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Mexico, 4/76-10/77 (6)
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324801945
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Mexico, 4/76-10/77 (6)
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Arthur F. Burns Papers
Federal Reserve Board Subject Files
subjects
Mexico
International Monetary Fund. (07/1944 - )
Balance of payments
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1977-10-31
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1977
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1976-04-01
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4
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1976
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The original documents are located in Box B80, folder "Mexico 4/76 - 10/77 (6)" 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States of America his copyrights in all of his unpublished writings in National Archives collections.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
December 1, 1976
To:
Chairman Burns
From: George B. Henry
Attached are the latest cables on the
Mexican economic situation.
Attachments: Mexico A-315
Mexico 15058
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 & LIBRARY GERALD
Com
R
MI
₹760178-0497
/R
REP
AF
ARA
Original to be Filed in
Decentralized Files.
FILE DESIGNATION
IR
FE
NEA
CU
A-315
LIMITED OFFICIAL USE
R
E
P
10
HANDLING INDICATOR
/
TO
:
Department of State
FBO
AID
E.0.11652: N/A
TAGS:
EINV, MX
Please
LIBRARY GERALD
International Information Center
GR
COM
FRB
INT
FROM
:
Amembassy MEXICO CITY
DATE: Nov. 17, 1976
AB
TAR
TR
XMB
SUBJECT :
VW Announces they will Stay in Mexico
me
IR
ARMY
NAVY
OSD
REF
:
Mexico City 308, Nov. 10, 1976
IA
NSA
CIA
To counter press reports from VW's German headquarters
(ref airgram) and a flurry of local rumors alleging
GGESTED DISTRIBUTION
VW's imminent departure from Mexico, VW Mexico's chief
PARTMENT OF STATE
24
executive officer, Hans Barsehkis, was widely quoted
in the media as announcing that VW would not leave
6 NOV 18 PM 12: 42
Mexico. Nevertheless, when the Ambassador was in
Puebla (the site of the VW plant) last-week, the rumor
FADRC/DA/WC
of W's withdrawal was very much in evidence. Even if
Barsehkis' statement is true, this still begs the
question as to how VW (and the other auto makers) will
POST ROUTING
handle the devaluation and labor associated problems
0:
Action
Info.
Initials
reported in the referenced airgram. Further speculation
1B/
/
on VW's intentions were not dampened by a Der Spiegel
)
article carried by Excelsior November 11 which asserted
M
/
VW would very much like to sell its Mexican subsidiary
DL
/
to the Mexican Government.
CON
2
4
To compensate the auto industry primarily for devaluation-
DM
/
generated cost increases, Industry and Commerce Secretary
D
Campillo Sainz announced on November 11 that auto prices
for the 1977 models would be increased an average of 38%.
is
/
This was based, he said, on Secretariat studies which
CI
1
showed costs to the industry had risen 35% over the
year. These increases are due primarily to the increased
cost of imported parts since the devaluation (about 40%
LE
I
of each car), and to the rising labor costs.
tion Taken:
13
The Embassy will continue to monitor and report on this
and other cases of apparent disinvestment as information
is developed.
to:
CALDERHEAD
FORM
and
For Department Use Only
Hals:
10-64
DS-323
LIMITED OFFICIAL USE
Out
Drafted by:
Dratting Date:
Phone No.:
Contents and Classification, Approved by:
COML:NMBouton:lg
11/15/76
724
learances:
E/C: WhHayne was
LAB:ANixon
DEPARTMENT OF STATE
Department of State
UNITED STATES OF AMERICA
TELEGRAM
LIMITED OFFICIAL USE
1032
PAGE 01
MEXICO 15058 292131Z
70
ACTION ARA-10
TNFO OCT-01 ISO-00 AGRE-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-02 OPIC-03
LAB-04 SIL-01 PA-01 PRS-01 H-02 L-03 DHA-02 /087 W
039089
R 292100Z NOV 76 29
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 8908
TNFO AMCONSUL HERMOSILLO
AMCONSUL MAZATLAN
Please return to
International Information Center
LIMITED OFFICIAL USE MEXICO 15058
PASS USDA
F.O. 11652: N/A
TAGS: EAGR, MX
SUBJECT: EFFECTS OF LAND INVASIONS IN NORTHWEST MEXICO ON CROP
PRODUCTION
REF: A) HERMOSILLO 333; B) MEXICO 14922
1. ASST AGATT TRAVELED TO CIUDAD OBREGON, SUNORA, NOVEMBER 17
TN ROUTE TO SAN DIEGO AND SPOKE WITH WHEAT GROWERS IN YAGUI
VALLEY IRRIGATION DISTRICT. SOURCES CONFIRMED UNCERTAINTY ON
PART OF PRIVATE LANDHOLDERS (PEQUENOS PROPRIFTARTOSJ REGARDING
GOM ACTION THROUGH SECRETARIAT OF AGRARIAN REFORM (SPA) ON
I AND TENURE PROBLEM TN SPITE OF INJUNCTION (AMPARO) BY SUPREME
COURT. SUPREME COURT HAD STAYED ANY EXPROPRIATION OF PROPERTY
ON THE GROUNDS OF INSUFFICTENT DOCUMENTATION JUSTIFYING ILLE-
GALITY OF LAND OWNERSHIP BY SEVERAL PRIVATE LANDHOLDERS.
e. UPON ARRIVAL GENERAL MOOD OF PRIVATE LANDOWNERS WAS PES-
SIMISTIC AND ANXIOUS. INCREASED LAND OCCUPATIONS OF LAST TWO
LIMITED OFFICIAL USE
GERALD FORD LIBRARY
FORM
DEPARTMENT OF STATE
Department of State
UNITED STATES OF AMERICA
TELEGRAM
LIMITED OFFICIAL USE
PAGE 02
MEXICO 15058 292131Z
WEEKS HAD RAISED FEARS OF LAND EXPROPRIATION ANNOUNCEMENT IN
LAST FEW DAYS OF ECHEVERRIA'S ADMINISTRATION IN SPITE OF QUOTE
AMPARO END QUOTE BY MEXICAN SUPREME COURT. SOURCES STATED THAT
MANY INDIVIDUALS TAKING PART IN THE LAND INVASIONS WERE NOT
FROM SONORA OR SINALOA STATES AND WERE NOT LEGITIMATE CAMPE-
SINOS. IN ADDITION. THEY CONFIRMED WHAT THEY CONSIDERED TO BE
THE CURRENT ADMINISTRATION'S SUPPORT OF LAND OCCUPATIONS AS
CONASUPO, GOVERNMENTAL FOOD SUPPLY STABILIZATION AGENCY, WAS
REPORTEDLY TRANSPORTING INVADERS IN ORDER TO PARTICIPATE IN
INVASIONS AND PROVIDING THEM WITH FOOD. SOME CAMPESINO GROUPS
WERE ALSO REPORTEDLY ARMED WITH AUTOMATIC WEAPONS.
3. NEARLY ALL PRIVATE FARMER ORGANIZATIONS WERE CONDUCTING
MEFTINGS DURING THE DAY, WEDNESDAY, NOVEMBER 17. THE GENERAL
MOOD WAS ONE OF ANXIETY AS A RESULT OF INCREASED INVASTONS
OF PRIVATE LAND OVER THE LAST FEW WEEKS IN AND AROUND THE
ARFA. HOWEVER, BY THE DAY'S END THE MOOD WAS MORE OPTIMISTIC
SINCE THE IMPRESSION WAS THAT THE GOM IN MEXICO CITY HAD
RECOME CONCERNED BY PRIVATE FARMERS THREAT TO NOT PLANT WHEAT
AND OTHER CROPS. ONE HERMOSILLO NEWSPAPER OF NOVEMBER 18,
FVFN SUGGESTED POSSIBILITY THAT LANDOWNER'S SUIT AGAINST
BARRA GARCIA, SRA SECRETARY, MIGHT WELL BE DECIDED IN THEIR
FAVOR AND ANY AFFECTED FARMERS WHO HAD THEIR LAND EXPROPRI-
ATFD WOULD RECEIVE INDEMNIFICATION. ANNOUNCEMENT BY THE PRESI-
DENT NOV 19 TO OVERRIDE THE AMPARO BY PRESIDENTIAL PROCLAMA-
TION AND EXPROPRIATING SOME 98,090 HECTARES IN SONORA THUS
CAME AS A SUPPRISE.
so WHILE AGATT HAS HAD NO CONTACT WITH ABOVE MENTIONED SOURCES
SINCE NOV 19, DAY OF PRESIDENTIAL PROCLAMATION OF EXPROPRI-
ATTON, OUR FFELING IS THAT PRIVATE FARMERS WILL CONTINUE
THEIR WORK STOPPAGE AND REFUSAL TO PLANT, AT LEAST UNTIL SUCH
TIME AS THE NEW PRESIDENT COMES INTO OFFICE AND POSSIBLE
THEREAFTER. IF NEW ADMINISTRATION UPHOLDS EXPROPRIATION OF
THE LANDS IN THE YAQUI VALLEY AND OTHER PRODUCTIVE TRRIGATED
LANDS IN THE STATE, THERE IS NO DOUBT THAT WHEAT, SAFFLOWER
AND OTHER CROP PRODUCTION WILL BE MUCH LOWER THAN NORMAL DES-
PITE GOM STATEMENTS TO THE CONTRARY. EJIDATARIOS--SMALL FARM-
FRS--ARE NOT EQUIPPED TO EFFECT A OUTCK PLANTING OF WHEAT
ON SUCH A LARGE SCALE, EVEN WITH THE HELP OF GOM THROUGH
FXTENSION PERSONNEL AND BANCO RURAL FINANCING AND TECHNICAL
LIMITED OFFICIAL USE
GERALD FORD LIBRARY
DEPARTMENT OF STATE
Department of State
UNITED STATES
TELEGRAM
OF
LIMITED OFFICIAL USE
PAGE 03
MEXICO 15058 292131Z
ADVISORS.
5. GIVEN THAT DECEMBER 15 TS LATEST DATE TO PLANT WHEAT IN
NORTHWEST MEXICO FOR CURRENT SEASON AND HERMOSILLO ESTIMATE
THAT NO MORE THAN 25 PERCENT OF THE YAQUI VALLEY IS PLANTED,
WE SEE A LIKELY REDUCTION OF WHEAT PRODUCTION FOR THE CURRENT
SEASON COMPARED TO LAST YEAR'S CROP BY SOME 500-700, 000 TONS.
SUCH AN INCREASE IN IMPORTS CLAST YEAR MEXICO WAS SELF-SUFFI-
CIENT IN WHEAT) COULD RATSE THEIR IMPORT EXPENDITURE BY SOME
50-70 MILLION DOLLARS FOR 1977.
6. LAND INVASIONS WERE ALSO A MAJOR CONCERN AT HORTICULTURAL
PRODUCERS MEETING IN GUAYMAS NOVEMBER 19-20. THREATENED
EXTENSION OF EXPROPRIATION TO SINALOA COULD ALSO HAVE ADVERSE
FFFECT ON FRFSH PRODUCE EXPORTS AS SUCH EXPORTS MOSTLY FIN-
ANCED BY U.S. BUYERS WITH LONG ESTABLISHED TIES TO LARGER
PRODUCERS IN SINALOA WHICH SUPPLY THE BULK OF THIS TRADE.
THF SITUATION IN SINALOA WAS APPARENTLY DEFUSED (OR AT LEAST
POSTPONED) WITH ANNOUNCEMENT NOVEMBER 26 THAT LANDHOLDERS HAD
DONATED 10.000 . HECTARES OF IRRIGATED LAND (PLUS 3,560 HECTARES
OF NONIRRIGATED) TO CAMPESINOS.
TOVA
R.FORD
GERALD
LIMITED OFFICIAL USE
FORM
Partment of Stat
UNITED STATES OF AMERICA
TELEGRAM
CONFIDENTIAL 4459
PAGE 01
MEXICO 14956 2500222
EMT
63
DD
ACTION S5-14
TNFO OCT-01 TSO-00 ARA-06 EB-03 SP-02 TRSE-00 NSC-05
NSCE-00 FRB-01 SSO-00 ONY-09 1932 W
092650
n 3423577 NOV 76
FM AMEMBASSY MEXICO
TO SECSTATE WASHOC IMMEDIATE 8848
F
I
La
N
T
MEXICO ) 14956
I IMDIS FOR DISTRIBUTION FOR S,O,E,C,P, EB, ARA, S/P,
TREASURY, NSC, FRB ONLY
doe 7/25/07
FO 11652 : GDS
PLEASE RETURN TO
TAGS : FFIN MY
SENTER
INTERN
SURJ : MEXICAN ECONOMIC SITREP
REF : A) STATE 277224: B) MEXICO 14904
1. EXCHANGE SYSTEM. TODAY, NOVEMBER 24, DOLLAR BUYING RATE
CONTINUED TO DROP. BANCO DF COMERCIO REPORTS THEY OPENED
AT 25 PESUS TO BUY DOLLARS AND 23 TO SELL, BUT CLOSED AT
04 AND 21 RESPECTIVELY. HOWEVER, OFFICIAL NOTED OTHER BANKS,
AND EVEN BANCO DE COMERCIO BRANCHES OUTSIDE OF MEXICO, WERE
QUOTING SOMEWHAT DIFFERENTLY ALTHOUGH TENDENCY WAS THE SAME,
MARKET CONTINUES TO HANDLE MOSTLY REQUESTS BY INDIVIDUALS, SOME OF
WHOM TRADED LARGE AMOUNTS. STILL LITTLE CURPORATE ACTIVITY
REING NOTED. DOLLAR BUYING RATE DROPPING DUE TO DOLLAR
OFFERINGS CONTINUING SOMEWHAT LARGER THAN DEMAND. BECAUSE
BANKS HAVE NO GUARANTEF THAT BANCO DF MEXICO WILL RUY
THF DOLLARS FROM THEM, OR THE RATE IF TT BUYS, THEY ARE
TRYING TO BALANCE THEIR POSITIONS. BANCU DE COMERCTO
TUNK IN A LARGE AMOUNT OF DOLLARS AT 28 PESOS EARLY
MONDAY LEAVING IT VERY LONG ON DOLLARS. HOWEVER, IT
HAS NOW ALMOST BALANCED TTS POSITION. INFORMANT
EMPHATIC THAT BANCO DE MFXICO NOT IN THE FOREIGN
EXCHANGE MARKET TN ANY MANNER.
BERALD FORD LIBRARY
CONFIDENTIAL
DEPARTMENT OF STATE
UNITED NAME AMERICA
Department of State
TELEGRAM
STATES OF
CONFIDENTIAL
PAGE 02
MEXICO 14956 250022Z
?. OTHER ECONOMIC FRONTS. THESE ALL CONTINUE
REMARKABLY QUIFT WITH NOTHING SIGNIFICANT TO REPORT.
TOVA
FORD is 838410 LIBRARY
CONFIDENTIAL
CONF IDENT TAL
December 1, 1976
To:
Chairman Burns
From: George B. Henry
Attached is the latest cable on the
Mexican economic situation.
cc: Governor Wallich
Attachment: Mexico 14956
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 074839 LIBRARY
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
December 1, 1976
To:
Chairman Burns
From: George B. Henry
Attached is the latest cable on the
Mexican economic situation.
cc: Governor Wallich
Attachment: Mexico 14956
FORD & GERALD LIBRARY
OF
Debartment of State
AMERICA
TELEGRAM
STATES OF
CONFIDENTIAL 4459
PAGE 01
MEXICO 14956 2500222
EMT
63
DD
ACTION SS-14
TNFO OCT-01 TSO-00 ARA-06 EB-03 SP-02 TRSE-00 NSC-05
NSCE-00 FRB-01 SSO-00 ONY-00 1032 W
002650
n 9423577 NOV 76
FM AMEMBASSY MFXICO
TO SECSTATE WASHOC IMMEDIATE 8848
I
F
A
L
MEXICO ) 14956
I IMDIS FOR DISTRIBUTION FOR S,D,E, C, P, EB, ARA, S/P,
TREASURY, NSC, FRB ONLY
dal 7/25/07
FO 11652 : GDS
PLEASE RETURN TO
TAGS : FFIN MY
INTERN
SURJ : MEXICAN ECONOMIC SITREP
REF : A) STATE 277224, B) MEXICO 14904
. EXCHANGE SYSTEM. TODAY, NOVEMBER 24, DOLLAR BUYING RATE
CONTINUED TO DROP. BANCO DF COMERCIO REPORTS THEY OPENED
AT 25 PESUS TO BUY DOLLARS AND 23 TO SELL, BUT CLOSED AT
PA AND 21 RESPECTIVELY. HOWEVER, OFFICIAL NOTED OTHER BANKS,
AND EVEN BANCO DE COMERCIO BRANCHES OUTSIDE OF MEXICO, WERE
OUOTING SOMEWHAT DIFFERENTLY ALTHOUGH TENDENCY WAS THE SAME,
MARKET CONTINUES TO HANDLE MOSTLY REQUESTS BY INDIVIDUALS, SOME OF
WHOM TRADED LARGE AMOUNTS. STILL LITTLE CURPORATE ACTIVITY
RETNG NOTED. DOLLAR BUYING RATE DROPPING DUE TO DOLLAR
OFFERINGS CONTINUING SOMEWHAT LARGER THAN DEMAND. BECAUSE
BANKS HAVE NO GUARANTEF THAT BANCO DF MEXICO WILL RUY
THF DOLLARS FROM THEM, OR THE RATE IF TT BUYS, THEY ARE
TRYING TO BALANCE THEIR POSITIONS. BANCU DE COMERCTO
TUNK IN A LARGE AMOUNT OF DOLLARS AT 28 PESOS EARLY
MONDAY LEAVING IT VERY LONG ON DOLLARS. HOWEVER, IT
HAS NOW ALMOST BALANCED TTS POSITION. INFORMANT
EMPHATIC THAT BANCO DE MFXICO NOT IN THE FOREIGN
EXCHANGE MARKET TN ANY MANNER.
