cables on Mexico.
Attachment: Mexico 874
Mexico A-34
cc: Governor Wallich
Defense classification of this document is due
to the Inclusion of U.S. Government information
officially classified under Exacutive Order 10501
which provides that "A document.. shall bear a
classification at least as high as that of its
highest classified component."
LIBRARY GERALD R. FORD
DEPARTMENT OF STATE
mexico
*
STATE UNITED name AMERICA
Department of State
TELEGRAM
OF
LIMITED OFFICIAL USE
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PAGE 01
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ACTION ARA-10
INFO OCT-01 ISO-00 CIAE-00 COME-00 EB-08 INR-07 LAB-04
NSAE-00 SIL-01 TRSE-00 OMB-01 FRB-03 AID-05 XMB-02
PRS-01 PA-01 USIA-06 1050 W
25
252011Z 040394 /46
R 251724Z JAN 77
FM AMEMBASSY MEXICO
TO SECSTATE WASHOC 9879
#
LIMITED OFFICIAL USE MEXICO 0874
INTERNATIONAL INFORMATION CENTER
E.O. 11652: N/A
TAGS: ELAB, EGEN, MX
SUBJ: JLP INAUGURATES WORKERS BANK AND HAILS LABOR/MANAGEMENT
COOPERATION
1. PRESIDENT LOPEZ PORTILLO OFFICIALLY INAUGURATED THE
WOKERS BANK (BANCO OBRERO) IN A LARGE CEREMONY HELD ON
THE MORNING OF JAN 21, GOM AUTHORIZATION OF THE BANK FULFILLES
A JLP DECEMBER 1 INAUGURAL SPEECH PROMISE AND TWENTY-YEAR
GOAL OF ORGANIZED LABOR. THE BANK WILL BE AN INSTITUTION OF
DEPOSIT, SAVINGS AND LOAN AVAILABLE FOR USE OF ALL WORKERS
WHETHER OR NOT ORGANIZED. CTM LEADERS CLAIM THAT INITIAL
CAPITAL OF 100 MILLION PESOS HAS BEEN 50 TO 60 PERCENT
SUBSCRIBED "EXCLUSIVELY FROM MAJOR MEXICAN UNIONS" AND THAT
THERE IS NO GOM OR PRIVATE SECTOR PARTICIPATION. GOM
AUTHORIZATION INCLUDES SUPERVISION AND INSPECTION BY THE
NATIONAL COMMISSION OF BANKING AND INSURANCE.
2. JLP USED THE INAUGURATION AS A FORUM FOR PRESENTING A NEW
DECREE AUTHORIZING THE SECRETARY OF COMMERCE TO NEGOTIATE WITH
INDUSTRY FOR THE PRODUCTION OF 90 BASIC COMMODITIES AT LOW PRICES
(SEPTEL) AND FOR FAILING WHAT HE TERMED A "SOCIAL PACT"
WHICH IF SUCCESSFUL WOULD "CONTROL THE ECONOMIC
DISORDER CTHAT EXISTS) NOT ONLY IN MEXICO."
FORD is GERALD LIBRARY
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AFTER PRAISING ORGANIZED LABOR FOR ITS RESPONSIBLE ROLE
IN REFRAINING FROM DEMANDS FOR INFLATIONARY WAGE
INCREASES, AND ITS HISTORIC CONTRIBUTIONS TO THE COUNTRY,
JLP ANNOUNCED THAT "WE NOW HAVE A FIRST AND BEAUTIFUL
(HERMOSA) RESPONSE FROM THE PRIVATE SECTOR. COMMERICAL
AND INDUSTRIAL ESTABLISHMENT HAVE OFFERED US A
POPULAR ALLIANCE FOR PRODUCTION AND DISTRIBUTION. "
3. COMMENT: WHILE JLP SPOKE EFFUSIVELY OF THE POPULAR
ALLIANCE AND THE "SOCIAL PACT" AS IF BOTH LABOR AND THE
PRIVATE SECTOR HAD MADE MAJOR NEW COMMITMENTS, (IN
DECEMBER THE GOM NEGOTIATED TEN INVESTMENT AGREEMENTS WITH
THE PRIVATE SECTOR AND LABOR CONSENTED TO ONLY 9-10
PERCENT NATIONAL MINIMUM WAGE INCREASES, BOTH OF WHICH
FELL UNDER THE "POPULAR ALLIANCE" RUBRIC), THERE IS NOTHING
TANGIBLE YET. WE BELIEVE JOP WAS SIMPLY JAWBONING ON THIS OCCASION,
HOPING TO KEEP ALIVE A FRAGILE SPIRIT OF COOPERATION WHICH BOTH
LABOR AND MANAGEMENT HAVE SHOWN, A PROBLEM IS THAT LABOR'S
FOREBEARANCE ON WAGES IS MORE VISIBLE AND DEMONSTRABLE
THAN IS MANAGEMENT SUCCESS AT CONTROLLING PRICES -- HENCE
THE FANFARE SURROUNDING THE WORKERS BANK (TO WHICH GOM
APPARENTLY IS MAKING NO FINANCIAL CONTRIBUTION) THE
PRESIDENTIAL PRAISE OF LABOR'S BEHAVIOR, AND JLP'S ATTEMPTS
TO SHOW THAT MANAGEMENT TOO IS ACTING RESPONSIBLY.
JOVA
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Original to be Filed in
Decentralized Files.
FILE DESIGNATION
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HANDLING INDICATOR
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FADRC/DA/WC
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US DEPT. OF COMMERCE, WASHDC
SS 20 :Z Wd E- NVC LL
INFO:
AMEMBASSY, MEXICO
AMCONSUL, GUADALAJARA
DEPARTMENT OF STATE
PLEASE
TO
CENTER
AGR
COM
FRB
INT
FROM
AMCONSUL, MONTERREY
DATE: December 21, 1976
E.0.11652:
NA
LAB
TAR
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XMB
TAGS:
ECON, PINT, MX
SUBJECT :
BUSINESSMEN'S ROUNDTABLE REPORT, DECEMBER, 1976
AIR
ARMY
NAVY
OSD
REF
:
MONTERREY'S A-31 OF NOVEMBER 12, 1976
USIA
NSA
CIA
EB
SUMMARY
03 OHWY 61 NAME
SUGGESTED DISTRIBUTION
The first two weeks of the López Portillo adminis-
tration received a high rating from the nine local
executives who participated in the latest in a series
of Businessmen's Roundtable discussions, held at the
Monterrey Consulate General on December 16. Govern-
ment agricultural policies, removal of tax incentives
for exports, and the Government's record of payment
were, however, of concern. Most executives saw 1977
POST ROUTING
as being an austere year, with sharply higher costs
TO:
Action
Info.
for labor and raw materials, a mixed sales picture,
Initials
AMB!
price controls, and dangers of severe inflation
PO
identified as their major worries. Prospects for
DCM
retailers and producers of consumer goods were,
POL
nevertheless, reported as generally bright. The Round-
ECON
table participants criticized the recent general 28%
CONS
wage increase, hoped for moderation in the minimum
ADM
wage revisions, recommended a strong role for company
executives in labor relations, and offered examples
AID
of the infiltration of their workforces by outsiders.
USIS
Consul General Lambert began this month's Roundtable
by offering an overview of US/Mexican relations during
the Carter/López Portillo Presidencies. Each of the
businessmen then made his presentation in turn.
FILE
Action Taken:
BERALD FORD LIBRARY
Date:
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Drafted by:
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In
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Drafting Date:
Phone No.:
Contents and Classification Approved by:
ECON/COMM:THCarter/RLGlass:mlg
12/20/76
APO/DCasteel
Clearances:
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December 21, 1976
REACTION TO LOPEZ PORTILLO
Monterrey Roundtable participants were generally optimistic about
President José López Portillo, basing their hopes on his inau-
gural address and his cabinet-level appointments. The senior
executive of a firm which manufactures cranes said that he was
impressed by the "sincerity and directness" of the inaugural
speech and was gratified by its lack of "rhetoric". A steel
pipe manufacturer said that he admired the "simplicity" of the
speech and believed that the President wrote most of the text
himself. He predicted that López Portillo would not move sharply
to the right but would at least stick closer to the center. He
was also encouraged by reports that López Portillo had privately
consulted with former Presidents Díaz Ordaz and Alemán just prior
to the inauguration.
The cabinet nominations were generally well received. The crane
manufacturer said that all but one of the appointments were
"worthy of confidence". However, the appointment of Muñoz Ledo
as Secretary of Education puzzled him since he feared the impact
of this "leftist" on Mexican youth. The steel pipe manufacturer
interjected that moving Muñoz Ledo out of the Presidency of the
Partido Revolucionario Institucional (PRI) tended to "freeze him
out of power", especially since his two strong undersecretaries
in the Education Secretariat would exert a restraining influence.
Moreover, the appointment of Muñoz Ledo was a political necessity
to placate Mexican leftists. This appointment may also help
maintain peace among Mexican leftists and, if not, give López
Portillo a fine excuse to dismiss Muñoz Ledo.
One large and important unknown is López Portillo's approach
to wage policy. Roundtable participants are anxiously awaiting
the Government of Mexico's January, 1977, minimum wage revision.
There was a general concurrence that 1976 wage settlements had
outstripped price inflation. An automobile parts manufacturer
said that he expected an eight to twelve percent minimum wage
hike in January and felt that anything over ten percent would be
inflationary and could lead to a further devaluation. A ceramics
manufacturer opined that if López Portillo does not hold the
wage increase to under twelve percent, his factory will be
seriously hurt. A manufacturer of stainless steel tubing volunteered
that this would be a "good time for the GOM to squelch wage in-
flation" through a merely symbolic wage hike, certainly not more
than eight to ten percent. The manufacturer of steel pipe said
that he had understood that the GOM and the International Monetary
Fund had agreed to a post-devaluation wage hike of only 15%,
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which was violated by the Government's 23% wage settlement.
He had also heard rumors that the GOM would soon start a policy
of paying salary increases in bonds to minimize their infla-
tionary impact. Press reports of a 38% increase in the 1977
Federal Budget also inspired several observations. The steel
pipe manufacturer noted that the budgetary discipline was so lax
in the previous administration that Petróleos Mexicanos (PEMEX)
exceeded its budget ceiling midway through the year. He was
confident that López Portillo will "enforce the budget". A
manufacturer of ceramics feared a big increase in GOM spending
and hoped that López Portillo would "impose budget discipline".
The steel pipe manufacturer was optimistic about agreements being
formulated between the Government of Mexico and the country's
private sector. The agreements, he said, will include provisions
to stop the Government from duplicating the efforts of the
private sector. He has also heard that chambers of commerce are
pressuring the new President to drop the retail sales of CONASUPO,
the public sector purchaser and distributor of certain basic
foodstuffs.
The new Administration's policy on agriculture was of acute concern
to the executive from an edible oils firm. Expropriations and
land invasions by squatters are threatening Mexico's bread basket
and will force the GOM to import large and costly quantities of
foodstuffs. Besides the loss of production during the current
crop year, the executive also expressed longer term fears that
the land's productivity will be permanently damaged. Although
1977 will be a poor year for agriculture, he nevertheless is
generally optimistic about the López Portillo administration over
the longer run. The Government is an unreliable customer according
to the pipe manufacturer, whose company faced massive order cuts
when PEMEX exceeded its budget ceiling in July, 1976. A pump
manufacturer added that his firm had also faced sudden order
cancellations from PEMEX. He was also upset when the GOM's
Secretariat of Water Resources suddenly cancelled a sizable
pump order so that it could divert the funds to one of President
Echeverría's pet projects. One participant added that an order
for two hundred taxis by Fomento Metropolitano (FOMET) in Mon-
terrey was cancelled after the distributor had purchased the
vehicles. According to him, the increased criticism of Nuevo
León Governor Zorrilla Martínez by the newspaper El Diario is
due at least in part to this action, since the same organization
controls both the automobile distributorship involved and the
newspaper.
A lamp manufacturer who recently arrived in Mexico had the most
pessimistic view of the country's future. His pessimism was
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based mainly on the cancellation of export subsidies, GOM
patent infringements and the new Patent and Trademark Law,
and the requirements for greater Mexican content in manufac-
tures. He conceded that Mexico's wage rates are generally
low enough to permit exporting, but he feared that such restric-
tions and "harassment" would discourage export activity.
BUSINESS CONDITIONS
Although there was some bright spots, the general business out-
look for 1977 was described as being somewhat pessimistic, with
cash flow problems, the inability to "pass through" higher
materials and wage costs because of Mexican Government price
controls and competitive market conditions, and financial and
wage uncertainties contributing to the pessimism. Several
company representatives stated that their firms were in for a
year of belt-tightening and austerity. Over the longer term there
was considerable optimism. Many participants admitted that the
peso devaluations and resultant wage and supplies increases
have had a negative effect on their prospects for 1977.
While the crane manufacturing company has enough of a backlog
to keep the plant operating throughout 1977, most of the firm's
orders were received before September 1. The company had quoted
fixed prices for these contracts and consequently has been hard
hit by escalating costs. The executive admitted that the company's
accounts payable had lengthened and that henceforth the firm
would quote primarily on a "cost at time of delivery" basis.
The manufacturer of steel pipe stated that his firm is now paying
54% more for the steel used in the majority of his firm's opera-
tions. A manufacturer of ceramic tile now faces significantly
higher prices for the raw materials it must import from the
United States. The manager of the firm making lightbulbs bemoaned
the sharply higher prices the firm has been required to pay for
its imports of tungsten wire.
The manager of a company making automobile parts noted a sharpening
dichotomy in his 1977 sales picture, The 30-40% of his business
represented by sales of original equipment to automobile assemblers
has suffered greatly because of the virtual stagnation in sales
of 1977 model cars. Car prices have increased more than 50% for
the 1977 models. Chevrolet Novas rose from some eighty thousand
to one hundred and thirty thousand pesos, for example, and Ford
LTDs rose from one hundred and forty thousand to over a quarter
of a million pesos in price. The clampdown on the availability
of credit has also hurt his business. According to him, automobile
production has been drastically reduced, and several automakers
are unwilling to fix future production schedules. In contrast,
Page 5 of 8
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December 21, 1976
the replacement parts component of the firm's business is
experiencing higher sales, primarily because more and more
carowners are having their existing vehicles repaired. For
the autoparts firm, the added demand for its replacement part
business has cushioned somewhat the adverse effects of the
devaluations.
Besides the improved market prospects for automobile replacementt
parts, the tile company executive reports that his business is
currently "booming" and that his plant is running at 100% of
production capacity to meet current demand and reduce a three
month backlog. The executive is guardedly optimistic, citing
reports that the Carter Administration will cause a "building
boom" in the United States, the firm's principal export market.
The executive stated that nearly forty percent of the firm's
output is currently being exported, a factor which has in part
compensated for rising costs for imported raw materials. To
maintain these exports, the executive admitted that his firm
has been offering an eight percent discount for its exports
(quoted in dollar terms) to the US. The executive criticized
the GOM's removal of tax incentives to export, stating that, for
his firm to remain competitive, the incentives would have to
be reinstated or the peso would have to depreciate further vis
a vis the dollar.
Several participants reported the markedly better sales and
profit picture in the retail sector of the Mexican economy.
While formerly heavy purchases of consumer goods and foodstuffs
by Mexicans in the United States have dropped significantly,
domestic wage hikes and more recently the sizable Christmas
bonuses paid to workers have stimulated domestic sales. A
cutlery manufacturing firm's executive admits that his sales
(in terms of number of pieces) have risen 15% in the past six
months. Again, the total picture for the firm is mixed, however,
since the same company also manufactures industrial springs.