&
FORD
GERALD
CONFIDENTIAL
DEPARTMENT DEP OF
STATE
UNITED XXX AMERICA
Department of State
TELEGRAM
STATES OF
CONFIDENTIAL
PAGE 02
MEXICO 14956 250022Z
0. OTHER ECONOMIC FRONTS. THESE ALL CONTINUE
REMARKABLY QUIFT WITH NOTHING SIGNIFICANT TO REPORT.
TOVA
GERALDO R. FORD LIBRARY
CONFIDENTIAL
FEDERAL OF RE RE RE RESERVE SYSTEM
BOARD GOVERNORS
1976DEC -2 AM11:03
OFFICE RECEIVE CHAIRMAN
FBIS 04
MEXICO: LOPEZ-PORTILLO ANNOUNCES CABINET
FL010225 MEXICO CITY INFORMEX IN SPANISH 0147 GMT 1 DEC 76 FL
(TEXT) MEXICO CITY, 30 NOV (INFORMEX) -- LIC JESUS REYES HEROLES,
SECRETARY OF GOVERNMENT OF PRESIDENT LOPEZ PORTILLO, TONIGHT
ANNOUNCED THE MEMBERS OF THE CABINET OF THE HEAD OF STATE WHO WILL
BE INAUGURATED TOMORROW.
THE DESIGNATED OFFICIALS ARE:
SECRETARIAT OF GOVERNMENT:
LIC JESUS REVES HEROLES
SECRETARIAT OF THE PRESIDENCY
LIC CARLOS TELLO
SECRETARIAT OF FINANCE AND PUBLIC
CREDIT:
PIC JULIO RODOLFO
SECRETARIAT OF AGRARIAN REFORM:
JORGE ROJO LUGO
SECRETARIAT OF TOURISM:
ARCHITECT GUILLERMO ROSELL
SECRETARIAT OF PUBLIC WORKS:
ARCHITECT PEDRO RAMIREZ
VASQUEZ
SECRETARIAT OF COMMUNICATIONS AND
TRANSPORT
EMILIO MUJICA MONTOYA
SECRETARIAT OF PUBLIC EDUCATION:
PORFIRIO MUNOZ LEDO
FORD
SECRETARIAT OF INDUSTRY AND COMMERCE:
FERNANDO SOLANA
GERALD
SECRETARIAT OF FOREIGN RELATIONS:
LIC SANTIAGO ROEL
LIBRARY
SECRETARIAT OF LABOR AND SOCIAL
WELFARE:
LIC PEDRO OJEDA PAULLADA
SECRETARIAT OF NATIONAL DEFENSE:
GEN FELIX GALVAN
SECRETARIAT OF NAVY:
ADM RICARDO CHAZARD
SECRETARIAT OF NATIONAL PATRIMONY:
LIC JOSE ANDRES DE OTEYZA
SECRETARIAT OF HEALTH:
OR EMILIO MARTINEZ M.
SECRETARIAT OF AGRICULTURE:
FRANCISCO MERINO RABAGO
FEDERAL DISTRICT DEPARTMENT:
PROF CARLOS HANK GONZALEZ
SOCIAL SECURITY: LIC ARSENIO FARELL.
INSTITUTE OF SOCIAL SECURITY AND
SERVICES FOR GOVERNMENT WORKERS:
PROF CARLOS JONGUITUO BARRIOS
INSTITUTE OF THE NATIONAL FUND FOR
WORKERS' HOUSING:
LIC JOSE CAMPILLO SAINZ
MEXICAN FOREIGN TRADE INSTITUTE:
LIC ADRIAN MARTINEZ
REPUBLIC'S ATTORNEY GENERAL:
LIC 05CAR FLORES
FEDERAL DISTRICT ATTORNEY GENERAL:
LIC GUILLERMO SLANIS FUENTES
GOVERNMENT BASIC COMMODITIES
CORPORATION
LIC MANUEL GONZALEZ DE COSSIO
MEXICAN PETROLEUM:
LIC JORGE DIAZ SERRA
BANK OF MEXICO LIC GUSTAVO ROMERO COLVECK
NATIONAL FINANCIAL BANKS
LIC DAVID IBARRA
NATIONAL LOTTERY:
EIC ROBERTO DE LA MADRID
(MEXICAN GUANOX
DAVID GUSTRVO GUTIERREZ
RAILROADS:
LUIS GOMEZ 2.
RURAL BANK:
LIC R. EVERARDO ESPINO
PRIVATE SECRETARY:
LIC ENRIQUE VELASCO IBARRA
CHIEF OF PRESIDENTIAL GENERAL STAFF
GEN MIGUEL ANGEL GODINEZ
PUBLIC WORKS AND SERVICES BANK:
PROF ENRIQUE OLIVARES SANTANA
FEDERAL ROADS AND BRIDGES
HECTOR N. CALDERON
NATIONAL INSTITUTE FOR THE
DEVELOPMENT OF THE RURAL COMMUNITY
AND LOW COST HOUSING:
ARCHITECT LUIS N. RUVALCABA
(COBE):
LIC JUAN PEREZ ABREU
AIRPORTS:
LIC ENRIQUE LOEZA
NATIONAL COOPERATUVE DEVELOPMENT
BANK:
LIC JORGE MARTINEZ GOMEZ
(IMAN--IMPIF):
LIC MARCOS VINIO GUTIERREZ
ARID AREAS COMMISSION:
FRANCISCO GUEL JIMENEZ
1 DEC 0322Z BB/GFE
GERALD FORD
CONFIDENTIAL
December 2, 1976
TO:
Chairman Burns
FROM: George B. Henry
Attached are the latest cables on the Mexican economic
situation.
Attachments: Mexico A-13
Mexico A-308
Mexico A-312
Mexico 15145
cc: Governor Wallich
Defense classification of this document is due
16 the Inclusion of U.S. Government information
officially Bloshified under Executive Order 10501
which provides that "A document shall bear a
elassification at least as high as that of its
highest classified companent."
FORD & DERALD LIBRARY
AIRGRAM
P760178-0346
M/R
E
REP
AF
FOR RM USE ONLY
RA
EUR
FE
A-13
UNCLASSIFIED
NO.
HANDLING INDICATOR
HA
CU
INR
TO
Amembassy MEXICO
E
P
10
&
INFO :
Department of State (ARA/MEX)
L.
FBO
AID
E. 11652: N/A
Please return to
International Information Center
TAGS
: PINT
GR
COM
FRB
FROM
:
Amconsul CIUDAD JUAREZ
DATE: November 12, 1976
NT
LAB
TAR
SUBJECT :
Monthly Report of Developments in the
Ciudad Juarez Consular District - October, 1976
976 NOV 24 PM 5
TR
XMB
AIR
REF
:
RMY
CIA
NAVY
SUMMARY: 1. One of the U.S.-affiliated twin plants
/
ISD
USIA
NSA
Ciudad Juarez is expanding its operations here as a result
81
NON
of the peso devaluation and there is indication others Will
follow suit. There is also indication that additional twin
THEME
plants will be established here. Some concern exists
CG-2
AFL-CIO will renew efforts to eliminate U.S. tariff
AMB
advantages for twin plants with view to decreasing unemploy-
ment in U.S. 2. As a result of the devaluation of the
DCM
POL
Mexican peso and the need to increase sales of goods and
ADM
services, Ciudad Juarez Chamber of Commerce, supported by
ECON
large number of Juarez merchants, has launched all-out
CHRON
"Buy in Juarez" campaign. 3. Survey undertaken by
employers sector for purpose of determining realistic minimum
8
wage for Juarez area. END SUMMARY
1. Border Industry
While in the past some twin plants on the Mexican border
have withered in the competition with assembly plants
located in Asian countries, the recent peso devaluation
appears to be reversing the situation. AMPEX (Cintas Magne-
ticas, S.A.) decided to close its plant in Taiwan and transfer
its operations to Ciudad Juarez on the basis of the advantage
gained by the peso devaluation. The company is presently
enlarging both of its plants in Ciudad Juarez and adding
approximately 200 employees to its payroll.
As a result of the peso devaluation and/or increased demand
UNCLASSIFIED
FOR DEPT. USE ONLY
FORM
DS-323
In
Out
62
Drafted by:
Contents and Classification Approved by:
PO: GShapiro: jez
Goodwin Shapiro, Principal Officer
D
Clearances:
GERALE FORD LBRARY
UNCLASSIFIED
Ciudad Juarez
A
for their products, four other twin plants are considering
expanding their operations in Ciudad Juarez. (1) Canyon de
Mexico, S.A. de C.V. (a Japanese firm in joint venture with
Contico International of St. Louis, Mo.). The firm
manufactures spray mechanisms for spray bottles. As the
controversy over aerosol sprays has spurred a trend away
from aerosol cans and bottles, the firm has experienced a
significant increase in the sale of its product, a non-aerosol
spray mechanism. (2) TDK de Mexico, S.A. de C.V., a Japanese
firm which manufactures magnets. (3) Sangamo Electrics. S.A.
de C.V. which assembles capacitors. (4) Convertors de
Mexico, S.A. de C.V. This firm packages disposable surgical
gloves and garments for American Hospital Supply, Evanston, T11.
Managers of the industrial parks are optimistic that, in
addition to plant expansion, other twin plants will be
established here because of the peso devaluation. Whereas
before the devaluation twin plants were paying a minimum
salary equivalent to $6.64 per day, they are now paying
slightly more than $4.00 per day. A number of Canadian
companies in the electronics and hand tools field, as well as
a Spanish tool manufacturer, have sent representatives CO
Ciudad Juarez to study the feasibility of opening plants here.
On the other side of the coin, questions are being raised as
to the effect Carter's election will have on the border
industries, since Carter had the backing of the AFL-CIO which
has consistently viewed the twin plants along the Mexican border
as "runaway sweat shops" which take jobs from U.S. workers.
It is recalled that President-Elect Carter stated in his first
debate with President Ford that one of the ways to decrease
unemployment in the United States "is to bring jobs back from
offshore."
2. Juarez Chamber of Commerce Initiates "Buy in Juarez" Campaign
The Ciudad Juarez Chamber of Commerce has launched an all-out
publicity campaign through all of the news media outlets in
Juarez and El Paso to attract the buying public in both cities
to take advantage of the ailing peso and shop in Juarez.
All of the news media, including El Paso television, have been
plugging Juarez restaurants, hotels, supermarkets, department
stores and auto repair shops, where the floating peso is being
accepted from 24 to 25 pesos to the dollar. Banks in both
Juarez and El Paso report heavy demand for conversion of
UNCLASSIFIED
BERALD FORD LIBRARY
Page 3
UNCLASSIFIED
Ciudad Juarez
-13
dollars to pesos since the second devaluation. Importation
of "Articulos Gancho" has dropped about 30 per cent since
the second devaluation.
3. Survey Prepared for the National Commission For
Minimum Wages
At the request of various local employers' and business
organizations, the National Commission for Minimum Wages
authorized a study to be undertaken to determine a minimum
wage for the Ciudad Juarez area (Economic Zone 9) which would
accurately reflect the cost of living here. The report,
which was submitted to the Local Commission for Minimum Wages
prior to the devaluation, recommended an increase of 10.84
per cent in the minimum wage, or 9 pesos per day, to bring
the minimum wage to 92 pesos per day. As a result of the
devaluation and the 23 per cent increase in wages which
followed, the study was amended to recommend that minimum
wages be increased by 5.78 per cent for 1977. The workers
sector, however, asked that the minimum wage be increased
by 40 per cent. The Local Commission for Minimum Wages has
proposed that for 1977 the minimum wage in Ciudad Juarez be
increased by 11 per cent. The employers' sector regards
this as an excessive increase and intendsto oppose the
position of the Local Commission for Minimum Wages.
The study leading up to the recommended change in the
minimum wage contains a number of interesting observations.
For openers, the report stuns the reader by noting that the
population of Ciudad Juarez has more than doubled since
1960, when the official census pegged the population at
276,000. When the survey was conducted last summer, the
city's population was estimated at 573,742. The survey
notes that during the last sixteen years the city's annual
growth rate has been 5.74 per cent, compared with the
overall Mexican population growth of 3.3 per cent. The
survey directors placed the blame for this dangerous and
uncontrolled growth on the never-ending migration of people
from the interior of Mexico, attracted to Ciudad Juarez by
the hope of better living conditions and the chance of
migrating to the United States--legally or illegally. The
internal mig. ation was held to be responsible for the acute
UNCLASSIFIED
BERALD FORD LIBRARY
Page 4
UNCLASSIFIED
Ciudad Juarez
A
3
unemployment situation in the city. The report also notes
that the Juarez population contains an astounding number
of young people (approximately 65.67 per cent of the
population is younger than 23); that 17,570 "green card"
holders (Mexicans who have been lawfully admitted to
the United States for permanent residence) live in Juarez
and work in El Paso, a tremendous financial impact on
both cities' economy; the Mexican minimum wage has been
upped eight times since 1966, and the most recent devaluation
of the peso is causing pressure for still another pay
increase.
SHAPIRO
Q
FORD & GERALD LIBRARY
UNCLASS "IED
DEPT. DISTRIMUTION
RIGIN/ACTION
DEPARTMENT OF STATE
Com
AIRGRAM
3a
P760175-23P4
S/R
REP
AF
ARA
55 Original to be Filed in
Decentralized Files.
FILE DESIGNATION
EUR
FE
NEA
CU
LIMITED OFFICIAL USE
A-308
INR
E
P
10
HANDLING INDICATOR
NO.
FORD
TO
:
Department of State
L
FBO
AID
E.0.11652: N/A
TAGS:
EINV, MX
GERALD
LIBRARY
International Information Center
AGR
COM
FRB
INT
FROM
:
Amembassy MEXICO CITY
DATE: November 10, 1976
LAB
TAR
TR
XMB
SUBJECT :
Moves Toward Disinvestment in Mexico
DECLASSIFIED
AIR
ARMY
NAVY
OSD
REF
:
E.O. 12038 SEC.3.6
USIA
NSA
CIA
MR07-117,#13: st.ltr 2/22/08
dal
3/10/08
Embassy is aware of two major fordign f ¡NABA Workswagen
and Massey-Ferguson) which for various reasons are
SUGGESTED DISTRIBUTION
trying to reduce or have reduced their equity investment
DEPARTMENT OF STATE
in Mexico. There may be other firms considering doing
so also, not known to the Embassy.
1976 NOV 12 AM 8: 10
Volkswagen
FADRC/DA/WC
Though local Volkswagen spokesmen maintain adamantly
that their efforts to dispose of 40% of their equity
POST ROUTING
investment either to the Mexican Government or to
TO:
Action
Info.
Initials
Mexican private investors is no more than an attempt
976 NOV 24 AM 8 16
AMB/
1
to follow worldwide VW policy, we understand that the
PO
DCM
1
VW management is thoroughly fed up with unreasonable
POL
1
labor demands and the resulting cost price squeeze in
which automobile manufacturers find themselves in Mexico.
ECON
4
The VW plant, in Puebla, has a radical union and was, we
CONS
1
heard second-hand, presented with a wage increase demand
ADM
1
following the second devaluation on October 24 on top of
AID
the earlier increases. Management also finds trouble-
some the GOM's requirement for ever increasing exports
USIS
1
in order to offset import of needed automotive components.
COML
1
According to press reports from Wolfsburg, Germany, the
parent VW firm has been obliged to make up local losses
of a billion marks since 1976. The Mexican company was
1
founded in 1964 with a 250 million mark investment. In
FILE
Action Taken:
1969 it started to show a profit, obtained 35% of the
12
Mexico market and exported its "Safari" to the United
Date:
LIMITED OFFICIAL USE
For Department Use Only
FORM
Initials:
10-64
DS-323
In
Out
Drafted by:
E/C: WANGYNE WAS FIN: LPascoe
Drafting Date:
Phone No.:
11/8/76
731
Contents and Classification want Approved by:
E/C: WAHay
Clearances:
COMML: GAStenford
AGR: RWelton
DRW
OFFICE
1966
(258)
Page 2
Mexico City A- 308
LIMITED OFFICIAL USE
States. But troubles started in 1974 with inflation in
Mexico and salary increases. The firm employed 11,000
persons two years ago, but let 2,000 go in 1975. Production
dropped from 140,000 units to 107,000 units. This year it
will not exceed 85,000 and in 1977, 75,000.
All of the above data was in the Wolfsburg story. In
addition, the local German Embassy (protect) tells us that
the German VW management is already looking for jobs back
home and that the company is considering leaving only a
skeleton staff of a Director General and a few assistants.
Massey-Ferguson
Massey-Ferguson sold 60% interest in its Mexican subsidiary
to the GOM's development bank about two months ago.
According to a Canadian Embassy source, the decision to
take the Mexican Government as a majority shareholder was
based on the belief that the GOM would probably force them
to Mexicanize at some point and that it might be advantageous
to take the GOM in as a partner. With GOM as a majority
shareholder, many problems vis-a-vis the government can be
solved more easily. Also, according to our source, Massey-
Ferguson believes it will continue to be able to exercise
effective management control and receive reasonable dividends.
Comment
In both cases, the decision to sell would appear to result
in part from government policies. The problems of these
companies are likely to discourage potential investors.
Also, when Mexico is short of development capital, it seems
unfortunate that the government should have to devote scarce
resources to replacing private foreign capital.
JOVA
GRA
LIMITED OFFICIAL USE
FORD i LIBRARY GERALD
AIRGRAM
P760178
om
MEXICO
REP
AF
ARA
Original to be Filed in
Decentralized Files.
FE
NEA
CU
A-312
LIMITED OFFICIAL USE
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P
10
HANDLING INDICATOR
TO
: DEPARTMENT OF STATE
FBO
AID
EMT
E.0.111652: N/A
International Information Center
Please return to
TAGS: ENRG EALR ETRD MX
COM
FRB
INT
FROM
:
AMEMBASSY MEXICO CITY
DATE: 17 Nov 1976
TAR
TR
XMB
SUBJECT : PETROLEOS MEXICANOS FORECAST: 1976-2000.
ARMY
NAVY
OSD
FORD
REF
:
NSA
CIA
GERALD
1.
LIBRARY
BEGIN UNCLASSIFIED. In a newspaper supplement
primarily devoted to its accomplishments during the
Echeverria administration, Petroleos Mexicanos outlined
SESTED DISTRIBUTION
its projections for petroleum production, investment,
cash flow.
RIMENT OF STATE
2. Demand for hydrocarbons (millions of Barrels of
IOV 18 PM 12: 43
Crude and Liquid Equivalents) :
DRC/DA/WC
Year
Consumption
Exports
Total
B/D
POST ROUTING
1976
419.6
38.9
458.5
Action
Info.
Initials
1977
451.9
54.7
506.6
1.38
"
1
1978
486.6
54.7
541.3
1.48
1979
524.0
54.7
578.7
1.58
1
1
1980
564.3
54.7
619.0
1.69
1
1981
598.0
54.7
652.7
1.78
IN
4
1982
633.8
54.7
683.5
1.88
is
1983
671.0
54.7
725.7
1.98
1
1
1984
712.1
54.7
766.8
2.10
1985
750.4
54.7
805.1
2.20
1976-85
5811.7
531.2
6342.9
3.
ml
1
If the ratio of reserves to production is to remain 15
/R
/
to 1, Pemex needs to discover 13.5 billion barrels of
iron
1
new reserves during the next 10 years.
E
on Taken:
11
LIMITED OFFICIAL USE
0:
For Department Us.
FORM
lals:
10-64
DS-323
In
Out
afted by:
Drafting Date:
Phone No.:
Conten's and Classificat 20 Approved by:
ECON:PPCarrico:cdm
11/11/76
729
E/C:WAHayne
WAA
learances:
ECON:
Mexico A 312
Page 2.
LIMITED OFFICIAL USE
3. Projected consumption through the year 2000 is as
Follows:
Year
Maximum
Minumum
1985
750.4
750.4
1990
1043.1
779.4
1995
1470.5
1052.0
2000
2077.8
1422.8
4. Investment required in the petroleum industry in
billions of constant dollars (1974). Difference depends
on level of consumption shown in paragraph 3.
Sector
1976-82
1983-2000
Maximum
Minimum
Drilling
3.988
28.007
17.314
Production
.938
4.754
2.583
Refining
1.914
5.969
3.242
Petrochemicals
1.448
4.474
2.431
Transport
1.054
6.978
3.763
Social and
Administration .092
1.899
.991
Capital and
Acquisitions
2.357
9.036
4.907
Exploratory
Studies
1.209
5.076
3.485
Total
13.003
66.210
38.785
5.
Cash flow in billions of constant dollars. The upper
Eigure for each year assumes prices will be adjusted to reflect
inflation. The lower figure shows results if prices remain
fixed at current levels and there is a 10% rate of inflation.
FORD i LIBRARY GERALD
LIMITED OFFICIAL USE
Mexico A 312
LIMITED OFFICIAL USE
Page
Year
Spending
Income
Borrowing
1976
4.108
3.791
.552
4.108
.552
1977
4.422
4.175
.546
5.852
1.976
1978
4.511
4.496
.363
6.575
4.819
1979
4.765
4.877
.241
7.718
2.713
1980
4.840
5.219
-.049
8.742
5.141
1981
4.872
5.595
-.469
9.870
6.598
1982
5.308
6.001
-.583
12.144
9.321
END UNCLASSIFIED
6. BEGIN L.O.U. COMMENT: Pemex's projections of exports of
only about 150,000 B/D seem unrealistic, given Mexico.s
need to expand exports to meet balance of payments deficit.
The report does say that Pemex should plan investment to
meet the maximum projected demand and export any difference
between that and actual demand. The difference would mean
additional exports of up to 722,000 B/D in 1990, 1.1 million
B/D in 1995, and 1.8 million B/D in 2000.
7. Para. 5' is a strong argument against freezing the prices
of petroleum products. The GOM froze prices from 1958 until
1973 and Pemex was unable to generate sufficient income to
make necessary investments. If such a freeze were reimposed
Pemex's ability to meet domestic demand would be in jeopardy.
Such financial pinch as Pemex may feel is largely self-inflicted:
the GOM collects $5.75 excise tax on each barrel of crude
exported.
JOVA
WMA
GERALD R. FORD
LIMITED OFFICIAL USE
OF
31.3
MEXICO
Department of State
UNITED STATES AMERICA
OF
CONFIDENTIAL 3922
EMT
PAGE 01
MEXICO 15145 3100232
Please return to
61
ACTION SS-54
International Information Centel
TNFO OCT-71 TS0-00 EB-03 ARA-06 SP-02 TRSE-00 NSC-05
NSCE-00
#PB-21
SSOW00 CIAE-00 1032 W
056016
n 3023432 NOV 76
30
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC IMMEDIATE 8949
N
T
n
MEXICO 15145
LIMDIS FOR DISTRIBUTION FOR S, D. F, C. P, EB, ARA, S/P,
TREASURY, NSC, FPB ONLY
dal 7/25/07
F.O. 11652: GDS
TAGS: EFIN. MX
SUBJECT: MEXICAN ECONOMIC SITREP
REF: A) STATE 277224. B) MEXICO 15058, C) MEXICO 15076,
n) MEXICO 15*64
1. EXCHANGE SYSTEM. PESO CONTINUES TO RISE IN VALUE. YES-
TERDAY, NOV 29, RUVING RATE FOR DOLLARS DROPPED FROM 27 TO
22 PFSOS AND THEN FINALLY CLOSED AT 21.75. OPENED AT 21.50
TODAY. SEE REFTEL D FOR DESCRIPTION OF OPERATION OF FORETGN
EXCHANGE MARKET.
?. OTHER ECONOMIC FRONTS. FAPE INCREASES VARVING FROM 20 in
30 PERCENT WERE DECREED FOR RUSES, DOMESTIC AIRLINES, AMD
RATLROADS. THE FEDERAL ELECTRICITY COMMISSION (OFE) DENIED
CHARGES THAT IT WAS BANKRUPT. IT CLAIMFO ITS ASSETS SHOULD
BE ASSESSED AT CURRENT VALUE RATHER THAN ORIGINAL VALUE RENCE
COVERING ITS ADDED PESO LIABILITIES. IT DID NOT, HOWEVER
SAY ANYTHING ABOUT DEPRECIATION ALLOWANCES. AS NOTED BEFORE,
MOST FIRMS AND FINANCIAL INSTITUTIONS, INCLUDING EVEN FORE
OWNED NACIONAL FINANCIERA AS WFLL AS CFE, BECAME ECONOMICA
ALLY INSOLVENT AS THE INCREASE 1N VALUE OF THEIR DOLLAR
LIABILITIES PROBABLY WIPED OUT THEIR CAPITAL AND RESERVES.
THIS IS NO PROBLEM FOR GOM-OWNED INSTITUTIONS AS THE GOM CAN
BERALD FORD CIBRAPT
FORM
DEPART
STATE
ALINA
Department of State
BY
of
CONFIDENTIAL
PAGE 02
MEXICO 15145 310023Z
WRITE UP THEIR CAPITAL AND HENCE JACK UP THE MONEY SUPPLY
THYS WILL ADD TO INFLATIONARY PRESSURES, HOWEVER, PRIVATE Y
OWNED FIRMS 00 NOT HAVE ACCESS TO THE PRINTING PRESS AND
NEFD RELIEF FROM THEIR BANKERS THE GOM ANNOUNCED YESTERDAY
THAT IT WILL ALSO HELP THEM AY ALLOWING THEM TO DEDUCT FROM
TAYES THE LOSSES THEY SUFFERED FROM THE FIRST DEVALUATION
HOWEVER, TO EXTENT THIS IS EFFECTIVE FOR THE FIRMS 60M
REVENUES WILL BE REDUCED, ADDING TO GOM DEFICIT AND CONSE-
DUFNT INFLATIONARY PRESSURES. SEE REFTELS C AND n FOR
DESCRIPTION of AGRICULNURAL SITUATION DUE TO LAND INVOSIONS
3. RUMORS. we HEAR RUMORS ARE CIRUCLATING WITHIN MILITARY
FSTABLISHMENT THAT IMMEDIATELY AFTER DEVALUATION JLP WILL
FIX THE VALUE OF THE PFSO AT 2⑈ TO THE DOLLAR, SUCH
COULD BE CONTRIBUTING TO STEADY SALE OF DOLLARS FURNING
EXCHANGE RATE.
A, APPOINTMENTS. LATE TODAY LOPEZ PORTILLO 13 SCHEDULED
ANNOUNCE APPOINTMENTS TO MAJOR GOM POLTITION POSTTIONS.
HOWEVER, WF NOW KNOW THAT NEW BANK OF MEXICO DIRECTOR SENERAL
WILL BE GUSTAVO ROMERO KOLBECK, WHO OCCUPIED SIMILAR POSTA
TION AT GOM DEVELOPMENT BANK, NATIONAL FINANCIERA, KOMERO IS
CONSIDERED TO BE REASONABLY CLOSE TO LOPEZ PORTILLO THROUGH
THEIR COMMON TEACHING EXPERIENCE, THOUGH IN DIFFERENT FIELDS
ROMERO IS AN ECONOMIST, BUT NOT A BANK-OF-MEXICO-TRAINED
FCONOMIST. HE TS PIEASANT, SPEAKS ENGLISH. BUT 15 NOT A
PARTICULARLY STRONG INDIVIDUAL. HE PROBABLY OMES HTS
MORE TO FRIENDSHIP THAN TO HiS STATURE IN THE FINANCIAL FORL
THE SENIOR BANK OF MEXICO STAFF WAS MEETING WITH ROMPRO THIS
MORNING. THEIR FUTURE IS UNCERTAIN, BUT MOST ARE LIKELY
TO STAY. THE BANK OF MEXICO WAS A SAD SPOT THIS MORNING A P
FERNANDEZ HURTADO WAS HIGHLY REGARDED. THE STAFF BELIEVES
HE WAS MADE A SCAPEGOAT FOR PROBLEMS THAT WERE NOT 08 HTS
OWN DUING. HF DOFS NOT APPEAR TO BE GETTING ANOTHER JOB. 145
TS ELIGIBLE FOR A BANK OF MEXICO PENSION
JOVA
BERALD FORD LIBRARY
FORM
BOARD OF GOVERNORS OF THE EDERAL RESERVE SYSTEM
December 3, 1976
To:
Chairman Burns
From: George B. Henry B
Attached are the latest cables on the
Mexican economic situation.
Attachments: Mexico 15169
Mexico 15184
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."
GERALD R. FORD LIBRARY
THE
Department of Stte
STATES AMERICA
TELEGRAM
OF
Ent
LIMITED OFFICIAL USE 6961
PAGE 01
MEXICO 15169 020203Z
71
ACTION ARA-10
TNFO OCT-01 ISO-00 AID-05 CIAE-00 COME-00 EB-07 FRB-03
INR-07 NSAE-00 TRSE-00 XMB-02 OPIC-03 SP-02 CIFP-01
LAB-04 SIL-01 ONB-01 NSC-05 SS-15 STR-04 CEA-01
DODE-00 PM-04 H.02 1-03 PA-01 PRS-01 NSCF-00 SSO-00
USIE-00 INRE-00 DES-06 FEA-01 INT-05 AGRE-00 1095 W
074081
n #123587 DEC 76 ZFF-4
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC IMMEDIATE 8964
TNFO ALL US CONSULATES IN MEXICO VTA POUCH
return to
LIMITED OFFICIAL USE MEXICO 15169
International Please Information Center
F. 0. 11652: N/A
TAGS: EGEN, MX
SUBJECT: ECONOMIC ASPECTS OF LOPEZ PORTILLO'S INAUGURAL ADDRESS
REF: A) MEXICO 15168: 8) MEXICO 15157
1. SUMMARY. TO THE EXTENT THAT WORDS CAN RESTORE CONFIDENCE,
PRESIDENT LOPE? PORTILLO S INAUGURAL SPEECH OF DEC. 1 SHOULD
HELP. HE SET FORTH A SERTES OF MEASURES TO HELP MEXICO'S
BAI ANCE OF PAYMENTS, INVESTMENT, AND SAVINGS. HE PLEDGED CONTINUED
FRFE CONVERTTBILITY END SUMMARY.
: TO MEET THE IMPERATIVE NEED TO REESTABLISH ECONOMIC CONFIDENCE
TN MEXICO, LOPEZ PORTILLO'S CHOICE OF CARINET MINISTERS AND HIS
TNAUGURAL ADDRESS HAD BEFN EAGERLY AWAITED AS THE TWO MOST
TMMEDIATE INDICTIONS OF THE DIRECTION IN WHICH HE WOULD SEEK TO GUID
THF MEXICAN ECONOMY HIS CHOICES OF MINISTERS WHICH WERE ANNOUNCED
LAST NIGHT(REFTEL A), LEAVE US WITH SOME RESERVATIONS (BEING REPORTED
SEPTEL). WF GIVE HIM HIGH MARKS, HOWEVER, FOR HIS INAUGURAL ADDRESS
(REFTEL B). THE MAINECONOMTC POINTS ARE SUMMARIZED IN THF FOLLOWING
LIMITED OFFICIAL USE
LISRARY GERALD GERALD'R. FORD
FORM
DS-1652
9.66
b
Department of Store
of STATE AMERICA UNITED
TELEGRAM
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PAGE 02
MEXICO 15169 0202032
PARAGRAPHS.
3. EXCHANGE RATE AND SYSTEM:CONTRARY CONTRARY TO SOME PREVIOUS EXPECTATIONS,
JLP NEITHER ANNOUNCED A NEW PESO/DOLLAR PARITY NOR PROMISED TO
FSTABLISH
ONE IN THE FUTURE. HE DEVOTED AN IMPRESSIVE AMOUNT OF TIME
TO EDUCATING THE PUBLIC ON THE REAL MEANING OF DEVALUATION. EFFORTS
WOULD BE MADE TO DESIGN MEASURES TO DISCOURAGE CAPITAL FLIGHT.
so BALANCE OF PAYMENTS:NO DIRECT MENTION WAS MADE OF
MEXICO'S OVERWHELMING FOREIGN DERT, BUT JLP PROMISED THAT
BORROWING ABOAD BY THE PUBLICSECTORWOULD HENCEFORT BE LIMITED FOR
CAPITAL GOODS ONLY. MEASURES AFFECTING THE PRIVATE SECTOR WERE LESS
SPECIFIC, BUT IT APPEARS THAT MOVES WILL BE MADE TO SUBSTITUTE TARIFF
PROTECTION FOR IMPORT QUOTAS. ATTENTION WILL BE GIVEN TO
INCREASING LABOR INTENSIVE AGRICULTURAL EXPORTS.