The company's sales of springs to autoparts manufacturers have
fallen sharply. In contrast, sales of springs to producers of
consumer goods have remained good. Another participant mentioned
that there now existed waiting lines for popular consumer
durables such as washing machines. A third businessman commented
that, with rapidly rising wages at the lower income levels,
there was occurring a marked shift in income distribution from
the middle class and toward the working class.
From the businessmen's comments, it was clear that no consensus
existed as to when the Government of Mexico might reinstitute a
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A-34 from MONTERREY
December 21, 1976
fixed parity for the peso and, if so, its rate of exchange.
One businessman predicted that the current rate of some twenty
pesos per dollar would persist for several months. Another
described the current situation as a "manipulated float" and
saw a return to a fixed parity within four to six months. On
the other hand, the cutlery and spring manufacturer is estimating
that the peso will fall to the thirty to one level by yearend
1977. Most of the executives believed that the soon to be
announced minimum wage levels for 1977 would be a good barometer
for the movement of the peso.
LABOR RELATIONS
General criticism of the 23% wage hike "recommended" last Sep-
tember, hope that the minimum wage increases to be announced for
January would be moderate, and concern over workforce infiltration
were the main themes discussed by the Roundtable participants.
There was widespread agreement that the 23% wage increase decreed
in September was excessive and unjustified. The manager of a
company producing cranes for the steel industry stated that his
workforce had received a 17% wage boost in July, 1976, and opined
that a six to eight percent increase in September would have fully
compensated for the increase in the cost of living between July
and late September. The 23% increase came at a particularly bad
time, in his view, especially since companies now have to use a
much higher base in computing the Christmas bonuses of workers.
The chief executive of a company producing food products stated
that his workforce had received an 18% wage increase in August,
1976, but nevertheless received the full 23% less than a month
later. In the case of the company producing ceramic tile, salary
revision negotiations were in progress when the 23% decree was
announced. A late September agreement to raise wages by 30%
included the 23% recommendation. Besides being critical of the
23% wage increase, the manager of the pump producing company also
criticized the recent shift from biennial to annual salary revi-
sion negotiations.
The food processing executive raised the point that too often
plant managers and executives shunned involvement in labor contact
negotiations and instead relied on labor relations lawyers. He
was critical of this practice, opining that lawyers tend to
follow the "path of least resistance" in many cases and generally
had less incentive than plant managers to reach a settlement
favorable to the company. The executive from the pipemaking
company agreed, stating that many outside lawyers would accept
a "bad settlement rather than a good fight." He offered the
example of Fundidora Monterrey which, according to him, has for
more than twenty years not given adequate management attention
to contract revision negotiations. He fears that, for the Fundi-
dora, the process ma' e irreversible.
Page 7 of 8
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A-34 from MONTERREY
December 21, 1976
Various Roundtable participants related their experiences
regarding actual or attempted infiltration of their work-
forces by outside agitators. The manager of a company making
pumps stated that a strike by his "white" (independent) union
against the company in March, 1976, was political rather
than economic in nature and was instigated by outsiders from
the Frente Auténtico de Trabajadores and the Mexican Communist
Party. He was particularly critical of interference by radical
members of Section 68 of the Miners' Union, the most politically-
active of the unions representing workers at Fundidora Monterrey.
These groups also sought to intertwine the cause of the strikers
with those of posesionarios and students, organizing several
joint demonstrations to pressure the pumpmaking company. Accord-
ing to the executive, the state labor conciliation board sup-
ported his efforts to settle the strike and combat the infiltra-
tion. After settlement of the two week strike, the company
fired twenty of its two hundred forty workforce which it had
identified as troublemakers, including several employees that
had been with the company for more than ten years. Despite the
reduced workforce, plant productivity subsequently rose because
of the better work environment.
The executive of a company producing stainless steel products
reported a similar experience. He stated that his union, affil-
iated with the Confederación de Trabajadores Mexicanos (CTM),
was helpful in isolating and removing the troublemakers by
denying them membership in the union, which was a prerequisite
to employment with the company. The executive of the company
producing lamps stated that his labor situation (with a CTM-
affiliated union) was generally good but that he was also con-
sidering the dismissal of a small group of identified trouble-
makers.
A number of participants stated that their companies had laid
off some portion of their workforces in recent months. The
pipemaking company executive offered the most dramatic story,
reporting that his workforce had dropped from 1500 to 800 since
midyear, primarily because of sharply reduced orders (and a few
cancelled contracts). The executive noted that his business
was classified in the "construction" field, thus permitting
the relatively easy hiring and firing of eventuales, or temporary
workers. The majority of those laid off by the firm were in
this category. Since there was no requirement to pay severance
8
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FORD a LIBRARY 828410
TIMILED OLLICIET nee
Page 8 of 8
A-34 from MONTERREY
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December 21, 1976
Ledayremeur
bgl
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benefits when eyentuales are dismissed, the company was able
to reduce its workforce without major cost or legal challenges
by its workers through the state labor arbitration panel. The
executive noted that most of the plant's workers that were
dismissed were able (with company assistance) to find employ-
ment elsewhere.
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V-34 WOMLEBEX
3 8
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
1977 JAN 31 PM 4: 46
RECEIVED
January 31, 1977
OFFICE OF THE CHAIRMAN
TO:
FROM: Ted Truman
Chairman Burns EMT
Attached is the latest cable from Mexico.
Attachment: Mexico 1018
cc: Governor Wallich
Defense classification of this decument is due
to the inclusion of 01 Covernment information
officially classiting main Executive Order 10501
which provides that 3 document shall bear a
classification at tratt 88 high as that of its
highest classified combonant."
FORD is GERALO LIBRARY
BRANTMENT OF STATE
*
Department of State
OF SEALS UNITED MARK AMERICA
TELEGRAM
LIMITED OFFICIAL USE
0144
PAGE 01
MEXICO 01018 280032Z
ACTION ARA-10
TNFO OCT-01 ISO-00 SP=02 USIA-06 AID-05 EB-08 NSC-05
CIEP-01 SS-15 STR-04 OMB-01 CEA-01 CIAE-00 COME-00
FRB-03 INR-07 NSAE-00 XMB-02 OPIC-03 LAB-04 SIL-01
PA-01 PRS-01 L-03 H-01 1085 W
2808257 077315 /17
R 2723327 JAN 77
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9952
TNFO TRSY WASHDC
ALI US CONSULATES IN MEXICO BY POUCH
International Please Information Center
LIMITED OFFICIAL USE MEXICO 1018
E.O. 11652: N/A
TAGS: EGEN MX
SUBJ: PROGRAM TO PROVIDE 90 BASIC PRODUCTS AT LOW PRICES
REF: (A) 76 MEXICO 15646, (B) 75 MEXICO 15754;
(C) MEXICO 0874
1. SUMMARY: ON JANUARY 21, LOPEZ-PORTILLO SIGNED DECREE
AUTHORIZING SECRETARY OF COMMERCE TO SIGN AGREEMENTS WITH
VARIOUS INDUSTRIES TO PROVIDE 90 BASIC CONSUMPTION ARTICLES
AT LOW PRICES. PRESIDENT'S COMMENTS AT SIGNINF IMPLIED
THTS WOULD BE A SACRIFICE BY INDUSTRY TO COMPENSATE FOR
RESTRAINT IN WAGE DEMANDS. MEASURE LABELED AS A MEANS
TO REDUCE PRICES. END SUMMARY.
2. THE LOPEZ-PORTILLO ADMINISTRATION IS NOW MOVING TO
GET INDUSTRY TO SIGN AGREEMENTS BY WHICH THEY WILL
PROVIDE 90 BASIC CONSUMPTION GOODS AT FIXED PRICES, AT
BOTH WHOLESALE AND RETAIL LEVELS. PRICE OF GOODS TO
RE BASED ON DIRECT AND INDIRECT COSTS AND A "REASONABLE"
PROFIT TO BE DETERMINED BY NEGOTIATIONS BETWEEN
FORD & GERALD LIBRARY
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3
FORM
DS-1652
9.66
DEPARTMENT OF STATE
Department of State
STATES UNITED AMERICA
TELEGRAM
OF
LIMITED OFFICIAL USE
PAGE 02
MEXICO 01018 2800322
INDUSTRY AND GOVERNMENT.
3. THE PRODUCTS COVER SOME PREPARED FOODSTUFFS, SCHOOL
SUPPLIES, HYGIENIC SUPPLIES,
HOUSEHOLD GOODS AND CLOTHING. THE PRODUCTS RANGE
FROM TOILET PAPER TO BICYLES TO PLASTIC SANDALS.
4. THERE WILL BE NO FISCAL INCENTIVES TO PRODUCE THESE
TTEMS, BUT NECESSARY IMPORT PERMITS WILL BE GRANTED
AND THE SECRETARY OF COMMERCE CAN "RECOMMEND" TO OTHER
GOM AGENCIES THAT CERTAIN OTHER FACILITIES SUCH AS
FINANCING BE MADE AVAILABLE. THE GOODS WILL BE
DISTRIBUTED THROUGH EXISTING RETAIL OUTLETS. SECRETARY
OF COMMERNCE SOLAND SAID THAT THE LARGE RETAIL CHAINS
HAD AGREED TO HANDLE THESE ITEMS AT LOWER PROFIT MARGIN.
SMALL RETAILERS WILL BE ABLE TO BUY THE ITEMS AT A
DISCOUNT.
5. SINCE THE PRODUCTS WILL BE SOLD THROUGH EXISTING
RETAIL OUTLETS, ANYBODY WILL BE ABLE TO PURCHASE THE
TTEMS, THOUGH THE PROGRAM IS AIMED LARGELY AT THE
URBAN WORKER. THE GOM HOPES TO HAVE AT LEAST
SOME OF THE ARTICLES ON STORE SHELVES WITHIN 90 DAYS.
6. THIS AGREEMENT WITH PRIVATE INDUSTRY SUPPLEMENTS
THE TEN AGREEMENTS SIGNED IN MID-DECEMBER. AT THAT
TIME. THERE WAS REFERENCE TO AN ELEVENTH AGREEMENT
ON BASIC CONSUMER GOODS, BUT IT WAS NOT SIGNED
APPARENTLY BECAUSE OF THE LARGE NUMBER OF INDUSTRIES
INVOLVED. NEGOTIATIONS WITH VARIOUS INDUSTRIES
WERE BEGUN BY THE LOPEZ-PORTILLO TEAM LAST SUMMER.
AGREEMENT HAD BEEN REACHED ON 20 OR SO PRODUCTS PRIOR
TO THE DEVALUATION. THE NEGOTIATIONS ARE NOW GOING
ON BETWEEN INDUSTRY ASSOCIATIONS AND THE GOVERNMENT.
7. WHILE THE GOVERNMENT DOES NOT EXPECT INDUSTRY TO
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FORM
DS-1652
9.66
TRANTMENT OF STATE
OF STATE UNITED AMERICA
Department of State TELEGRAM
LIMITED OFFICIAL USE
PAGE 03
MEXICO 01018 280032Z
PRODUCE THESE BASIC GOODS AT A LOSS, IT EXPECTS
INDUSTRY TO MAKE MINIMAL PROFITS. IN EXCHANGE THE
GOVERNMENT WILL PROBABLY INCREASE PRICE CEILINGS FOR
HIGHER PRICED GOODS.
8. IT IS NOT CLEAR TO US HOW THIS MEASURE WILL REDUCE
PRICES, OR HOW FLEXIBLE GOVERNMENT WILL BE IN LETTING
PRICES CHANGE FOR THE 90 BASIC PRODUCTS ONCE THEY HIT
THE MARKET. THUS FAR, WE HAVE NOT HEARD ANY MAJOR
COMPLAINTS FROM BUSINESSMEN, IN PART BECAUSE SEVERAL
TO WHOM WE HAVE SPOKEN SAY THE DISCUSSIONS ARE STILL
PRELIMINARY. ON BUSINESSMAN NOTED THAT USING COMMERICAL
RETAIL CHAINS AND KNOWN PRODUCT NAMES IS BETTER THAN
BEING FORCED TO PRODUCE SPECIAL BRANDS FO RESALE
THROUGH THE GOM-OWNED CONASUPO RETAIL STORES.
9. GOM OBVIOUSLY IS ANXIOUS TO CASH IN ON ITS IMPLIED
PROMISE TO LOWERPRICES. GOM OFFICIAL TOLD US THAT
THE SEVEN MAJOR RETAIL CHAINS IN MEXICO WILL OFFER
35 ARTICLES AT SPECIAL PRICES BEGINNING JANUARY 31.
TOVA
FORD & LIBRARY GARALO
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FORM
DS-1652
9,66
10
[c. 2-77?]
RESTRICTED
RESTRICTED
HANDLE THE ATTACHED DOCUMENT IN ACCORDANCE WITH INTERNAL
INFORMATION SECURITY PROCEDURES FOR RESTRICTED INFORMATION
FORD i GERALD LIBRARY
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TAGS:
EGEN, EFIN, MX
RESTRICTED
SUBJECT: CURRENT ECONOMIC SITUATION
ACTION: SECSTATE WASHDC
INFO:
TREASURY
1. SUMMARY. Economic activity in Mexcio has slowed
down, with output running slightly below mid-76
levels. GOM appears to be concentrating its. energies
on replacing the outgoing bureaucracy and effecting
" an administrative reform program. While JLP has publicly
stated that 1977 will be an economically difficult year
and that Mexico needs a new development strategy, there
has not been much discernable progress in developing
either a short-term or long-term economic strategy.
Private sector seems to be adopting a wait and see atti-
tude before undertaking new investments. END SUMMARY.
2. The rate of growth of industrial activity began to
slow in mid-1976 in response to the Bank of Mexico's
tight credit policies. The industrial production index
peaked in June, and has run at lower levels through
October, the latest date for which it is available. The
October index is 140.7 below levels prevailing in this
month in two previous years. Partial data for November
is mixed with some industries showing increases in unit
sales.
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3. Mexico's gross domestic output is estimated to have
grown about 3% in real terms from 1975 to 1976. Most of
this growth would have been in the first half of the year
with total output more or less holding steady in the
second half. The price deflator is estimated to have been
about 20%. The preliminary Bank of Mexico data on
national accounts will be available by end-February.
4. Actual price data is now available for the year 1976.
The year to year increase in the CPI was 15.8%. The
December to December 1976 increase was 27.2%. The increase
in the WPI was more marked, 22.3% on a year to year basis
and 45.9% from December to December. This reason for
this is that the WPI is heavily influenced by raw
material prices, most of which trade at or close to world
prices.
5. Lopez Portillo has publicly stated that the first six
months of 1977 will be particularly difficult and that
Mexico must find a new development strategy. While he
admits that economic problems are the most pressing,
there is no public evidence that the government has a
coherent short-term economic strategy. GOM policy makers
are working on various policy options, but have not yet come
to any conclusions as far as we know. JLP's first two
priorities appear to have been a restoration of confidence,
largely through words, and administrative reform. The
latter has meant
that in addition to filling positions
FORD i LIBRARY GERALD
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3
to a fairly low level in the bureaucracy, new lines of
command are being drawn with resultant confusion over
responsibilities, information flow, etc. Administration
is reportedly JLP's strong point and first love judging. from
the priority he has given to administrative reform. The
major loser in this reform at least with respect to control
oyer spending and trade policy appears to have been JLP's
stepping stone to the Presidency, the Finance Ministry.
The biggest gainers would appear to be the new Budget and
Planning Ministry (ex-Presidency) and the Patrimony and
Industrial Development Ministry. The significance of adminis-
trative reform in the context of this message is the impact
it might have on the economic policy-making process and on
the level of government expenditure.