5. MONETARY POLICY: THERE WAS: LITTLE DISCUSSION PER SE, BUT THE
"DOLLARIZATION" OF THE MEXICAN ECONOMY WAS DESCRIBED AS A THREAT
TO MEXICAN SOVEREIGNTY. TWO INTERESTING PROPOSALS WERE MADE FOR THE
CREATION OF "STORE OF VALUE" INSTRUMENTS, PRESUMABLY TO WEAN
MEXICANS AWAY FROM HOLDING DOLLARS. ONE PROPOSAL CALLS FOR THE
MINTING OF TRADITIONAL MEXICAN STLVER COINS WHICH HE CALLED "OUR
STRONG PESOS". THE OTHER PROPOSAL IS FOR THE ISSUANCE OF NEW LONG-TERM
RONDS BACKED BY THE PRODUCTION OF BASIC RAW MATERIAL AND LINKED TO
THE WORLD MARKET PRICE OF SILVER AND OIL. JLP MADE SOME INTERESTING
COMMENTS WHICH SEEMED TO AFFECT THE FUTURE ABILITY OF STATE
GOVERNMENTS TO BORROW ON THEIR DWN.
6. INVESTMENT POLICY: THE PRESIDENT SAID THAT THE GOM WOULD
SEFK TO ORTENT INVESTMENT TO THE FOLLOWING PRIORITIES OF SECTORS:
AGRICULTURE AND LIVESTOCK, ENERGY, PETROCHEMICALS MINING, STEEL,
CAPITAL G0005, TRANSPORTATION AND BASIC CONSUMER GOODS. HE SEEMED TO
MAKE A MUTED CALL FOR MORE FOREIGN INVESTMENT.
7. TAX POLICY: TAX RATES SHOULD BE ADJUSTED FOR INFLATION. PROGRES-
SIVE TAXATION OF INCOMES WILL BE REINSTATED. IN AN EFFORT TO
ENCOURAGE RETNVESTMENT OF FARNINGS, HIGHER TAXES WILL BE
APPLIED TO COMPANIES DISTRIBUTED PROFITS. EMPHASIS WAS
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GERALD FORD LIBRARY
FORM
DS-1652
9.66
D&
STATE UNITED AMERICA
Separtment of Star
TELEGRAM
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PAGE 03
MEXICO 15169 020203Z
GIVEN TO ADMINISTRATIVE REFORM. THE PRESIDENT APPEARED TO OPEN
THF DOOR FOR A FORM OF REVENSUE SHARING WITH STATES.
A. WAGES AND PRICES: THE PRESIDENT STRESSED THAT HE
WISHED TO AVOID FURTHER DETERIORATION OF INCOME DISTRIBUTION
SALARIES SHOULD BE TIED TO AN IMPROVED COST OF LIVING INDEX WHICH
SHOULD BF DEVELOPED. STRONG EFFORTS SHOULD BE MADE, HOWEVER, TO
CONTROL INFLATION. A SYSTEM WILL BE PROPOSED TO GIVE SALARY INCREASE
FOR INCREASED PRODUCTIVITY, BUT SUCH INCREASES ARE TO BE CHANNELED
PARTIALLY OR WHOLLY TOWARD SHARES SUCH AS THE CAPITAL STOCK OF
PROPOSED JOINT WORKERS INVESTMENT BANK. THE PRESIDENT DEMONSTRATED A
GOOD GRASP OF BASIC RELATIONSHIP AMONG WAGES, COSTS AND PRICES.
0, ADMINISTRATIVE REFORMS: THE PRESIDENT PROPOSED THREE NEW LAWS WHOSE
AFFECT ON THE ECONOMY IS PRESENTLY HARD TO ASSESS. A GOVERNMENT
EXPENDITURE LAW IS TO GIVE PROGRAMMATIC ORIENTATION TO GOM
FXPENDITURES. A SINGLE MINISTRY IS TO BE PLACED IN CHARGE OF
BUDGET AND PUBLIC EXPENDITURES. NOTE: THIS SEEMS TO BE DESIGNED
AFTER THE USG'S OMR AND MAY REFLECT THE EARLIER EFFORTS OF THE
EMRASSY AND OMB TO RESPOND TO EXTENSIVE REQUESTS ON HOW OMB OPERATES.
s PUBLIC DEBT LAW WOULD SEEK TO GIVE THE MEXICAN CONGRESS BETTER
CONTROL OVER THE EXECUTIVE EXPENDITURES, PARTLY BY MAKING MORE
INFORMATION AVAILABLE TO THE PUBLIC ON THE GOM'S PUBLIC DEPT. THE
ADMINISTRATION ORGANIZATION LAW SETS FORTH THE CHANGES DEMANDED TN
SECTORIAL STRUCTURE AND RECLASSIFIES GOVERNMENT MINISTRIES.
10. AGRICULTURAL POLICY: THIS SECTION WAS WEAKER
THAN WE HAD EXPECTED. THE PRESIDENT GAVE EMPHASIS TO
MEXICO'S SEEKING SFLF SUFFICIENCY IN FOOD. ATTENTION IS TO BE PAID
TO TECHNICAL AND SOID RESEARCH IN TROPICAL AGRICULTURAL LANDS. THE
PRESTDENTS FUTURE POLICY ON AGRICULTURAL REFORM DID NOT COME
THROUGH CLEARLY. HE STATED THAT "LAND REFORM IS MEXICO".
91x INDUSTRIAL DEVELOPMENT: JLP SAID HE WOULD PLACE PARTICULAR
EMPHASTS ON STIMULATING AGRO-INDUSTRY, MINING, AND THE STEEL
INDUSTRY BY "GIVING SUPPORT TO SMALL AND MEDTUM-SIZED INDUSTRIAL AND
MINING OPEREATIONS". HE WOULD IMPROVE UPON "SIMPLE IMPORT-
SUBSTITUTION POLICIES BY INSTITUTING PROGRAMS FOR VERTICAL INTEGRATION
TN SPECIFIC FIELDS. A SPECIAL 250 MINISTRY WILL BE SET UP TO
HANDLE INDUSTIBL
GERALD FORD LIBRARY
LIMITED OFFICIAL USE
FORM
DS-1652
9.66
DEPART
STATE
Department of State
OF STATES AMERICA
TELEGRAM
EMT
LIMITED OFFICIAL USE
9004
PAGE 01
MEXICO 15184 0221397
70
ACTION EB-07
INFO OCT-01 ARA-06 EUR-12 EA-07 ISO-00 AGRE-00 CIAE-00
COME-00 INR-07 LAB-04 NSAE-00 SP=02 STR-04 TRSE-00
CIEP-01 FRB-03 OMB-01 SSO-00 INRE-00 USIE-00 NSCE-00
OIC-02 L-03 1060 W
2
094071
0 B 022056Z DEC 76 ZFF-4
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC IMMEDIATE 8970
INFO AMEMBASSY GUATEMALA
AMEMBASSY MANAGUA
AMEMBASSY PORT AU PRINCE
international Information Center
Please return to
AMEMBASSY PANAMA
AMEMBASSY SAN JOSE
AMEMBASSY SAN SALVADOR
AMEMBASSY SANTO DOMINGO
AMEMBASSY TEGUCIGALPA
AMEMBASSY CANBERRA
AMEMBASSY WELLINGTON
AMEMBASSY OTTAWA
LIMITED OFFICIAL USE MEXICO 15184
EO 11652 : N/A
TAGS : EAGR, ETRD, MX
SUBJ : MEAT IMPORT PROGRAM
REF : A) STATE 2900451 B) STATE 293203
1. EMBASSY FEELS STRONGLY THAT DEC 6 DEADLINE FOR SUBJECT
CONSULTATIONS IS UNREALISTIC FOR MEXICO. NEW CABINET JUST APPOINTED
YESTERDAY AND WE DO NOT YET KNOW IF KEY OFFICIALS FAMILIAR WITH
IMPORT PROGRAM WILL CONTINUE IN OFFICE.
2. AGATT DELIVERED ESSENTIAL ELEMENTS OF REF (A) TO RAMOS ON
LIMITED OFFICIAL USE
FORD LIBRARY & 9ERALD
FORM
DS-1652
9.60
SPAL
STATE
of CHINA MAKE AMERICA
Department of State
TELEGRAM
STATE
LIMITED OFFICIAL USE
PAGE 02
MEXICO 15184 0221392
NOVEMBER 30 AND CHECK TODAY REVEALS THEY HAVE NOT YET FOCUSED ON THE
MATTER. THEY WOULD PREFER CONSULTATIONS AT LATER DATE TO HAVE BETTER
IDEA OF ACTUAL SHIPMENTS IN 1976. EMBASSY FEELS WE SHOULD GIVE THEM
AS MUCH TIME AS POSSIBLE so AS NOT TO GIVE IMPRESSION THAT WE ARE
PUSHING NEW TEAM INTO AGREEMENT BEFORE THEY HAVE THEIR FEET ON THE
GROUND.
3. WE CONTINUE TO ESTIMATE 1977 SHIPMENTS AT 60.0 MILLION
POUNDS WITH POSSIBILITY THAT ESTIMATE MAY BE CONSERVATIVE
IN VIEW OF PESO DEVALUATION. RECENT SHIPMENTS HAVE BEEN AT
WEEKLY RATE OF 2.0 MILLION POUNDS.
JOVA
LIMITED OFFICIAL USE
FORD & GERALD LIBRARY
M
DS-1652
December 6, 1976
TO:
Chairman Burns
FROM: Ted Truman EMT
Attached is the latest cable on the Mexican
economic situation.
Attachment: Mexico 15287
cc: Governor Wallich
chossification Provides that "A document 10501
Which classified under Exacu ve Order information
efficially inclusion of U.S. Government is due
to Defense the elassification of this document
highest exassitied at least componsion." as high as shall that bear of its a
GERALD LIBRARY D-50RD
DEPART
STATE
4a
UNITED
2)
Department of State
TELEGI
Please
STATES
OF
international Information Center
CONFIDENTIAL 3096
PAGE 01
MEXICO 15287 01 OF 02 040206Z
64
ACTION ARA-10
INFO OCT-01 IS0-00 SP=02 USIA-06 AID-05 EB-07 NSC-05
CIEP-01 SS=15 STR-04 OMB-01 CEA-01 CIAE-00 COME-
FRB-03 INR=07 NSAE-00 XMB-02 OPIC-03 LAB-04 SIL-0
L-03 H-02 PA*01 PRS-01 1085 W
125361
R 0323552 DEC 76
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9013
INFO TREASURY WASHDC
6
0
N
I
0
E
N
T
I
A
SECTION 1 OF 2 MEXICO 15287
dal 7/25/07
E. 0. 11652: GDS
TAGS: EFIN MX
SUBJECT: MEXICAN INTEREST RATES
1. IN SPITE OF THE ALMOST 50 PERCENT DEVALUATION OF THE
PESO, MEXICAN DEPOSIT INTEREST RATES HAVE NOT BEEN CHANGED.
DEPOSIT INTEREST RATES ARE FIXED BY THE CENTRAL BANK AND
THERE IS NO COMPETITION BETWEEN BANKS. LENDING INTEREST
RATES ARE ALSO FIXED BY THE BANK OF MEXICO, BUT THERE IS
MORE ROOM FOR COMPETITION BY VARYING COMPENSATING BALANCE
REQUIREMENTS. THE REASONABLY STABLE LENDING RATES CANNOT
POSSIBLY CLEAR THE MARKET WHEN INFLATION IS RUNNING 25 TO
35 PERCENT, AND LIKELY TO REMAIN IN THIS RANGE FOR AT
LEAST A YEAR PRESIDENT LOPEZ-PORTILLO HAS CALLED FOR A
RESTRUCTURING OF INTEREST RATES, AND PROPOSED OTHER
INNOVATIONS AIMED AT SLOWING THE "DULLARIZATIONOF
MEXICO.
2. THE BANK OF MEXICO HAS BEEN UNWILLING TO LET DEPOSIT
INTEREST RATES FLOAT, OR TO ADJUST THESE RATES TO A
LEVEL THAT WOULD GIVE DEPOSITORS A REAL RETURN ON THEIR
INVESTMENTS IN FIXED-TERM DEPOSITS.
CONF IDENT
LIBRARY GERALD R. FORD
FORM
DS-1652
9.66
DEPART
STATE
Lipartment of Stat
OF STATES AMERICA UNITED
TELEGR
CONFIDENTIAL
PAGE 02
MEXICO 15287 01 OF 02 040206Z
3. THE TRADITIONAL ALLEGIANCE TO FIXED INTEREST RATES
IS APPARENTLY VIEWED BY THE BANK OF MEXICO AS A SIGN OF
FINANCIAL STABILITY. THIS IS NOT NECESSARILY VIEWED THE
SAME BY THE PUBLIC AS THEY HAVE BEEN MOVING FROM
LONGER TIME DEPOSITS TO THE MORE LIQUID INTEREST BEARING
DEPOSITS, AND/OR INTO DOLLARS. PESO TIME DEPOSITS MAY
NOT INCREASE THIS YEAR, BUT EVEN HOLDING THESE DEPOSITS
AT END-175 LEVELS WOULD BE AN ACCOMPLISHMENT OF SORTS.
4. INTEREST RATES ON THE MOST LIQUID POPULAR SAVINGS
INTSTRUMENT (FINANCIAL BONDS) PAY 7.5 PERCENT INTEREST
ANNUALLY AND CAN BE REDEEMED UPON DEMAND. THIS IS A
DECLINE FROM THE 8.75 INTEREST PAID ON THESE INSTRUMENTS
IN DECEMBER 1974c THE HIGHEST RATE OF INTEREST PAID BY
FINANCIAL INSTITUTIONS IS 12 PERCENT, NET OF WITHHOLDING
TAX ON CERTIFICATES OF DEPOSIT WITH SIX-MONTH MATURITIES
AND IN DENOMINATIONS OF ONE MILLION PESOS OR MORE. THESE
INSTRUMENTS PAID 11.5 PERCENT IN DECEMBER 1975; THE RATE
DROPPED TO 10.75 PERCENT IN JANUARY 1976 AND WAS
INCREASED TO THE PRESENT LEVEL IN MID-AUGUST 1976. THE
RATE FOR FINANCIAL BANKS DID NOT INCREASE AT THIS TIME.
5. IN LIGHT OF A CURRENT RATE OF INFLATION OF 35 PERCENT,
WITH THE PROSPECT OF A RATE OF 30 PERCENT CONTINUING
THROUGH MOST OF 1977, IT MAY BECOME INCREASINGLY
DIFFICULT TO ATTRACT OR EVEN HOLD PESO TIME DEPOSITS.
THE RESULT COULD BE AN INCREASING DOLLARIZATION OF THE
ECONOMY, PARTICULARLY IF THE PUBLIC ANTICIPATES FURTHER
DEPRECIATION OF THE PESO AGAINST THE DOLLAR.
6. THE FEDERAL GUVERNMENT DOES NOT BORROW DIRECTLY FROM
THE PUBLIC BUT RATHER DEPENDS ON THE BANKING SYSTEM TO RAISE
FUNDS WHICH THE GOVERNMENT BORROWS VIA THE CENTRAL BANK.
THE CENTRAL BANK CAN ADJUST THE FLOW OF FUNDS AVAILABLE
TO THE GOVERNMENT THROUGH RESERVE REQUIREMENTS BUT DOES
NOT BELIEVE IT CAN SQUEEZE THE PRIVATE SECTOR FURTHER AT THIS
SOME LENDING BY THE CENTRAL BANK TO THE GOVERNMENT IS
BEING DENOMINATED IN "MEX-DOLLARS." "MEX DOLLARS" IS A
RELATIVELY RECENT TERM USED TO DESCRIBE THE DOLLAR
DEPOSITS IN MEXICAN FINANCIAL INSTITUTIONS. THESE ARE
ALSO BEING USED FOR LOANS TO PRIVATE ENTERPRISES.
CONF IDENTIAL
LIBRARY GERALD R. FORD
FORM
DS-1652
9.66
DEPART
STATE
UNITED STATES of and
epartment of Star
TELEGI
CONFIDENTIAL
PAGE 03
MEXICO 15287 01 OF 02 040206Z
7. A MORE FLEXIBLE INTEREST RATE POLICY IS NEEDED,
PARTICULARLY IF THE PESO IS GOING TO CONTINUE TO FLOAT.
CURRENT LENDING INTEREST RATES, WHICH CAN BE AS LOW AS
15 PERCENT FOR MURTGAGES AND PRIME BORROWERS ARE NOT
CLEARING THE MARKET. PRESUMABLY CREDIT IS BEING ALLOCATED
BY SOME KIND OF SELECTIVE ADMINISTRATIVE CRITERIA. FOR
EXAMPLE, THE BANK OF MEXICO HAS TRIED TO ENCOURAGE BANKS
NOT TO LEND TO SUBSIDIARIES OF MULTINATIONALS WHICH
SHOULD BE ABLE TO BORROW ABROAD. HOWEVER, A MANAGER OF
ONE SUCH SUBSIDIARY TOLD US HE WAS ABLE TO BORROW PESOS
APPARENTLY BECAUSE HE WAS CONSIDERED A SAFE RISK.