6. The economic policy-making process in the new government
is not yet clearly defined. At the present time the Minister
for Budget and Planning, Carlos Tello, appears to be the
preeminent, though not necessarily dominant advisor to the
President. Tello's economic philosophy appears to favor
acting against inflation on the supply side. Opposed to him
are the financial officials from Hacienda and Banco de Mexico
who want to reduce inflation by cutting back demand. Key
presidential advisor Rafael Izquierdo is said to be somewhere
between these two schools of thought. The President seems
to lean to the former school of thought perhaps because he
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fears the political consequences that a cutback in per capita
consumption and employment might have. Even as Finance
Minister at the time of the U.S. recession, JLP told the
Ambassador that Mexico could not afford a recession because
of the lack of social welfare programs to take care of
the unemployed, a theme he continues to repeat.
7. The JLP administration's first internal policy debate
is likely to focus on the budget. There is pressure on him
from the Bank of Mexico and Hacienda to reduce expenditures
as well as to increase revenues, particularly by higher
public sector prices. It is possible that the delays caused
by the administrative reform will impact on the level of
expenditures. Whether this will result in permanent savings
or merely a brief delay in making expenditures is unknown.
The outcome of this debate will be the key in determining
economic developments later in the year.
FORD & LIBRARY
8. Apart from the question of public sector spending,
the GOM is faced with the problem of financing a current
account deficit which is being forecast at anywhere from
$1.8 billion to $2.6 billion. In addition to this, the
public sector's short-term debt of $4.2 billion has to
be rolled over and public sector long-term debt
amortization payments of $1.7 billion have to be refinanced.
RESTRICTED
5
9. Mexico's financial problem is twofold and inter-
related. That is, the GOM not only has to finance a
substantial budget, the size of which will impact on the
external accounts, but it also has to arrange, one way
or another, for substantial, foreign borrowing.
10. While senior GOM officials often state that Mexico
cannot afford a recession, the economy is in a recession
according to the informal Mexican definition, i.e., a
negative per capita growth rate. Industrial activity may
be lower now than it was in last October. This judgment
is based on the following factors. (1) The industrial
work force is probably lower now than last summer. Various
businessmen have told us that they are laying off workers.
(2) Public sector spending is probably down due to the
reorganization of the entire public sector. We hear reports
of major spending decisions being postponed. Public sector
spending has been the underpinning of Mexico's economic
growth since 1972. (3) Private investment was undoubtedly
affected negatively by the events of last fall. The lack
of ability to forecast economic developments with any
certainty is affecting investment decisions.
Many private
businessmen say they are waiting to see specific economic
measures rather than base investment decisions on moral
suasion. (4) Foreign exchange transactions are reporting
declining. This may indicate a continued decline in imports
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that began last September! (5) Peso and dollar financing
is not available to Mexico's private sector, nor has it been
for some months. The impact of these, plus the delayed
impact of the devaluation may be hitting domestic economic
activity, particularly in the private sector, harder than
is generally known.
11. The picture in the agriculture sector is more difficult
to discern. Output of some crops may be up whereas output
of other crops may be down. It is not possible to measure
the impact of the land seizures in northwest Mexico, but
these were certainly not conducive to increased private
sector investment in agriculture and may have a negative
impact on output in that region.
12. Our judgments in the preceeding two paragraphs are
extremely qualitative because of the Lack of current data
on which to base an analysis. However, we think the
indirect signs of further economic slowdown are significant
enough to report.
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13. The GOM is undoubtedly aware of these signs and the
prospect of continued stagnation or even further declines
in economic activity may be one of the reasons JLP could
opt for a relatively high level of public sector spending
even though this means more foreign financing than would
otherwise be necessary.
14. The current economic slowdown is a mixed blessing.
It should lead to a reduction in the current account
deficit and, if there are actual budget savings, make
attainment of EFF program targets somewhat more likely.
On the other hand, JLP is unlikely to be satisfied with a
growth rate of zero to two percent because of what he views
as the political risks from reduced employment and per capita
consumption.
15. Although a significant turnaround in economic activity
could hardly have been expected within two months of taking
office, we believe the suspected deterioration in the economic
situation could have been mitigated by more positive action
by the new government. In particular, while JLP has stated
that this will be a difficult period, neither he nor other
GOM spokesmen have laid out in any detail what the Mexican
business community and public might expect in 1977. This has
never been done in Mexico, but it is important in the present
context because the economic policy framework that predominated
for over twenty years disappeared with the devaluation.
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16. Some areas where coherent policies have not yet been
developed are the following:
A) Exchange rate policy (Fluctuations in
rates generally attributed to changes in
supply and demand. GOM has not said
publicly that exchange rate might also
be determined by such objectives as
reducing the current account deficit and
making manufactured exports competitive
in world markets.)
B) Interest rate policy. (Higher interest
rates on peso deposits will be necessary
to retain existing peso financial savings
and attract more pesos into banking system.)
C) Fiscal policy. (Ideally, some target
figure for budget cuts could be announced
along with a revenue increase target. The
details need not be made public at this time.
The intention to pursue a less inflationary
policy would be reassuring to foreign
bankers and to local businessmen who want
financial stability.)
D)
Wage Guidance.
R.
DERALD
FORD
9
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17. While JLP has prepared the country for bad economic
news, he has not provided any details. The economic
situation is confused and the economic climate is radically
different from what it was even a year ago. Confusion
complicates planning and investment. It also delays the
necessary structural changes in the economy. The public
does not understand GOM objectives. Without guidance,
stagnation is likely to last longer than would otherwise
be necessary. Further, the foreign banking community is
unlikely to be as supportive as it could in the light of
this uncertainty.
GERALD R. FORD
February 4, 1977
TO:
FROM: Ted Truman
Chairman Burns EMT
Attached is the latest cable from Mexico.
Attachment: Mexico 1104
cc: Governor Wallich
Defense c'assification of this document is due
to the inclusion of U.S. Government information
officially classified under Executive Order 10501
which provides that "A document... shall bear a
classification at least as high as that of its
highest classified component."
≤
GERALO R. FORD THERE
EMT
OF
STATE
#
*
Department of State
UNITED AMERICA
TELEGRAM
STATES OF
CONFIDENTIAL 7979
PAGE 01
MEXICO 01104 0122497
ACTION ARA-10
TNFO OCT-01 ISO-00 SP-02 USIA-06 AID-05 EB-08 NSC-05
CIEP-01 TRSE-00 SS-15 STR-04 OMB-01 CEA-01 CIAE-00
COME-00 FRB-03 INR-07 NSAE-00 XMB-02 OPIC-03 LAB-04
SIL-01 AGRE-00 PA-01 PRS-01 L-03 H-01 1085 W
0202127 012820 /63
R 9901257 JAN 77 29
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9991
TNFO AMCONSUL MONTERREY POUCH
A
C
n
N
E
2
I
7
MEXICO 1104
Please return to
dal 7/25/07
International Information Center
FO 11652: GDS
TAGS: EFIN
SUBJECT: NEED TO ASSURE POTENTIAL INVESTORS
4. MEXICAN BUSTNESS/BANKING COMMUNITY HOSTED LUNCH
TANUARY 27 FOR BANK OF AMERICA SENIOR VP VAN LEARDEN,
WHO REPORTEDLY PUT TOGETHER LAST FALL'S $800 MILLION LOAN
FOR MEXICO. AMBASSADOR WAS PRESENT. VAN LEARDEN TOLD GROUP
HE THOUGHT MEXICO WOULD GET THROUGH 1977 WITHOUT SERIOUS
PROBLEMS, BUT THAT HE WAS CONCERNED ABOUT 1978/79. GOM'S
PRTORITY NEED NOW, WAS TO REASSURE FOREIGN
AND DOMESTIC INVESTORS AND LENDERS, AS WELL AS THE IMF
AND OTHER INTERNATIONAL FINANCIAL INSTITUTIONS, OF ITS
SERIOUS INTENT TO OVERCOME ITS PRINCIPAL PROBLEMS, WHICH
VAN LEARDEN DIVIDED INTO SHORT AND LONGER TERM.
: HE CHARACTERIZED THE SHORT-TERM PROBLEM AS THE
NNFD TO PREVENT THE DEVELOPMENT OF A RUNAWAY CYCLE OF IN-
FLATION SUCH AS HAD HIT CHILE AND ARGENTINA. THIS WOULD, HE
SATD, REQUIRE SACRIFICE AND RESTRAINT NOW ON PART OF BOTH
INDUSTRY AND LABOR. AT SAME TIME, PRICE LEVEL OF BASIC MARKET
BASKET OF THE POOR COULD BE PROTECTED FROM INFLATION THROUGH
APPROPRIATE ALLOCATION OF RESOURCES.
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3. IN THE LONG TERM, HE REPORTEDLY SAID MEXICO MUST
CONTROL ITS POPULATION GROWTH, BRINGING NUMBER OF NEW
ENTRANTS INTO JOB MARKET INTO LINE WITH JOB CREATING
POSSIBILITIES OF THE ECONOMY.
4. VAN LEARDEN EXPRESSED UNDERSTANDING THAT ONLY 58 DAYS
TN OFFICE WAS OBVIOUSLY INSUFFICIENT TO HAVE DEVELOPED
PROGRAMS OVER A BROAD SPECTRUM#BUT OF GREATEST PRIORITY
FOR GOM WAS NEED TO EXHIBIT A FAVORABLE ATTITUDE TOWARD
INVESTORS, IN PARTICULAR, THE GOM SHOULD CLARIFY ITS
ATTITUDE TOWARD NEW FOREIGN INVESTMENT, ESPECIALLY AS
MANIFESTED IN IMPLEMENTATION OF FOREIGN INVESTMENT LAW AND
PATENTS AND TRADEMARKS LAW. AND IT SHOULD ASSURE POTENTIAL
INVESTORS THAT THE "RULES OF THE GAME" WILL NOT CHANGE
AFTER INVESTMENTS ARE COMMITTED. GOM MIGHT ALSO DEVELOP
INCENTIVES SUCH A "REASONABL" DEPRECIATION (READ
RAPID) WRITEOFF TO ATTRACT INVESTORS.
5. WE ALSO UNDERSTAND VAN LEARDEN IS BEING PRESSED TO
ORGANIZE NEW LOAN TO GOM.
S. AMBASSADOR LEARNED THAT GROUP OF 40 MEXICAN
BUSINESS AND BANKING LEADERS HAD LENGTHLY SESSION WITH
PRESIDENT FROM WHICH THEY CAME AWAY HIGHLY ENCOURAGED THAT
THE WAR BETWEEN GOM AND PRIVATE SECTOR, PARTICULARLY
MONTERREY GROUP, WAS OVER. JLP EMPHASIZED THAT PRO-
DUCTIVITY MUST BE KEY GOAL IN ALL INVESTMENT, BOTH
PRIVATE AND PUBLIC, AND THAT HE WAS PARICULARLY INTERESTED
TN INCREASING RATE OF INVESTMENT IN PRIVATE SECTOR INCLUDING
FOREIGN INVESTMENT.
7. IN THIS REGARD, PRESIDENTIAL ADVISOR RAFAEL IZQUIERDO RE-
CENTLY TOLD AMBASSADOR THAT THE MONTERREY GROUP WILL SHORTLY ANNOUNCE
THE INTENTION TO UNDERTAKE MAJOR INVESTMENTS IN THE
AGRICULTURAL SECTOR THROUGHOUT THE COUNTRY AT INSTANCE
CONFIDENTIAL
DEPARTMENT or STATE
UNITED AMERICA
Department of State TELEGRAM
STATES OF
***
CONFIDENTIAL
PAGE 03
MEXICO 01104 012249Z
OF THE GOVERNMENT.
POVA
FORD & GERALD LIBRARY
CONFIDENTIAL
February 7, 1977
TO:
Chairman Burns
FROM: Ted Truman EMT
Attached are the latest cables on Mexico.
Attachments: Mexico 1251
Mexico 1306
Mexico 1414
cc: Governor Wallich
Defense cirasification of this document is due
to the inclusion of U.S. Government information
officially classified under Exceutive Order 10501
which provides that "A document... shall bear a
classification at least as high as that of its
highest classified component."
LIBRARY GERALD R. FORD
3a
DECARTMENT
STATE
CAEXICO
STATE UNITED AMERICA
Department of State
TELEGRAM
OF
EMT
CONFIDENTIAL 0499
RAGE 01
MEXICO 01251 0220327
ACTION ARA-10
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CIEP-01 SS=15 STR-04 OMB-01 CEA-01 CIAE-00 COME-00
FRB-03 INR-07 NSAE-00 XMB-02 OPIC-03 LAB-04 SIL-01
PA-01 PRS-01 L-03 H-01 1085 w
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INFO TREASURY WASHDC
ALL US CONSULATES IN MEXICO VIA POUCH
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dal 7/25/07
F. 0. 11652: GDS
TAGS: EINV, EGEN, MX
SUBJECT: PUBLIC-PRIVATE SECTOR RELATIONS
REF: (A) MEXICO 1018: (B) 76 MEXICO 15963.
1. SUMMARY: U.S. BUSINESSMEN ARE CRITICAL OF GOM EFFORT
TO PRODUCE INEXPENSIVE CONSUMER GOODS AND EVIDENCE SOME
APPREHENSION OF NEW GOVERNMENT. PRESUMABLY SHARED BY
RUSINESSMEN GENERALLY, THIS ISSUE, PLUS CONCERN OVER EXCESS
PROFITS TAX APPEAR TO BE HINDERING TO SOME DEGREE
IMPROVED RELATIONS BETWEEN THE PUBLIC AND PRIVATE
SECTORS. END SUMMARY.
2. AT AMBASSADOR'S MONTHLY MEETING WITH U.S. BUSINESSMEN,
LATTER COMPLAINED ABOUT THE GOMIS PROGRAM TO MARKET 90
BASIC CONSUMTION GOODS AT LOW PRICES. (SEE REF A) GOM
APPARENTLY WANTS PRIVATE INDUSTRY TO REDUCE PRICES ON
EXISITING GOODS AT LOWER PRICE RANGE RATHER THAN DEVELOP
NEW INEXPENSIVE MODELS. IN EXCHANGE, GOM INDICATES IT
WILL REMOVE PRICE CEILINGS ON HIGHER PRICED ITEMS.
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3. ONE BUSINESSMAN WHOSE COMPANY DEPENDS ON ONE
PRODUCT FOR 80 PERCENT OF ITS SALES MAINTAINED HE
COULD NOT AFFORD TO LOWERE THE PRICE OF THIS ITEM.
ANOTHER, A FOOD PROCESSOR, SAID HE MERELY SUBMITTED
TO THE GOM HIS LIST PRICES WITH THE COMMENT THAT HIS
FIRM DOES NOT GIVE DISCOUNTS. ANOTHER EXPRESSED CONCERN
THAT EVEN IF COMPANIES PARTICIPATED IN THIS "VOLUNTARY"
PROGRAM THE GOM MIGHT NOT REMOVE PRICE CEILINGS ON HIGHER
PRICED GOODS. STILL ANOTHER WORRIED ABOUT HOW GOVERNMENT
RUREAUCRATS WOULD DEFINE A REASONABLE PROFIT,
WHICH HE MAINTAINS IS ALL HIS FIRM IS MAKING NOW ON THE
TTEMS FOR WHICH THEY WANT A LOWER PRICE. ONE EXPRESSED
THE OPINION THAT THIS PROGRAM REFLECTS THE ECHEVERRIA
ADMINISTRATION'S BELIEF THAT MIDDLEMEN TAKE UNNECESSARILY
I ARGE PROFITS AND A MISUNDERSTANDING OF THE COSTS OF DISTRIBUTION
AND RETAILING. SEVERAL BUSINESSMEN MAINTAINED THAT THE
WHOLE SCHEME WAS DESIGNED BY RETAILERS TO PREVENT THE
GOVERNMENT FROM EXPANDING ITS OWN RETAIL DISTRIBUTION FACILITIES.