8, FINANCING THE PUBLIC SECTOR DEFICIT IN A NON-
INFLATIONARY MANNER IN 1977, AS STIPULATED IN THE IMF
PROGRAM, MAY BE DIFFICULT. WHILE LOPEZ-PORTILLO CALLED
FOR A RESTRUCTURING OF INTEREST RATES, WE DO NOT YET
KNOW WHAT THIS MEANS. WITHOUT A SUBSTANTIAL INCREASE
IN PESO INTEREST RATES, THE "DOLLARIZATION" OF THE
FINANCIAL SECTOR IS LILEY TO CONTINUE. IF THESE DOLLARS
CAN BE RETAINED IN MEXICAN BANKS, THEY CAN, PERHAPS,
FINANCE AT LEAST PART OF THE PUBLIC SECTOR DEFICIT.
9. "DOLLARIZATION" WAS CALLED A THREAT TO MEXICO'S
SOVERIGNTY BY LOPEZ-PORTILLO. IT DOES REDUCE THE
ABILITY OF THE MONETARY AUTHORITIES TO RUN A MONETARY
POLICY THAT DIFFERS SIGNIFICANTLY FROM THAT OF THE U.S.
BUT AS THE DEVALUATION AND SUBSEQUENT EVENTS HAVE
DEMONSTRATED, THIS MAY HAVE NEVER BEEN A REAL ALTERNATIVE
FOR AN EXTENDED PERIOD OF TIME.
R.
GERALD
FORD
LIBRATA
CONF IDENTIAL
FORM
DS-1652
DEPAR
YIS
Department of Sta
OF STATE OFFINA AMERICA
TELEGRAN
CONFIDENTIAL A 3093
PAGE 01
MEXICO 15287 02 OF 02 040235Z
64
ACTION ARA-10
INFO OCT-01 ISU-00 SP-02 USIA-06 AID-05 EB=07 NSC-05
CIEP-01 SS-15 STR-04 OMB-01 CEA-01 CIAE-00 COME-0
FRB-03 IN8-07 NSAE-00 XMB-02 OPIC-03 LAB-04 SIL-01
L-03 H-02 PA-01 PRS-01 /085 W
125862
R 0400157 DEC 76
FM AMEMBASSY MEXICO
TO SECSTATE WASHOC 9014
TREASURY WASHDC
GONF I E I A ± SECTION 2 OF 2 MEXICO 15287
10. TO COMBAT "DOLLARIZATION", LOPEZ-PORTILLO HAS
PROPOSED THE REINTRODUCTION OF SILVER COINS AND LONG-
TERM BONDS TIED TO WORLD PRICES OF BASIC COMMODITIES
THE MEXICO PRODUCES. JLP SAID THE "STRONG PESOS"
WOULD BE USED FOR TRANSACTIONS. WE SUSPECT THESE WILL
SOON DISAPPEAR INTO MATTRESSES, THEREBY DEPRIVING THE
ECONOMY OF SAVINGS. THE LONG-TERM BOND PROPOSAL IS
FUZZY, BUT APPEARS TO CALL FOR BONDS PAYABLE IN PESOS
BUT DENOMINATED IN TERMS OF WORLD MARKET PRICES FOR
COMMODITIES SUCH AS OIL OR SILVER. WHILE BOTH TECHNIQUES
MIGHT DIVERT SOME PESOS THAT WOULD OTHERWISE GO INTO
DOLLAR INSTRUMENTS, WE DOUBT IF THEY WOULD SOLVE THE
DOLLARIZATION PROBLEM. IT WOULD SEEM NECESSARY TO LET
INTEREST RATES ACROSS THE BOARD REFLECT THE RELATIVE
ATTRACTIVENESS OF PESOS VS. DOLLARS. MEXICAN BANKS
WOULD PROBABLY BE UNWILLING TO PAY HIGH INTEREST RATES
FOR DEPOSITS IN EXCESS OF SIX MONTHS, BECAUSE OF AN
ANTICIPATION THAT RATES WOULD DECLINE WITHIN A YEAR OR
EIGHTEEN MONTHS
11. TO MANAGE A FLEXIBLE INTEREST RATE POLICY, THE
GOVERNMENT COULD SET INTEREST RATES FOR ITS OWN SECURITIES
AND SELL THEM DIRECTLY TO THE BANKS, OR TO THE PUBLIC
R.
CONFIDENTIAL
GERALD
FORD
LISAARY
FORM
DS-1652
9.66
DEPARTMENT
STATE
Department of Stars
TELEGRAM
STATES
OF
CONF IDENTIAL
PAGE 02
MEXICO 15287 02 OF 02 040235Z
OR CONTINUE TO USE THE CENTRAL BANK AS AN INTERMEDIARY.
WHILE THE NEW ADMINISTRATION IS THINKING ABOUT THESE
PROBLEMS, WE SUSPECT THAT THEY WILL BE RELUCTANT TO FREE
INTEREST RATES JUST AS THEY HAVE BEEN RELUCTANT TO LET
THE EXCHANGE RATE FLOAT FREELY. THE REASON WOULD BE THAT
THE BANKING SYSTEM WOULD NOT WANT A SYSTEM WHEREBY
INTERESTRATES ARE FIXED BY MARKET FORCES, AND THE
GOM MAY NOT BELIEVE SUCH A SYSTEM MANAGEABLE.
12. AS A FOOTNOTE, THREE MONTH DOLLAR TIME DEPOSITS
PAY 7.5 PERCENT FOR RESIDENTS AND 8.5 PERCENT FOR NON-
RESIDENTS. IT IS VERY EASY FOR A MEXICAN TO SAY HIS
RESIDENCE IS IN, FOR EXAMPLE, LOS ANGELES, BUT HE WANTS
HIS STATEMENTS MAILED TO A LOCAL ADDRESS. THE RELATIVELY
HIGHER RETURN ON MEX-DOLLARS COMPARED TO U.S. OR EURO-
DOLLARS IS WHAT MAKES THEM ATTRACTIVE. ALSO, THE REAL
INTEREST RATE ON DOLLARS IS POSITIVE WHEREAS THAT FOR
PESOS IS NOW NEGATIVE. WITH THE MARKET FIXING INTEREST
RATES, THE GOM AND/OR BANKS MAY WISH TO DROP THE MEX-
DOLLAR. THIS WOULD DEPEND ON LOAN DEMAND FOR THE TWO
CURRENCIES. PRESENTLY, THE CENTRAL BANK ABSORBS MOST
OF THE MEX-DOLLARS AND RELENDS THEM TO
GOVERNMENT. NOW, COMPANIES BORROW DOLLARS ONLY WHEN
PESOS ARE NOT AVAILABLE, THOUGH THIS COULD CHANGE IF
REAL LENDING RATES FOR PESOS AS WELL AS DOLLARS WERE
POSITIVE.
JOVA
FORD
GERALD
LIBRARY
CONF IDENTIA
FORM
DS-1652
9.66
BOARD OF GOVERNORS
FEDERAL RESERVE SYSTEM
OF THE
0.8
Decemb ed PM 4:53
TO:
Chairman Burns
OFFICE
RECEIVE CHAIRMAN
FROM: Ted Truman
Attached are the latest cables on the Mexican
economic situation.
Attachments: Mexico 15379
Mexico 15380
cc: Governor Wallich
Delense classification of this document is due
the of U.S. Government intermation 10501
to oilic ally classified under Executive Order best 8
which provides that "A document... shall of its
classification at least as high as that
highest classified component."
LISAREY GERALD R. FROM
DEPAT.
STATE
Merico
5a
UNITED OF the
Department of State
TELEGRAM
TES
EMT
CONFIDENTIAL 1930
PAGE 01
MEXICO 15379 070048Z
66
ACTION ARA-06
TNFO OCT-01 SS-14 ISD-00 EA-03 SP-02 TRSE-00 NSC-05 NSCERT
FRB-01 SSO-00 1032 W
020113
n 0700157 DEC 76 ZFF-4
FM AMEMBASSY MEXICO
TO SECSTATE WASHOC IMMEDIATE 9046
PLEASE RETURN TO
INTERNATIONAL INFORMATION CENTER
J
i
MEXICO
15379
1 IMDIS FOR DISTRIBUTION FOR s, D. F, C. P, ER, ARA, S/P
TREASURY, NSC, FRB ONLY
7/25/07 dal
F. 9. 116528 GDS
TAGS F.FIN, MX
SUBJECT: MEXICAN ECONOMIC SITREP
4. EXCHANGE SYSTEM. THURSDAY DEC 2, PESO CLOSED AT
19.59 TO BUY DOLLARS VS. 21.00 TO SELL. FRIDAY, DEC. 3,
TT CLOSED AT 20.00 AND 21.50 RESPECTIVELY. TODAY,
DEC 6, IT CLOSED AT 20.00 AND 21.00. MARKET APPEARS
STABLE AND RELATIVELY DEEP IN THAT TRANSACTIONS OF ONE MILLION
DOLLARS OR sn DO NOT AFFECT MARKET PRICE.
HOWEVER, TRANSACTIONS OF FIVE MILLION OR
MORE REPORTEDLY no EXERT PRESSURE ON MARKET RATE.
BANKERS CATEGORICAL IN STAYING BANCO DE MEXICO NOT IN
MARKET NOR TRYING TO INFLUENCE IT. BANOC DE MEXICO WILL
NO* BUY CASAS DE VALORES LONG OR SHORT POSITION AT END OF
DAY, FORCING BANKS TO ASSURE THEY FINISH DAY AS CLOSE TO
COVERED POSITION AS POSSIBLE. HOWEVER BANCO DE COMERCIO
HAS NOT SEEN ANY TRANSACTIONS FOR PUBLIC ENTERPRISE AND
CONCLUDE THAT BANCO DE MEXICO IS HANDLING EXCHANGE NEEDS
FORD & GERALD LIBRARY
FOR THEM. THERE APPEARS TO BE NO INTER-BANK OR INTER-
CASA TRADING DURING DAY BUT SOME MAY BE ARRANGED
AT END OF DAY YO COVER OPEN POSITIONS.
2. OTHER ECONOMIC FRONTS, MEXICAN BANKERS REPORT THAT SINCE
LOPEZ PORTILLO'S INAUGURAL SPEECH DEC. 1 THEY FIND
RENEWED CONFIDENCE AMONG MAJOR CUSTOMERS AND BUSINESS
HAS PICKED UP. ON FRIDAY, LOPEZ PORTILLO, AND HIS
CONFIDENTIAL
is
DEPAR
STATE
of SEATES UNITED MAKE AMERICA
Department of State
TELEGRAN
CONF IDENTIAL
PAGE 02
MEXICO 15379 070048Z
NEW TREASURY SECRETARY, RUDOLFO MOCTEZUMA INVITED OVER 100
BUSINESSMEN, BOTH MEXICAN AND FOREIGN, TO BREAKFAST.
THIS MEETING WAS DELIBERATELY NOT PUBLICIZED ALTHOUGH
PRESS DID EVENTUALLY NOTE THAT IT HAD OCCURRED. WE
HEAR THAT MOCTEZUMA ASSURED BUSINESSMEN THEY HAD
NOTHING TO FEAR FROM NEW GOVERNMENT WHICH WOULD FOLLOW
THE CONSTITUTION. JLP DID NOT SPEAK, HOWEVER. REPORT-
FDLY BUSINESSMEN LEFT HIGHLY IMPRESSED. WE HAVE ALSO
HEARD THAT FOR THREE WEEKS PRIOR TO DEC. 1 MOCTEZUMA
HAD BEEN SEEING IMPORTANT BUSINESSMEN AND ASKING THEM
WHAT THEY WOULD NEED FROM THE NEW GOVERNMENT. HE MADE
A POINT OF CAREFULLY NOTING THEIR REPLIES BUT MADE NO
PROMISES.
JOVA
R.
FORD
GERALD
LIBREY
CONFIDENTIAL
Mexico
5b
Dep.rtment rtment of State
TELEGRAPH
EMT
CONFIDENTIAL 2278
PAGE 01
MEXICO 15380 0701122
71
ACTION ARA-10
INFO OCT-01 ISO-00 AID-05 CIAE-00 COMEROW Fbrb7 FRB- 13
INR=07 NSAE-00 USIA-06 XM8-02 OPIC-03 SP-02 CIFEX01
LAB-04 SIL-01 OMR-01 NSC-05 SS-15 STR-08 CEA-01 1078
020426
R 070015Z DEC 76
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9047
TNFO TREASURY WASHDC
CONFID ENTIAL MEXICO 15380
clal 7/25/07
FO 11652: GDS
TAGS: EFIN MX
PLEASE RETURN TO
SUBJECT: FOREIGN BANKERS REACTION TO JLP 4DDH
INAUGUATION CENTER
1. SUMMARY: OUR SAMPLING OF FOREIGN BANKERS ATTENDING JLP
INAUGURATION INDICATES THEY FOUND SPEECH ENCOURAGING, BUT ARE
AWAITING MORE SPECIFIC INDICATIONS OF JLP POLICIES BEFORE MAKING
POLICY DECISIONS. MEDIUM-SIZED AND LARGER BANKS APPEAR TO RE
WILLING TO MAINTAIN THEIR EXPOSURE AT CURRENT LEVELS, BUT
SEVERAL BANKERS INDICATED THERE IS PRESSURE FROM SENIOR
MANAGEMENT TO REDUCE EXPOSURE. END SUMMARY.
2. LARGE NUMBER OF FOREIGN BANKS ARE REPRESENTED AT INAUGUR
ATTON CEREMONIES OF JLP. CONVERSATIONS OF FMBASSY OFFICIALS
WITH THOSE BANKERS INDICATE THAT BANKERS FOUND JLPTS INAUGURAL
ADDRESS UPBEAT AND ENCOURAGING, BUT WOULD HAVE LIKED TO KNOW
MURE SPECIFICS OF NEW ADMINISTRATION'S ECONOMIC POLICIES.
nn THURSDAY NIGHT NEW FINANCE MINISTER MOCTEZUMA HOSTED DINNER AND
ONFRIDAY PRESIDENT HOSTED BREAKFAST FOR VISITING BANKERS,
WHILE SOME BANKERS HAD EXPRESSED HOPE THAT MORE DETAIL START
RE PROVIDED ON ONE OR BOTH OF THESE OCCASIONS, NONE WAS FORTH.
COMING. BANKERS WERE LIMITED FOR MOST PART in TEN-SECOND
CONVERSATIONS WITH SENIOR GOMOFFICIALS. PROBLEMS IN ORGAN.
TLING NEW GOVERNMENT HAS MADE IT DIFFICULT in SEE New SENIOR
OFFICIALS PRIVATELY.
3. VISITING OFFICIAL OF LARGE TEXAS BANKTOLD FINATT THAT HIS
SENIOR MANAGEMENT WANTED SOME POSITIVE SIGNS THAT GUN TS NOVT 16
CONFIDENTIAL
,
GERALD FORD LIBRARY
STATE
Lepartment of Stat
UNITED STATES of AMERICA
CONFIDENTIAL
PAGE 02
MEXICO 1538 0701127
TO STABILIZE ECONOMY WITHIN THREE MONTHS OR THEY WOULD
REDUCING THEIR EXPOSURE. HE ALSO EXPRESSED CONCERN APOUT
CLASSIFICATION OF LOANS TU MEXICAN PUBLIC SECTOR ENTITIES
COMPTROLLER OF THE CURRENCY, AND EXPRESSED OPTNION THAT
POI ITICAL FACTORS SHOULD BE TAKEN INTO ACCOUNT BEFORE ANY
ACTION.
1. REPRESENTATIVE OF LARGE NEW YORK BANK SAID THEY MERE
ADOPTING LOW PROFILE FOR TIME BEING, HIS COMMENTS IMPLICE
HIS SENIOR MANAGEMENT WAS CONSIDERING HOW THEY COOLD REDUCT
THEIR EXPOSURE OVER COURSE OF NEXT YEAR.
5. SENIOR OFFICIAL OF LARGE PENSYLVANIA BANK EXPRESSED WESE
TIONS ABOUT INAUGURAL SPEECH AND EXPRESSED SATISFACTION
BANK'S EXPOSURE WAS HEAVILY ORTENTATED TOWARD PUBLIC SECTOR
AND MUSTLY SHORT-TERM.
6. BANKERS THAT TEND TO BE MOST OPTIMISTIC ARE THUSE ATTH
EXPOSURES: I.E, BANK OF AMERICA AND CITIBANK, THOUGH 11
PRIVATE THEY TOO EXPRESS THEIR CONCERNS.
7, ONE ITEM IN JLP SPEECH THAT OTD IMPRESS BANKERS KAS HTS
STATEMENT, "WE WILL SUPPORT COMPANIES WHICH IN GOOD FAITH
FORCED TO INCUR DEBTS TN DOLLARS IN ORDER TO PREVENT RTST
COSTS AND DEPELETION OF THEIR CAPITAL".
THEY ARE ANXIOUS TO KNOW HOW NEW GOVERNMENT WILL IMPLEMENT
8. NEW FINANCE MINISTER, MOCTEZUMA CTD IS VIRTUALLY UNKNOWN
TO BANKERS WHICH IS PROBABLY NEGATIVE FACTOR, AT LEOSi WATH
MOCTEZUMA CAN PROVE HIMSELF. ROMERO KOLBECK, AS HEAD OF
FINANCIERA, WAS KNOWN TO BANKERS, PUT NOT VERY WELL AS
EVEL OFFICIALS HANDLED MOST OF NAFINSA'S NEGOY ATTONS 111
CUMMERCIAL BANKERS. WE HAVE NOT HEARD ANY REMARKS ABOUT TELD
TN PART RECAUSE HIS POSITION WOULD NOT RECESSARILY PUT
DIRECTO CONTACT WITH FOREIGN BANKERS.