4. ANOTHER GOVERNMENT ACTION THAT HAS IRRITATED THE
PRIVATE SECTOR IS THE EXCESS PROFITS TAX. THE EXCESS
PROFITS TAX WAS FIRST MENTIONED IN THE SEPTEMBER 1,
1976 INFORME AS A MEASURE TO PREVENT ANY "UNUSUAL OR
EXCESSIVE PROFITS RESULTING FROM THE EXCHANGE RATE
CHANGE OR UNWARRANTED PRICE INCREASES. WE UNDERSTAND
THAT ATTEMPTS TO WRITE LEGISLATION THAT WOULD APPLY SO
NARROWLY FAILED. THE FINAL CONCEPT WAS INCLUDED IN THE
LATE-DECEMBER TAX REFORM PACKAGE AND WAS NOT DISCUSSED
WITH ANYBODY OUTSIDE THE GOVERNMENT PRIOR TO ITS
PRESENTATION TO CONGRESS, TO THE BEST OF OUR KNOWLEDGE.
(SFE REF B). BUSINESSMEN ARGUE THAT THE GROSS PROFITS
TAX WOULD BE CONFISCATORY AND UNFAIR IN THAT IT PENALIZES
COMPANIES WHOSE PROFITS MAY HAVE INCREASED FOR REASONS
OTHER THAN THE DEVALUATION, I.E., A RELATIVELY NEW
COMPANY THAT FINALLY TURNS A PROFIT. SOME COMPANIES
ARE CONSIDERING A WRIT OF "AMPAROR(INJUNCTION) AGAINST
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THE EXCESS PROFITS TAX. THIS TAX HAS BEEN DEFENDED
PRIVATELY BY GOM OFFICIAL AS A QUID PRO QUO FOR THE
10 PERCENT MINIUMUM WAGE INCREASE. IN THIS REGARD IT SHOULD BE NOTED
THAT PRESIDENT PUBLICLY LABELED BASIC CONSUMPTION GOODS PROGRAM AS
TRADE-OFF FOR WAGE RESTRAINT.
5. WHATEVER THE MERITS OR FAULTS OF THE BASIC
CONSUMPTION GOODS PROGRAM AND THE EXCESS PROFITS TAX,
THEY HAVE HINDERED SOMEWHAT IMPROVEMENT OF PUBLIC-
PRIVATE SECTOR RELATIONS AND ENCOURAGED CONTINUED
SKEPTICISM OF GOM INTENTIONS ON THE PART OF THE LOCAL U.S.
BUSINESS COMMUNITY WHO ARE LOOKING FOR FAVORABLE
ACTIONS AS WELL AS FRIENDLY WORDS.
R. ON THE OTHER HAND, THE GOM IS MAINTAINING AN OPEN
ATTITUDE TO BUSINESS COMPLAINTS. FOR EXAMPLE,
PRESIDENTIAL ADVISOR RAFAEL IZQUIERDO HAS OFFERED
TO SET ASIDE TWO DAYS FOR INDIVIDUAL HALF HOUR MEETINGS
TO HEAR ANY COMPLAINTS FROM U.S. BUSINESSMEN AGAINST
GOM POLICIES, PARTICULARLY AS REGARDS OBSTACLES TO
FORETGN INVESTMENT. THESE SESSIONS ARE TO TAKE PLACE
PRIOR TO THE JLP TRIP TO THE U.S.
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1306
International Information Center
FO 11652 : N/A
TAGS : PFOR ETRO MX
SUBJ : POSSIBLE TRADE TOPIC FOR LOPEZ PORTILLO MEETING WITH
PRESIDENT CARTER
REF : MEXICO 948
1. BRUCE EVANS, U.S. -CITIZEN PRESIDENT OF MEXICAN IN-BOND TEX-
TILE PLANTS (ACAPULCO FASHIONS) LOCATED IN CIUDAD JUAREZ AND
PACATECAS INFORMED EMBOFF FEB 1 THAT PRESIDENT LOPEZ
PORTILLO PLANS TO RATSE SPECIFIC ISSUE OF U.S. MEXICO
ATERAL TEXTILE AGREEMENT DURING HIS MEETING WITH
PRESIDENT CARTER. EVANS TOLD EMBOFF THIS MATTER WAS
DISCUSSED DURING LOPEZ PORTILLO'S MEETING LAST WEEK WITH
GOVERNORS OF MEXICAN NORTHERN STATES, WHICH WAS ATTENDED
INTER ALTA BY CHAIRMAN OF CIUDAD JUAREZ PRI PARTY CWHO
ALSO HAPPENS TO BE LAWYER OF IN-BOND PLANTS MENTIONED
ABOVE).
2. COMMENT: THIS REPORT ABOUT JLPIS INTENTIONS MAY
RE CASE OF WISHFUL THINKING ON PART OF EVANS, WHOSE
COMPANY HAS PERSONAL INTEREST IN OBTAINING LARGER
R.
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QUOTA FOR TEXTILF CATEGORY 225 (BRASSIERES) ASSEMBLED
TN MEXICO AND THEN REXPORTED TO U.S. EVANS WAS ONE
OF THOSE MANUFACTURERS WHOSE APPROACHES TO GOM
RESULTED IN GOM REQUEST FOR INCREASED TEXTILE CON-
SULTATION LEVELS AND CATEGORY LIMITS REPORTED IN
REFTEL.
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AMEMBASSY CARACAS
AMEMBASSY GUATEMALA
international Please Information Center
AMEMBASSY MANAGUA
AMEMBASSY PANAMA
AMEMBASSY SAN JOSE
AMEMBASSY SAN SALVADOR
AMEMBASSY TEGUCIGALPA
/Azatt
C
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SECTION 1 OF 2 MEXICO 1414
due 7/25/07
FO 11652 : GDS
TAGS : PINT MX PFOR EGEN
SUBJ: MONTHLY POLITICAL HIGHLIGHTS: JANUARY 1977
REF : MEXICO 874
:- SUMMARY: THE LOPEZ PORTILLO GOVERNMENT IS BEGINNING TO
TAKE HOLD IN SUCH AREAS AS PRIVATE SECTOR-LABOR RELATIONS,
AGRARIAN UNREST, PUBLIC ADMINISTRATION, AND DOMESTIC POLITICS
THOUGH TERRORISM PERSISTS AND TEACHER UNIONS IN THE UNIVERSITIES
ARE SHAPING UP AS A CHALLENGE. AT THE SAME TIME, THE GCM
HAS MOVED HESITANTLY AND WITHOUT MUCH SURE-FOOTEDNESS TO DEAL
WITH WHAT IT RECOGNIZES AS THE MOST PRESSING PROBLEMS, THOSE
TN THE FINANCIAL AND ECONOMIC AREA. END SUMMARY.
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2. LABOR-MANAGEMENT RELATIONS IMPROVED: JLP'S MOST
NOTABLE SUCCESS TO DATE HAS BEEN THE COOPERATION
ELICITED FROM THE PRIVATE SECTOR AND LABOR, BOTH OF
WHICH HAVE PLEDGED TO TRY TO KEEP PRICES AND WAGES
DOWN. THE AGREMENT IS FRAGILE, HOWEVER, AND IT REMAINS
TO BE SEEN WHETHER BOTH SECTORS WILL IMPLEMENT IN
SPECIFIC ACTIONS THEIR GENERAL PLEDGES TO HELP CONTROL
INFLATION. (SEE MEXICO 874).