9. BRITISH BANKER EXPRESSED CONCERN ABOUT PEACTION OF U.S.
BANKS TO MEXICOIS SITUATION, HF SATD THAT HE BELIEVED THA
DIFFICULTPERION WOULD LAST SEVERAL YEARS, RUT THAT THE
ONGER-TERM TERM OUTLOOK WAS STILL THE BEST AMONG DEVELOPING
SHOULD U.S. BANKS TRY TO PULL OUT, HF SATO, THIS WOULD
CONFIDENTIAL
GERALD FORD LIBRARY
DEPARTMENT
STATE
Dep.rtment of State
UNITED AMERICA
TELEGRAM
STATES OF
CONF IDEN T I
PAGE 03
MEXICO 15380 0701122
THF REST OF THE BANKING COMMUNITY
JOVA
CONFIDENTIAL
BERALD R. FORD
December 17, 1976
TO:
Chairman Burns
FROM: Ted Truman
Attached is the latest cable on the Mexican economic
situation.
Attachment: Mexico 15724
cc: Governor Wallich
Devellse 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."
LIBRARY GERALD ? FORD
EPARTMENT
40
STATE
6a
Department of State
CHITED STATES
OF
/
CONFIDENTIAL 2674
PAGE 01
MEXICO 15724 150142Z
ACTION ARA-10
INFO OCT-01 ISO-00 AID-05 CIAE-00 COME-00 E8-07
INR-07 NSAE-00 USIA-06 TRSE-00 XMB-02 OPIC-0
CIEP-01 LAB-04 SIL-01 OM8-01 1053 W
R 150100Z DEC 76
15
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9187
return to
meniational Information Center
©
F
:-
D
E
I
A
+
MEXICO 15724
dal 7/25/07
E.O. 11652: GDS
TAGS: EFIN MX
SUBJECT: FORMER BANK OF MEXICO DIRECTOR GENERAL'S VIEW ON
ECONOMIC OUTLOOK
1. I SAW FORMER BANK OF MEXICO DTRECTOR GENERAL ERNESTO
FERNANDEZ-HURTADO AT SOCIAL EVENT RECENTLY. HE TOLD ME
THAT THE BANK OF MEXICO IS INFLUENCING THE RATES IN THE
EXCHANGE MARKET AND DOES ENGAGE IN FOREIGN EXCHANGE TRANS
ACTIONS FROM TIME TO TIME.
2. HE ALSO SAID THAT IN NOVEMBER AND DECEMBER CAPITAL
REFLOWS WERE NOT UNUSUAL AS BUSINESSES NEEDED MONEY TO PAY
YEAR-END BONUSES AND MEET OTHER COMMITMENTS. THIS COULD
ACCOUNT FOR THE APPARENT STRENGTH OF THE PESO AT THE
MOMENT. HE SAID THAT THE NEXT SIX MONTHS WERE LIKELY TO
BE VERY DIFFICULT FOR THE PESO AS THE NEW GOVERNMENT AND
EXCHANGE SYSTEM IS BEING TESTED.
JOVA
R.
FORD
GERALD
CONF IDENTIAL
TELEGRAM
LEASED WIRE SERVICE
MOVED AT WASHINGTON
1076 DEC 20 AM 7 43
0
2238 EST+
440043 FEDR UI+
BLARD/OF GOVERNORS
440043 FEDR UI
OF
BANXICO EXT MEX
FEDERAL RESERVE SYSTEM
T 107 MEXICO DF DEC 17, 1976 ROV HS 21.40
BANKOF GOVERNORS
FEDERAL RESERVE SYSTEM
WASHINGTON D C
ATTN. MR ARTHUR BURNS
CHAIRMAN
PLEASE BE ADVISED THAT THE BANK OF MEXICO HAS ISSUED FOLLOWING
TELEX TO THE MEXICAN BANKING INSTITUTIONS.
ITT World Communications Inc.
"A PART IR DEL 20 DE LOS CORRIENTES QUEDA SIN EFECTO LO
DISPUESTO EN NUESTRO TELEX-CIRCULAR DEL 21 DE NOVIEMBRE
ULTIMO. CONSECUENTEMENTE, LAS INSTITUCIONES DE CREDITO
PODRAN COMPRAR Y VENDER MONEDA EXTRANJERA Y ORO AMONEDADO
EN LOS TERMINOS DE LA LEY BANCARIA. AL EFECTUAR LAS
OPERACIONES REFERIDAS SE AJUSTARAN A LO ESTABLECIDO EN
NUESTRA CIRCULAR 1740/72, DETERMINANDO SUS TIPOS DE VENTA
Y DE COMPRA LIBREMENTE.
LOS BANCOS DE DEPOSITO QUE ESTIMEN NECESARIO TOMAR POSI-
CIONES MAS AMPLIAS QUE LAS PERMITIDAS EN NUESTRA CITADA
CIRCULAR 1740/72, PRESENTARAN SUS SOLICITUDES AL RESPECTO
A ESTE BANCO CENTRAL EL CUAL LAS RESOLVERA CON VISTA AL
VOLUMEN Y CAPACIDAD DE OPERACION DE LAS SOLICITANTES.
SECURITIES HOUSES CONTINUE AUTHORIZED TO OPERATE IN
FOREIGN EXCHANGE.
IN ADDITION, AND ON A STRICTLY CONFIDENTIAL BASIS, PLEASE
BE ADVISED THAT BANK OF MEXICO MAY INTERVENE IN THE FOREIGN
EXCHANGE MARKET TO PREVENT ERRATIC FLUCTUAT IONS IN THE EXCHANGE
RATE OF THE MEXICAN PESO TO THE DOLLAR. REGARDS,
BANXICO
+
440043 FEDR UI
BANXICO EXT MEX
HS 21.45
LIBRARY GERALD R. FORD
1709 L. St. N.W. Washington D.C. Phone 206 6200
TRANSLATION OF TWO PARAGRAPHS
IN SPANISH
FROM TELEGRAM RECEIVED FROM
BANK OF MEXICO
Beginning on December 20, the provisions of our telex-
circular of last November 21 are repealed. Consequently, the
credit institutions may buy and sell foreign currencies and gold
coins as provided by the banking law. In conducting these opera-
tions, they will comply with the provisions of our circular 1740/72,
determining their selling and buying rates freely.
The deposit banks which deem it necessary to take wider
positions than those permitted in our circular 1740/72, mentioned
above, shall present applications for this purpose to this central
bank which will pass on them on the basis of the volume and capacity
of operation of the applicants.
BERALD R. FORD LIBRARY
0
2238 EST*
446043 FEDR UI+
440043 FEOR UI
BANXICO EXI MEX
I 107 REXICO DF DEC 17, 1976 ROV HS 21.40
BANKOF GOVERNORS
FEDERAL RESERVE SYSTEM
WASHINGTON D C
ATTN. AR ARTHUR BURNS
CHAIRMAN
PLEASE BE ADVISED THAT THE BANK OF MEXICO HAS ISSUED FOLLOWING
TELEX TO THE MEXICAN BANKING INSTITUTIONS.
"A PARTIR DEL 20 DE LOS CORRIENTES QUEDA SIN EFECTO LO
DISPUESTO EN NUESTRO TELEX-CIRCULAR DEL 21 DE NOVIEMBRE
ULTINO. CONSECUENTENENTE, LAS INSTITUCIONES DE CREDITO
PODRAN COMPRAR Y VENDER MONEDA EXTRANJERA Y ORD AMONEDADO
EN LOS TERMINOS DE LA LEY BANCARIA. AL EFECTUAR LAS
OPERACIONES REFERIDAS SE AJUSTARAN A LO ESTABLECIDO EN
NUESTRA CIRCULAR 1740/72, DETERMINANDO SUS TIPOS DE VENTA
Y DE COMPRA LIBREMENTE.
LOS BANCOS DE DEPOSITO QUE ESTIMEN NECESARIO TOMAR POSI-
CIONES MAS AMPLIAS QUE LAS PERMITIDAS EN NUESTRA CITADA
CIRCULAR 1740/72, PRESENTARAN SUS SOLICITUDES AL RESPECTO
A ESTE BANCO CENTRAL EL CUAL LAS RESOLVERA CON VISTA AL
VOLUMEN Y CAPACIDAD DE OPERACION DE LAS SOLICITANTES.
SECURITIES HOUSES CONTINUE AUTHORIZED TO OPERATE IN
SACHANGE.
IN ADDITION, AND ON A STRICTLY CONFIDENTIAL BASIS, PLEASE
BE ADVISED THAT BANK OF MEXICO MAY INTERVENE IN THE FOREIGN
EXCHANGE MARKET TO PREVENT ERRATIC FLUCTUATIONS IN THE EXCHANGE
RATE OF THE MEXICAN PESO TO THE DOLLAR. REGARDS,
BANXICO
+
440043 FEDR UI
0301
BANXICO EXT MEX
HS 21.45
GERALD
LIBRARY
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
December 20, 1976
To:
Chairman Burns
From: George B. Henry
Ann
Attached are the latest cables on the
Mexican economic situation.
Attachments: Mexico 15754
Mexico 15769
Mexico 15770
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 LIBRARY GERALD
DEPARTMENT OF STATE
MEXIUS
OF AMERICA UNITED
Department of State
TELEGRAM
LIMITED OFFICIAL USE
5484
PAGE 01
MEXICO 15754 152245Z
ACTION ARA-10
INFO OCT-01 ISO-00 AGRE-00 AID-05 CIAE-00 COME-00 EB-07
FRB-03 INR-07 NSAE-00 USIA-06 TRSE-00 XMB-02 OPIC-03
SP-02 CIEP-01 LAB-04 SIL-01 OMB-01 NSC-05 SS-15
STR-04 CEA-01 L-03 H-01 PA-01 PRS-01 /084 W
017509 /15
R 152158Z DEC 76 15
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9205
Please return to
LIMITED OFFICIAL USE MEXICO 15754
International Information Center
E.O. 11652: N/A
TAGS: EGEN MX
SUBJECT: PUBLIC-PRIVATE SECTOR AGREEMENTS
REF: MEXICO 15646
1. FOLLOWING COMMENTS ON PUBLIC-PRIVATE SECTOR AGREEMENTS
CAME FROM AMBASSADOR'S DECEMBER 13 MEETING WITH U.S. BUSI-
NESSMEN. U.S. BUSINESSMEN VIEW AGREEMENTS NOT AS BINDING, BUT
RATHER AS A "LETTER OF INTENT". ONE BUSINESSMAN SAID HIS WAS
THE ONLY FOREIGN COMPANY IN HIS INDUSTRIAL GROUP (FATS AND
OILS) AND HE WAS UNDER CONSIDERABLE PRESSURE TO SIGN.
2. IT IS NOT CLEAR IF THE PROPOSED INVESTMENT OVER THE SIX-
YEAR PERIOD WOULD BE ADDITIONAL. AUTOMOBILE REPRESENTATIVES
SAID THIS WAS NOT NECESSARILY THE CASE FOR THEIR COMPANIES
WHOSE INVESTMENTS WOULD DEPEND ON THEIR OWN ASSESSMENT OF THE
ECONOMIC SITUATION. TIME FRAME FOR PROPOSED NEW INVESTMENT
APPEARS TO VARY FROM GROUP TO GROUP, IN SOME CASES BEING A
TWO-YEAR PERIOD AND IN UTHER CASES LONGER. THE BUSINESSMAN
SAID "SHORT-TERM" LABLE APPLIED TO AGREEMENTS WOULD BE
LONGER THAN GOM INTENDS AND SHORTER THAN INDUSTRY HOPES FOR.
3. SOME GOM-OWNED ENTERPRISES PARTICIPATED IN THE NEGOTIA-
TIONS. APPARENTLY THE FIRST AGREEMENT SIGNED WAS FOR PETRO-
CHEMICALS AND INVOLVED ONLY PEMEX.
4. THE ELEVENTH AGREEMENT WAS TO HAVE BEEN BETWEEN THE JLP
GERALD 19817 FORD
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DEPARTMENT OF STATE
Department of State
UNITED STATE STATES OF
TELEGRAM
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TEAM AND THE BASIC CONSUMER DURABLES INDUSTRY. THIS WAS NOT
SIGNED FOR REASONS WHICH OUR BUSINESS CONTACTS WERE NOT
CERTAIN, BUT BELIEVED DUE TO THE LARGE NUMBER AND VARIETY OF
FIRMS INVOLVED.
5. THE BUSINESSMEN ARE NOT CLEAR WHAT APPROACH JLP WILL TAKE
TO PRICE CONTROLS, BUT SOME SUSPECTED THAT HE MAY TRY TO CUT
BACK ON THE NUMBER OF ITEMS THAT ARE PRICE-CONTROLLED, LIMITING
THESE TO BASIC CONSUMER GOODS AND SOME CONSUMER DURABLES. SOME
WORRY WAS EXPRESSED THAT PRICE CONTROLS WOULD BE APPLIED TO
ONE "BASIC MODEL" WITH FIRMS EXPECTED TO MAKE UP LOSSES IN
SALES OF OTHER MODELS, (CHARACTERIZED AS THE "VENEZUELAN SOL-
UTION").
6. WE VIEW THE AGREEMENTS AS A PUBLIC RELATIONS MEASURE MORE
THAN AN ELABORATE ATTEMPT AT SECTORAL PLANNING. THEY HAVE
ALREADY BEEN A PUBLIC RELATIONS SUCCESS BUT ONLY TIME CAN
JUDGE THEIR USEFULNESS AS PLANNING TOOLS.
7. PARTICIPANTS IN THE DISCUSSIONS SAID THAT NEWSPAPER SUM-
MARIES WERE ACCURATE. THE OVERALL COVERING AGREEMENT IS AVAIL-
ABLE, BUT INDIVIDUAL SECTOR AGREEMENTS ARE MORE CLOSELY HELD.
BUSINESSMEN GENERALLY WERE ENCOURAGED BY PREAMBLE LANGUAGE
REAFFIRMING RIGHTS OF PRIVATE PROPERTY, RULE OF LAW AND
DESIRABILITY OF REASONABLE PROFITS. ALL PARTICIPANTS WERE
IMPRESSED BY CONCISE, PUNCTUAL AND EFFICIENT NATURE OF SIGNING
CEREMONY OF OVERALL AGREEMENT.
THOMPSON
FORD & LIBRARY
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DEPARTMENT OF STATE
Department of State
OF / AMERICA UNITED
TELEGRAM
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PAGE 01
MEXICO 15769 1600372
ACTION ARA-10
INFO OCT-01 ISU-00 AID-05 CIAE-00 COME-00 EB-07 FRB-03
INR-07 NSAE-00 USIA-06 XMB-02 OPIC-03 SP-02 CIEP-01
LAB-04 SIL-01 OMB-01 NSC-05 SS-15 STR-04 CEA-01 L-03
H-01 PA-01 PRS-01 1084 W
019252 /15
R 160006Z DEC 76 16
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9210
INFO DEPT OF TREAS WASHDC
Please return to
LIMITED OFFICIAL USE MEXICO 15769
International Information Center
E.O. 11652: N/A
TAGS: EFIN, MX
SUBJECT: MEXICAN BANKER'S VIEWS ON OPERATION OF FOREIGN
EXCHANGE MARKET
BANCO DE COMERCIO OFFICER, WHO OVERSEES THE BANK'S FOREIGN
EXCHANGE OPERATION, TOLD EMBASSY OFFICERS TODAY THAT HIS
BANK, THROUGH ITS ASSOCIATED CASA DE VALORES WAS BUYING MORE
DOLLARS THAN IT WAS SELLING. BANK WAS PRESENTLY LONG ON
DOLLARS. HENCE VALUE OF PESO WAS APPRECIATING. HE SAW LITTLE
CHANGE IN THIS TENDENCY OVER NEXT SEVERAL WEEKS AT LEAST. HE
SAID BANCO DE COMERCIO SETS ITS OWN RATE ALTHOUGH IT DID
CONSULT WITH OTHER MAJOR FOREIGN EXCHANGE TRADERS, ESPECIALLY
BANCO NACIONAL DE MEXICO. NEVERTHELESS DEPENDING ON THEIR
DOLLAR POSITIONS BOTH BANKS FREQUENTLY HAD SLIGHTLY DIFFERENT
RATES. HE DID NOT BELIEVE THE BANCO DE MEXICO WAS IN THE
FOREIGN EXCHANGE MARKET, AT LEAST NOTICEABLY. HE ALSO
STATED THAT RECENTLY ATTEMPTS BY A PUBLIC COMPANY TO SELL
10 MILLION DOLLARS HAD BEEN REFUSED BY HIS BANK BECAUSE IT
WAS ALREADY TOO LONG IN DOLLARS AND DID NOT WANT TO PUT
PRESSURE ON THE RATE. HE DID NOT KNOW HOWEVER WHAT THE FIRM
EVENTUALLY DID. HE ALSO INDICATED THAT A FORWARD MARKET WOULD
HAVE TO DEVELOP SOON BUT SURPRISINGLY COUPLED THIS WITH
COMMENT ON NECESSITY TO FIX EXCHANGE RATE AFTER A FEW MONTHS.
HE BELIEVED THE BANCO DE MEXICO WAS ANXIOUS TO SEE A FORE-
WARD MARKET ESTABLISHED. HE HAD HEARD OF ONE TEN THOUSAND
DOLLAR FORWARD OPERATION THAT WAS REPORTED IN TODAY'S PRESS
GERALD FORD LIBRARY
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DEPARTMENT OF STATE
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Department of State
TELEGRAM
STATES OF
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BUT DID NOT KNOW WHAT CASA DE VALORES WAS INVOLVED. FINALLY,
HE INDICATED THAT THE BANCO DE MEXICO WAS NOT WATCHING THE
MARKET AS CLOSELY AS IT HAD BEEN IN THE FIRST SEVERAL WEEKS.
THOMPSON
FORDO is LIBRARY
LIMITED OFFICIAL USE
PRESENTMENT
of
STATE
Department of State
UNITED STATES OF AMERICANCE
TELEGRAM
UNCLASSIFIED 5925
PAGE 01
MEXICO 15770 160152Z
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 OMB-01 NSC-05 SS-15 STR-04 CEA-01 PA-02
PRS-01 L-03 H-02 AGRE-00 /099 W
020176 /15
R 160008Z DEC 76 / 6
FM AMEMBASSY MEXICO
TO SECSTATE WASHUC 9211
INFO TREASURY DEPT WASHDC
Please return to
UNCLAS MEXICO
15770
International Information Center
E.O. 11652: N/A
TAGS: AFIN MX
SUBJ: BUDGET FOR 1977.
1. SUMMARY. 1977 PUBLIC SECTOR BUDGET CALLS FOR 38.9 PERCENT
INCREASE IN SPENDING TO 616.3 BILLION PESOS, THIS SAID TO
BE A SLIGHT INCREASE IN REAL TERMS. NET NEW FINANCING
REQUIREMENT IS 126.8 BILLION PESOS. END SUMMARY.
2. SECRETARIES OF PRESIDENCY ANOTREASURY PRESENTED 1977
PUBLIC SECTOR BUDGETIN PRESS CONFERENCE AT NOON, DECEMBER 15.
THIS IS A PRELIMARY REPORT.
3. TOTAL BUDGETED SPENDING FOR 1977 IS 616.3 BILLION
PESOS, UP 38.9 PERCENT FROM 1976 LEVEL. THIS IS SAID TO
BE A SLIGHT INCREASE IN REAL SPENDING. WE PRESUME, BUT
HAVE NOT CONFIRMED THAT PRICE DEFLATUR ASSUMED TO BE 35
PERCENT. CURRENT SPENDING IS UP 31.5 PERCENT TO 374.3
BILLION PESOS. CAPITAL SPENDING UP 46.8 PERCENT, TO
147.8 BILLION PESOS.
4. SECTORAL BREAKDOWN IN PERCENT IS AS FOLLOWS:
AGRICULTURE, 16,8; INDUSTRIAL, 33.3; SOCIAL DEVELOPMENT
21.8, TRANSPORTATION AND COMMUNICATIONS, 7.3, TOURISM
0.4, ADMINISTRATION 20.4. THE BIGGEST INCREASES ARE
FOR INDUSTRIAL DEVELOPMENT AND ADMINISTRATION: THE
LATTER INCLUDES DEBT SERVICING. EXCHANGE RATE OF
22.50 USED FOR CALCULATING FOREIGN DEBT SERVICING
GERALD FORD LIBRABALL
UNCLASSIFIED
D
DEPARTMENT OF STATE
UNITED
Department of State
AMERICA
TELEGRAM
STATES
OF
UNCLASSIFIED
PAGE 02
MEXICO 15770 160152Z
BURDEN.
5. THE PROPOSED INCOME LAW DOES NOT SEEM TO INCLUDE
ANY MAJOR TAX CHANGES, THOUGH SEPARATE LEGISLATION
IS SAID TO BE FORTHCOMING, PERHAPS BY WEEKEND. PRESS
TOLD THERE WOULD NOT BE ANY MAJOR TAX CHANGES, EXCEPT
FOR ADJUSTMENT OF INCOME TAX RATES.
6. TOTAL REVENUUES ARE PROJECTED AT 677.4 BILLION PESOS.
S
(NOTE THAT 61.1 BILLION PESOS OF THESE ARE CONSIDERED
OFFSETTING OPERATIONS AND NOT INCLUDED IN EXPENDITURE
FIGURE.) MAJOR SOURCES OF INCOME ARE AS FOLLOWS:
INCOME TAX 76.6 BILLION PESOS; TAXES ON PRODUCTION AND
COMMERCE 42.9 BILLION PESOS; SALES TAX 40.6 BILLION;
IMPORT TAXES 17.3 BILLION PESOS; EXPORT TAXES, 13.1
BILLION PESOS; SOCIAL SECURITY TAXES, 37.0 BILLION PESOS;
REVENUES OF DECENTRALIZED AGENCIES AND GOM-OWNED
ENTERPRISES 205 BILLION PESOS. FEDERAL GOVERNMENT
BORROWING IS TO YIELD 135.4 BILLION PESOS AND OTHER
PUBLIC SECTOR BORROWING 85.6 BILLION PESOS. THIS TOTAL
PUBLIC SECTOR GRUSS BORRDWING OF 221 BILLION IS
REDUCED TO THE NET NEW FININCING REQUIREMENT UF
126.8 BILLION BY DEDUCTING AMORTIZATION PAYMENTS
OF 74,7 BILLION PESOS AND 19.6 BILLION PESOS FOR FUNDS
COMMITTED IN 1977, BUT EXPENDED IN 1978. THERE ARE
TWO PUBLIC DEBT AMORTIZATION FIGURES. ONE IS 74.7
BILLION AND ANOTHER IS 94.3 BILLION. SHOULD THE LATTER
FIGURE BE ACCURATE, THEN THE NET NEW FINANCING REQUIRE-
MENT WOULD BE 20 BILLION LESS.
7. THERE WERE NO TABLES FOR 1976 IN THE BUDGET
DOCUMENT, MAKING YEAR TO YEAR COMPARISONS DIFFICULT.
JOVA
QERALO FORD LIBRARY
UNCLASSIFIED
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
December 21, 1976
To:
Chairman Burns
From: George B. Henry ARM
Attached are the latest cables on the
Mexican economic situation.
Attachments: Mexico 15646
Mexico 15908
Mexico 15938
Mexico 15939
cc: Governor Wallich
Defense this document is due
to the income Government information
officially
Exccutive Order 10501
which
document... shall bear a
classificati
25 high as that of its
highest class
FORD is LIBRARY 9ERALD
DEPARTMENT
cm
STATE
UNITED and STATES OF AMERICA
Department of State
TELEGRAM
Please return to
International' Information Center
LIMITED OFFICIAL USE
TFC651
PAGE 01
MEXICO 15646 132257Z
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 CIAE-00 COME-00
FRB-03 INR-07 NSAE-00 XMB-02 UPIC-03 LAB-04 SIL-01
PA-01 PRS-01 ( TFCE ) W
071067 /21
R 1322297 DEC 76
FM AMEMBASSY MEXICO
TU SECSTATE WASHDC 9150
INFO DEPT OF TREAS WASHOC
ALL CONSULATES IN MEXICO (POUCH)
LIMITED OFFICIAL USE MEXICO 15646
E.O. 11652: N/A
TAGS: EGEN, MX
SUBJECT: PUBLIC-PRIVATE SECTOR AGREEMENTS :
1. SUMMARY: LOPEZ-PORTILLO PRESIDED OVER MEETING OF GOVERNMENT
AND PRIVATE SECTOR LEADERS ON DEC 10, TO FORMALIZE AGREEMENTS
BETWEEN GÜVERNMENT AND 140 BUSINESSES TU BOOST OUTPUT AND
EMPLOYMENT OVER THE NEXT SIX YEARS. AGREEMENTS WERE TOUTED AS
.
-
PART OF JLPIS ALLIANCE FOR PRODUCTION AND REPRESENT INFORMAL
SECTOR PLANNING, WITH MORE PROMISED. MORE IMPORTANTLY, THEY
REPRESENT A MARKED CHANGE FOR THE BETTER IN PUBLIC-PRIVATE
SECTOR RELATIONS. END SUMMARY.
2. LOPEZ-PORTILLO PRESIDED OVER MEETING OF PUBLIC AND PRIVATE
ECTOR LEADERS ON DEC 10, TO FORMALIZE THE AGREEMENTS BETWEEN
TIS ADMINISTRATION AND TEN INDUSTRIAL GROUPS INCLUDING 140
USINESSES. THE AGREEMENTS PROVIDE FOR SPECIFIC ACTIONS BY
UTH THE GOVERNMENT AND THE PRIVATE SECTOR. THE AGREEMENTS
ERE NEGOTIATED PRIOR TO DEC 1, BY THE COPEZ-PORTILLO TEAM
ND CALL FOR THE INVESTMENT OVER SIX YEARS OF 1K0 BILLION
BERALD FORD LIBRARY
UGUST 1976 PESOS AND THE CREATION OF 300,000 JOBS.
LIMITED OFFICIAL USE
PARTMENT
ULSTATE
on
DEPA
STATE
UNITED
the
Department of State
AMERICA
TELEGRAM
STATES
OF
LIMITED OFFICIAL USE
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MEXICO 15646 132257Z
INDUSTRIES COVERED BY THE TEN AGREEMENTS ANNOUNCED DEC 10,
RE PETROCHEMICALS, CAPITAL GOODS, IN-BOND ASSEMBLY PLANTS,
OURISM, VEGETABLE OILS, CEMENT, MINING, AUTOPARTS AND AUTO
SSEMBLY PLANTS. THE AGREEMENTS ARE NOT BINDING, THOUGH THE
UM SEEMS TO BE PUBLICIZING THEM AS SUCH. AS AN EXAMPLE, THE
UTOPARTS AGREEMENT (A) CALLS FUR THE GOVERNMENT TO ENSURE
CCESS TO IMPORTS, (B) REQUIRES A STUDY OF TAX INCENTIVES,
ND (C) CUNTEMPLATES A RATIONALIZATION OF THE PRICE CONTROL
ECHANISM.
, FOREIGN BUSINESSMEN WHO PARTICIPATED IN THE DISCUSSIONS
ELL US THEY FOUND THE LOPEZ-PORTILLO TEAM OPEN AND SYMPA-
HETIC TO THEIR PROBLEMS, ONE FAIRLY COMMON COMPLAINT BY
USINESSMEN CONCERNED THE PRICE CONTROL SYSTEM WHICH THEY
AINTAIN HURTS PROFITS AND THEREBY HINDERS INVESTMENT. THE
GREEMENTS APPEAR TO CALL FOR A REVIEW OF THIS SYSTEM AND
PORTILLO IN HIS SPEECH SAID THAT MEXICO WOULD SOON HAVE
U ABANDON THIS POLICY OF "ECONOMIC-FICTION" AND FACE NEW
RICE INCREASES.
, LOPEZ-PORTILLO SAID THE AGREEMENTS CONFIRMED ON DEC 10,
ERE ONLY THE BEGINNING AND THAT SHORTLY A SECTOR PLAN FOR
GRICOLTURE, FORESTS AND FISHING WOULD BE ANNOUNCED, HE ALSO
AID A "GLOBAL" PLAN FOR THE PUBLIC SECTOR BROKEN DOWN BY
ECTORS, WOULD BE ANNUUNCED IN JANUARY 1977. THE PRESIDENT
ICKED UP A THEME FROM HIS DEC 1 SPEECH AND SAID THAT THE
UST-KORLD WAR II ECONOMIC POLICIES HAD TERMINATED. HE CALLED
THE PRIVATE SECTOR A PARTNER IN ATTAINING A NEW BASIC OBJECTIVE
HICH HE DESCRIBED AS GUARANTEEING A MINIMUM LEVEL OF SUBSIS-
ENCE FOR THE POPULAR CLASSES.
S. PEZ-PORTILLO'S SPEECH WAS CONCILIATORY AND FRIENDLY,
UITE THE CONTRARY UF ECHEVERRIA WHO TENDED TO TREAT MANAGE-
1ENT AS SELF-SEEKING WITH NO INTEREST IN PURSUING COURSES OF
ACTION THAT WOULD BENEFIT THE ENTIRE POPULATION. NEEDLESS
FORD & 076830 LIBRARY
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TU SAY, THE BUSINESS COMMUNITY WELCOMED THE CHANGE OF TONE.
7. THE NEXT HURDLE FOR THE NEW ADMINISTRATION WILL BE THE
1977 BUDGET THAT IS TO BE RELEASED THIS WEEK, PROBABLY BY
WEDNESDAY. IF THE TARGETS IN THE IMF PROGRAM ARE TO BE
ATTAINED, THE BUDGET WILL HAVE TO INCLUDE MEASURES TO
INCREASE REVENUE SUBSTANTIALLY. TO THE DEGREE THAT THESE
IMPACT ON BUSINESS, THE HONEYMOON JLP IS NOW ENJOYING WITH
BUSINESS MAY BE AFFECTED, THOUGH NOT NECESSARILY ENDED. THE
BUSINESS COMMUNITY IS NOT PREPARED FOR AUSTERITY, BUT RATHER
IS ANTICIPATING A NEW ERA OF GROWTH AND, THEY HOPE, PROS-
PERITY, AS IS IMPLIED IN THE NEW AGREEMENTS, THE IDEA FOR
WHICH AND MUCH OF THE NEGOTIATIONS PRECEED THE DEVALUATION.
8. THIS SUBJECT WILL BE DISCUSSED AT THE AMBASSADOR'S MEETING
WITH U.S. BUSINESSMEN ON AFTERNOON OF DEC 13. WE wILL REPORT
THEIR REACTION AND OPINIONS AFTER THIS MEETING. FOREIGN
BUSINESSES HAVE PARTICIPATED IN THE NEGUTIATIONS AND WERE
REPRESENTED AT THE DEC 10 CEREMONY.
JUVA
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55
ACTION ARA-10
INFO OCT-01 ISO-00 SP-02 USIA-06 AID-05 EB-07 NSC-05
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FRB-03 INR-07 NSAE-00 XMB-02 OPIC-03 LAB-04 SIL-01
AGRE-00 1078 W
051550 /11
R 180008Z DEC 76
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9270
INFO DEPT OF TREASURY WASHDC
Please return to
LIMITED OFFICIAL USE MEXICO 15908
International Information Center
E.O. 11652: N/A
TAGS: EFIN MX
SUBJECT: 1977 PUBLIC SECTOR EXPENDITURES
REF: A) MEXICO 15770, B) MEXICO 15826.
1. SUMMARY: WE WERE SURPRISED BY THE SIZE OF THE PROPOSED
PUBLIC SECTOR SPENDING IN 1977, IN PARTICULAR SPENDING ON
SOCIAL DEVELOPMENT. GOM DENIES BUDGET WILL HAVE INDLATIONARY
IMPACT, AND EMPHASIZES NEED TO INCREASE PRODUCTION. END SUMMARY.
2. WE HAVE NOT HEARD ANYBODY CALL THE 1977 BUDGET AUSTERE
THOUGH THE GOVERNMENT IS SAYING THAT IT WILL NOT BE INFLA-
TIONARY, AND THAT IT IS GEARED AT INCREASING OUTPUT. THIS WAS
THE POINT OF VIEW EXPRESSED BY SECRETARY OF PRESIDENCY, CARLOS
TELLO, AT THE PRESS CONFERENCE WHEN THE BUDGET WAS ANNOUNCED.
HE APPEARS TO BE LIVING UP TO HIS REPUTATION AS A SPENDER
(SEE PARA 4, MEXICO 15206).
3. BUDGET MESSAGE STATES THAT 31.5 PERCENT INCREASE IN
CURRENT SPENDING IS LIMITED TO WHAT IS INDISPENSABLE TO
CONTINUE OPERATING THE ADMINISTRATION, WHEREAS THE 46.8 PER-
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CENT IN CAPITAL SPENDING IS AIMED AT INCREASING EMPLOYMENT
AND CREATING THE BASIS (PRESUMABLY INFRA-STRUCTURED FOR FUR-
THER DEVELOPMENT, THEREBY CONTRIBUTING TO THE "ALLIANCE FOR
PRODUCTION". INCREASED PRODUCTION OF GOODS AND SOCIAL
SERVICES FOR THE POPULAR CLASSES, AND INCREASED EMPLOYMENT
SEEM TO BE THE OVERRIDING OBJECTIVES OF THE BUDGET.