3. AGRARIAN SITUATION CALMER. WHILE LAND INVASIONS
HAVE NOT ENDFD (THERE WERE NEW, SMALL ONES IN SINALDA
IN THE LAST SEVERAL WEEKS, THEIR NUMBERS HAVE DIMINISHED,
AND STATE AND LOCAL AUTHORITIES ARE REMOVING, SO FAR
WITHOUT VIOLENCE, CAMPESINOS FROM LANDS INVADED AS LONG
AGO AS OCTOBER 75. WE THINK THIS REPRESENTS LOCAL
AUTHORITIES GETTING A NEW SIGNAL FROM MEXICO CITY AND
ACTING ACCORDINGLY. THE GOM IS NOW ACTIVELY BUT QUIETLY
MEDIATING TN THE SONORA LAND EXPROPRIATION, AND BOTH
SIDES ARE REFRAINING FROM ANY ACTION WHICH WOULD DISTURB
THE TALKS. THERE IS ALSO EVIDENCE OF A POLITICAL HOUSE-
CLEANING OF ECHEVERRTA LOYALISTS IN THE FOUR MAJOR
CAMPESINO ORGANIZATIONS, THE REMOVAL OF SALCEDO MONTEON
FROM THE CNC SEING THE MOST IMPORTANT SUCH CHANGE.
s. ADMINISTRATIVE REFORM: LOPEZ PORTILLO'S ADMINISTRATIVE
REFORM MAY BE MORE MEANINGFUL THAN OUR PREVIOUS REPORTS
WOULD INDICATE. MORE THAN JUST A RESHUFFLING OF
CABINET RESPONSIBILITIES, THE REFORM IS INTENDED TO
IMPOSE REAL FISCAL AND POLICY CONTROLS IN THE HERETOFORE FREE-
WHEELING PARASTATAL AGENCIES, WHO CONSUME HALF THE
ANNUAL BUDGET; BUDGET AND ACCOUNTING PROCEDURES HAVE
BEEN TIGHTENED TREASURY'S CONTROL OVER THE PUBLIC DEBT
HAS BEEN INCREASED: AND THERE ARE STEPS BEING TAKEN TO
UPGRADE THE PROFESSIONALISM OF THE CIVIL SERVICE.
FATRGRAM FOLLOWS.)
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5. FIRM HAND ON DOMESTIC POLITICS: GOM INNOVATION IN
PUBLIC ADMINISTRATION IS NOT BEING REFLECTED IN INTERNAL
POLITICS. THE GOM SOLVED THE NUEVO LAREDO ELECTORAL
PROBLEM IN TRADITIONAL FASHION BY SEATING BOTH PRI
AND OPPOSITION CONTESTANTS. ALTHOUGH THE SITUATION
STILL COULD CHANGE, SO FAR BAJA CALIFORNIA VOTERS ARE
HAVING TO SHALLOW THEIR UNHAPPINESS OVER THE IMPOSITION OF
FCHEVERRIA'S SECRETARY OF DEFENSE AS GOVERNOR, LIKEWISE,
PUERTO VALLARTA VOTERS, WHILE STILL CAUSING HEADACHES,
ARE NOW BEING GOVERNED BY A SIMILARLY UNPOPULAR
IMPOSITION. PRT PRESIDENT SANSORES HAS SEVERAL TIMES
SPOKEN OF MAKING THE PROCEDURE FOR SELECTING MUNICIPAL
CANDIDATES MORE DEMOCRATTC, BUT NO ONE ANTICIPATES REAL REFORM.
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CIAE-00 COME-00 FRB-03 INR-07 NSAE-00 XMB-02 OPIC-03
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AMEMBASSY SAN SALVADOR
AMEMBASSY TEGUCIGALPA
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6. TERRORISM PERSISTS: FOUR TERRORIST INCIDENTS IN
ONE WEEK IN JANUARY SERVED TO REMIND THAT THIS PROBLEM
HAS NOT GONE AWAY. TWO OF THE FOUR INCIDENTS OCCURRED
WHEN MANAGEMENT OFFICIALS ATTEMPTED TO REMOVE PERSONS
DISTRIBUTING 23 OF SEPTEMBER COMMUNIST LEAGUE LITERATURE
FROM INDUSTRIAL SITES: THE TERRORISTS RESPONDED WITH
GUNFIRE, KILLING A VISITING U.S. BUSINESSMAN IN ONE
INCIDENT. WHILE GOM OFFICIALS HAVE EXPRESSED CONCERN,
NO MAJOR PUBLIC GOVERNMENT FIGURE HINTED AT USG INVOLVE-
MENT, A REFLEX OF THE ECHEVERRIA ADMINISTRATION.
7. UNIVERSITY PROBLEMS: EFFORTS BY SELF-PROCLAIMED
"MARXIST, ANTI-IMPERIALIST" ELEMENTS TO UNIONIZE
UNIVERSITY ACADEMIC AND ADMINISTRATIVE PERSONNEL IN - THE
LAST YEAR OR TWO HAVE PROGRESSED TO THE POINT WHERE TWO
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SUCH UNIONS AT MEXICO'S NATIONAL UNIVERSITY (UNAM) ARE
CONTESTING GOM CONTROL OF THE CAMPUS. UNAM RECTOR
SOBERON LAST AUGUST SUGGESTED A CONSTITUTIONAL
"REFORM" WHICH WOULD GIVE THE GOM THE LEGAL WHEREWITHAL
TO HAMSTRING THE UNIONS. LITTLE HAS BEEN HEARD OF THE
PROPOSAL SINCE THEN, BUT UNION RELATED DISORDERS IN
TANUARY AT SEVERAL STATE UNIVERSITIES AND IN MEXICO CITY
MAY REVIVE THE PROPOSAL. HOW THE JLP ADMINISTRATION
HANDLES THE CHALLENGE IS SHAPING UP AS A POSSIBLY MORE
REVEALING MEASURE OF ITS ABILITY TO GOVERN THAN HAVE
BEFN ITS VARIOUS MINOR SUCCESSES TO DATE.
8. US-MEXICAN RELATIONS: THE WARMING TREND IN U.S.-
MEXICAN RELATIONS WHICH BEGAN WITH THE DECEMBER VISIT
OF MRS. CARTER CONTINUED APACE IN JANUARY. MRS. JLP'S
RECEPTION IN WASHINGTON GRATIFIED MEXICO, FROM THE
PRESIDENT TO THE MAN IN THE STREET, AND MEXICO WAS
EQUALLY PLEASED WITH JLP BEING THE FIRST HEAD OF
STATE INVITED TO WASHINGTON BY THE CARTER ADMINISTRATION.
0. WHILE THE CURRENT GOOD FEELINGS ARE GENUINE AND
PERSONALLY FELT, MEXICO'S DESIRE FOR BETTER RELATIONS
WITH THE USG HAS ALSO BEEN DICTATED BY MEXICO'S NEED
FOR US HELP ON ITS ECONOMIC AND FINANCIAL PROBLEMS.
WITH THE JLP VISIT THE GOM APPARENTLY HOPES TO CEMENT
THE PERSONAL RELATIONSHIP BETWEEN THE FIRST FAMILIES,
AND TO BENEFIT FROM THAT RELATIONSHIP BY, INTER ALIA,
INFORMALLY LINKING ISSUES. OUR CONVERSATIONS
INDICATE, FOR EXAMPLE, THAT MEXICO HOPES TO PROFIT
FROM ITS RECORD OF COOPERATION ON NARCOTICS MATTERS TO
GET MORE. PERHAPS MASSIVE, HELP ON ITS SHORT RANGE
FINANCIAL PROBLEMS. WE HAVE THE NAGGING FEELING THAT
THE NEW GOVERNMENT FEELS OVERWHELMED BY THE ENORMITY
OF ITS PRESENT FINANCIAL AND ECONOMIC DIFFICULTIES AND IS
COUNTING HEAVILY ON US PRIVATE AND OFFICIAL ASSISTANCE TO SEE IT
THROUGH ITS HARD TIMES. (A SEPARATE REPORT FOLLOWS.)
JOVA
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