4. SPENDING ON AGRICULTURE IS SAID TO CONTINUE AT ROUGHLY
THE SAME LEVEL IN REAL TERMS AS LAST YEAR, BUT THAT RURAL
DEVELOPMENT PROGRAM (PIDER) EXPENDITURES WILL BE UP 60 PER-
CENT OVER 1976 AUTHORIZED LEVELS. (THIS PROGRAM IS FINANCED
IN PART AT LEAST BY IBRD AND IDB LOANS). BUDGET PRESENTA-
TION ALSO OUTLINES PROSPECTIVE IMPORTS AND EXPORTS OF MAJOR
COMMODITIES BY CONASUPO, GOM-OWNED FOOD DISTRIBUTION AGENCY.
AGATT BELIEVES IMPORT REQUIREMENTS MAY BE UNDERSTATED AND
EXPORTS OVERSTATED. THEY SHOW EXPORTS OF 150,000 TONS OF
WHEAT WHEN THEY WILL PROBABLY HAVE TO IMPORT WHEAT. THIS IS
ONE OF FEW INSTANCES WHERE EMBASSY HAS EXPERTISE TO LOOK AT
DETAILED FIGURES AND WHERE SUCH INFORMATION IS AVAILABLE.
OUR CONCLUSION IS NOT ENCOURAGING AS REGARDS THE LIKELIHOOD
OF THE GOM BEING ABLE TO IMPLEMENT ITS PLANS.
5. IN THE INDUSTRIAL SECTOR, A 96 PERCENT INCREASE IN INVEST-
MENTS IN ENERGY IS PROGRAMMED WITH THE STATED INTENTION OF
MAINTAINING EQUILIBRIUM BETWEEN EXPLORATION, EXPLOITATION AND
REFINING OF HYDROCARBONS. INVESTMENT IN PRODUCTION OF FERTI-
LIZERS AND PETROCHEMICALS IS TO INCREASE 150 PERCENT, IN
MINING 125 PERCENT AND IN WOOD AND PAPER 230 PERCENT. INVEST-
MENTS IN STEEL WILL BE ADEQUATE TO FINISH EXPANSION PROGRAMS
UNDERWAY AND TO MAKE THEM VIABLE. ALTERNATIVE MEANS OF INCREAS-
ING PRODUCTION ARE UNDER CONSIDERATION. NO SPECIFIC MENTION
IS MADE OF PURSUING THE SECOND STAGE OF LAS TRUCHAS STEEL
WORKS.
6. WE WERE SURPRISED BY THE LARGE INCREASE IN SOCIAL DEVELOP-
MENT EXPENDITURES AS THESE WERE NOT MENTIONED AS AN INVEST-
LIMITED OFFICIAL USE
D
23
OF STATE
UNITED
Department of State
TELEGRAM
STATE
of
LIMITED OFFICIAL USE
PAGE 03
MEXICO 15908 180048Z
MENT PRIORITY IN THE DEC 1 SPEECH. MORE SCHOOL FACILITIES AT
ALL LEVELS WILL BE CONSTRUCTED, MORE MEDICAL FACILITIES WILL
BE CONSTRUCTED, MORE PEOPLE WILL BE COVERED BY SOCIAL SECURITY
PROGRAMS, AND ADDITIONAL POTABLE WATER FACILITIES WILL BE
CONSTRUCTED.
7. THE PROPOSED INCREASE IN EXPENDITURES FOR TRANSPORTATION
AND COMMUNICATIONS IS THE SMALLEST AMONG THE SIX BASIC SECTORS.
THE BUDGET MESSAGE PROMISES SPENDING ON BOTH NEW FACILITIES
AND ADEQUATE FUNDS TO MAINTAIN EXISTING FACILITIES.
8. THE INCREASE IN SPENDING ON TOURISM IS NOT GREAT IN ABSO-
LUTE TERMS AND IS TO BE EXPECTED IN LIGHT OF ITS IMPORTANCE
AS A FOREIGN EXCHANGE EARNER EXISTING PROJECTS ARE TO BE
CONTINUED AND A NEW PROJECT BEGUN IN BAJA CALIFORNIA.
9. THE INCREASE IN ADMINISTRATION EXPENDITURES IS BLAMED ON
THE HIGHER COST OF SERVICING THE FEDERAL GOVERNMENT'S DEBT.
THIS IS TO BE 80.8 BILLION PESOS IN 1977. WE DO NOT YET HAVE
A COMPARABLE FIGURE FOR 1976.
10. THE BUDGET MESSAGE CONTAINS NUMEROUS REFERENCES TO RE-
ORGANIZATION OF GOVERNMENT AGENCIES AND, PRESUMABLY, BETTER
CONTROL OVER PUBLIC SECTOR EXPENDITURES. THIS IS REASSURING,
BUT WE WOULD STILL VIEW THE JLP ADMINISTRATION'S CAPACITY
TO CONTROL SPENDING WITH A SOMEWHAT JAUNDICED EYE, IT IS
LIKELY, HOWEVER, THAT THE SLIPPAGE COULD COME MORE ON THE
REVENUE SIDE THAN THE EXPENDITURE SIDE. FOR EXAMPLE, THE
REVENUE FIGURES IN THE 1976 BUDGET IN PARAGRAPH FOUR OF REF
B) MAY HAVE BEEN OPTIMISTIC. USING THE SAME RATIO FOR THE
PERIOD JANUARY-SEPTEMBER TO YEAR 1975, HE WOULD PROJECT 1976
FEDERAL GOVERNMENT REVENUES AT ABOUT 135 BILLION PESOS RATHER
THAN THE 153 BILLION PESO FIGURE USED IN THE 1976 BUDGET PRE-
SENTATION. IF OUR 1976 ESTIMATE IS ACCURATE, THE GOM IS
COMTEMPLATING A 58.8 PERCENT INCREASE IN GOVERNMENT REVENUES.
THIS WOULD BE A SUBSTANTIAL INCREASE IN REAL TERMS AND VERY
LIBRARY GERALD
LIMITED OFFICIAL USE
23
of STATE
Department of State
UNITED of
TELEGRAM
I
LIMITED OFFICIAL USE
PAGE 04
MEXICO 15908 180048Z
DIFFICULT TO ACHIEVE EVEN IN A RAPIDLY GROWING ECONOMY. NEW
REVENUE MEASURES ARE BEING ANNOUNCED AND WE SHALL REPORT MORE
ON THESE AND THE POSSIBILITY OF FINANCING A 221 BILLION PESO
DEFICIT LATER
11. GOM DOES NOT ISSUE AN OFFICIAL ECONOMIC FORECAST. THE
BUDGET IS VIRTUALLY THE ONLY PUBLIC STATEMENT THAT GIVES ANY
INDICATION OF WHAT MIGHT HAPPEN TO THE ECONOMY IN THE FORTH-
COMING YEAR, AND IN THIS CONNECTION, THERE IS ONLY ONE FIGURE,
THE PRICE DEFLATOR, AND THAT IS NOT EXPLICIT. THE BUSINESSMEN
AND BANKERS THAT WE TALK TO DO NOT ANTICIPATE PRICE INCREASES
OF 30 TO 35 PERCENT AND THE GOVERNMENT'S LABELING THE
BUDGET AS ANTI-INFLATIONARY CAN ONLY REINFORCE THIS VIEW,
FURTHER, THESE PEOPLE DU NOT NECESSARILY ANTICIPATE THE IMPACT
A RATE OF INFLATION THIS HIGH COULD HAVE ON THE EXCHANGE RATE.
ONE MONEYBROKER WROTE HIS U.S. CLIENTS THAT HE BELIEVED THE
20:1 EXCHANGE RATE COULD BE MAINTAINED THROUGHOUT THE JLP
ADMINISTRATION. WE CANNOT HELP BUT BELIEVE THERE WILL BE SOME
SURPRISED AND DISAPPOINTED MEXICANS WHEN THEY REALIZE THAT
THE POST-DEVALUATION INFLATION HAS NOT YET ABATED. THEY COULD
REACT BY MOVING FUNDS INTO DOLLARS IN LARGE AMOUNTS ONCE
MORE.
JOVA
LIMITED OFFICIAL 23 US
OF STATE
MEXICO
Department of State
UNITED 1 STATES OF AMERICA
TELEGRAM
UNCLASSIFIED 2829
EMT
PAGE 01
MEXICO 15938 2022322
ACTION ARA-10
INFO OCT-01 ISO-00 SP-02 USIA-15 AID-05 E0-07 NSC-05
CIEP-02 SS-15 STR-04 DM8-01 CEA-01 CIAE-00 CUME=00
FRB-71 INR-07 NSAE-00 XMB-04 OPIC-06 LAB-04 SIL=01
SEC-01 DODE-00 PM-04 H-02 L-03 PA-02 PRS-01 /104 11
072729 163
R 2020287 DEC 76 20
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9287
INFO TREASURY WASHDC
Please return to
UNCLAS MEXICO 15938
International Information Center
E.O. 11632: N/A
TAGS: EFIN MX
SUBJ: NEW PUBLIC DEBT LAW
1. SUMMARY. ON DECEMBER 17, TREASURY SECRETARY ANNOUNCED A
PROPOSED GENERAL LAW ON THE PUBLIC DEBT THAT WILL STRENGTHEN
TREASURY'S CONTROL OVER PUBLIC SECTOR BORROWING. ESTIMATED
PUBLIC SECTOR EXTERNAL DEBT FOR END-1976 IS 20 BILLION.
END SUMMARY.
2. PROPOSED GENERAL LAW ON THE PUBLIC DEBT DEFINES PUBLIC
DERT AS BEING FINANCIAL LIABILITIES OF FEDERAL GOVERNMENT,
FEDERAL DISTRICT, DECENTRALIZED ORGANISMS, COMPANIES IN
WHICH THE GOVERNMENT IS A MAJORITY SHAREMOLUER, NATIONAL
CREDIT INSTITUTIONS AND GOVERNMENT TRUSTS. ALL FOREIGN
AND DOMESTIC BORROWING BY THESE ENTITLES MUST HAVE PRIOR
APPROVAL OF THE TREASURY AND TO OBTAIN THIS APPROVAL, THE
ENTITIES MUST PROVIDE APPROPRIATE FINANCIAL PLANS TO THE
TREASURY. THERE MUST ALSO BE SOME EVIDENCE THAT THEY CAN REPAY
THE DEBTS.
3. THE CONGRESS MUST APPROVE THE OVERALL VOLUME OF
BERALD FORD LIBRARY
UNCLASSIFIED
0
6
DEPARTMENT OF STATE
Departmen of State
STATES AMERICA UNITED
TELEGRAM
OF
UNCLASSIFIED
PAGE 02
MEXICO 15938 2022322
FINANCING AND INFORMATION ON THIS IS TO BE MADE
AVAILABLE IN THE ANNUAL ACCOUNTS OF THE TREASURY.
DATA ON BORROWINGS FOR "MONETARY REGULATION" WILL NOT
BE MADE PUBLIC. LAW ALSO CREATES AND ADVISORY
COMMITTEE ON PUBLIC SECTOR EXTERNAL DEBT TO BE CHAIRED
BY TREASURY TO ADVISE THE SECRETARY.
4. LAW PROVIDES THAT FEDERAL GOVERNMENT BORROWINGS
WILL CARRY "FULL FAITH AND CREDIT" OF UNITED MEXICAN
STATES, AND THAT TREASURY CAN GIVE FEDERAL GOVERNMENT
GUARANTEE TO BORROWINGS USED FOR ECONOMIC DEVELOPMENT
PROJECTS THAT WILL GENERATE RESOURCES FOR REPAYMENT OF
DEBT. LAW DOES NOT EXTEND "FULL FAITH AND CREDIT"
PROVISION TO ANY NEW PUBLIC SECTOR ENTITIES.
5. AT PRESS CONFERENCE, MOCTEZUMA WAS ASKED IF MEXICO
WERE RENEGOTIATING ITS DEBT. HE REPORTEDLY REPLIED
THAT DEBT IS VERY FLEXIBLE AND SOME PARTS OF IT ARE
BEING RENEGOTIATED WHEREAS OTHER PARTS ARE BEING REPAID.
6. GOM ALSO ISSUED ESTIMATE OF ITS FOREING DEBT AS OF
DECEMBER 31, 1976, AS FOLLOWS IN MILLION OF DULLARS.
A. TOTAL
20,000
8. DEBT WITH MATURITY OVER ONE YEAR
15,845.6
1. FEDERAL GOVERNMENT
2,123.3
2. PUBLIC SECTOR ORGANISMS AND
BUSTNESSES
7,257.3
3. FEDERAL DISTRICT AND MEXICO CITY
METRO
871.5
4. OTHER NON-FINANCIAL ORGANISMS
1,949.0
LIBRARY GERALD
UNCLASSIFIED
OF STATE
Department of State
OF AMERICA UNITED
TELEGRAM
it
UNCLASSIFIED
PAGE 03
MEXICO 15938 2022322
5. FINANCIAL INTER. MEDIARIES
3,544.5
C. SHORT-TERM
4,154.4
1. PUBLIC SECTOR ORGANISMS AND
ENTERPRISES
028.0
2. OTHER NON-FINANCIAL ORGANISMS
60.6
3. FINANCIAL INTERMEDIARIES
3,465.8
JOVA
GERALD FORD VIBRARY
UNCLASSIFIED
6
FORM
DEPARTMENT OF STATE
Department of State
UNITED STATES OF AMERICA
TELEGRAM
UNCLASSIFIED 2838
PAGE 01
MEXICO 15939 2022352
ACTION ARA-10
INFO OCT-01 IS0-00 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 OMS-01 ABF-01 FSE-08 PA-02 PRS-01 1070 W
072779 173
H 2020587 DEC 76 20
FM AMEMBASSY MEXICO
TO SECSTATE WASHCC 9288
INFO TREASURY WASHDC
Please return to
UNCLAS MEXICO 15939
international Information Center
E.O. 11652: N/A
TAGS: EFIN NX
SURJC NEW SILVER COIN
1. SUMMARY: AS PROMISED IN HIS DECEMBER 1 SPEECH
LOPEZ-PORTILLO HAS PROPOSED A LAW THAT WOULD PERMIT
MINTING OF A 100 PESO COIN CONTAINING 20 GRAMS OF SILVER.
WHILE SOME VIEW THIS AS A GIMMICK, OTHERS MAINTAIN IT WOULD
HAVE SIGNIFICANT PSYCHOLOGICAL IMPORTANCE IN A COUNTRY WHERE
SILVER HAS PLAYED SUCH A LARGE ROLE. END SUMMARY.
2. ON DECEMBER 17, TREASURY SECRETARY ANNOUNCED THE
PROPOSED AMENDMENT TO MEXICO'S MONETARY LAW THAT WOULD
PERMIT MINTING A 100 PESO COIN THAT WOULD CUNTAIN 20 GRAMS
OF PURE SILVER AND WEIGHT 27.777 GRAMS. THE BALANCE: OF THE
COIN WILL BE COPPER. THE COINS SHOULD BE PUT INTO
CIRCULATION EARLY IN 1977.
3. WF CALCULATE THAT THE MARKET VALUE OF THE SILVER WOULD
BE ROUGHLY 2.82 OR ABOUT 55 PESUS. THE GOVERNMENT
THEREFOE STANDS TO MAKE A SUBSTANTIAL PROFIT UN THE
COINS. AS LONG AS THE METAL'S VALUE REMAINS
BELOW THE FACE VALUE, THEY MAY STAY IN CIRCULATION.
GERALD FORD LIBRARY
UNCLASSIFIED
of
STATE
Department of State
STATES AMERICA UNITED
TELEGRAM
OF
UNCLASSIFIED
PAGE 02
MEXICO 15939 2022352
4. SOME OBSERVERS HAVE CALLED THE IDEA OF MINTING
SILVER COINS A GIMMICK THAT WILL MERELY DRAIN SAVINGS
INTO MATTRESSES. THIS PRESUMED THAT THE SILVER VALUE
OF THE NEW COINS WOULD EQUAL THE FACE VALUF WHICH IS
NOT THE CASE AT THE PRESENT TIME. OTHER OBSERVERS
MAINTAIN THE SCHEME SHOULD HELP RESTORE SOME DEGREE OF
CONFIDENCE IN THE CURRENCY SIMPLY BECAUSE SILVER HAS
PLAYED SUCH A MAJOR ROLE IN MEXICO'S HISTORY AND IN
ITS CURRENCY.
5. SILVER COINAGE WAS PROMISED IN JLP'S DECEMBER 1
SPEECH AS ONE OF TWO SPECIFIC MEASURES TO COUNTER THE
"DOLLARIZATION" OF THE MEXICAN ECONOMY. THE OTHER
MEASURE WAS TU BE INDIXED BONDS, BUT NO SPECIFICS
ON THIS HAVE BEEN ANNOUNCED.
JOVA
GERALD R.FORD LIBRARY
UNCLASSIFIED
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
December 21, 1976
To:
Chairman Burns
From: George B. Henry Asio
Attached is the latest cable on the
Mexican economic situation.
Attachment: Mexico 15826
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 shall bear a
classification a hast is high 25 that of its
highesi chosilind companent."
GERALD ADVESIT FORD
OF
STATE
Department of State
AMERICA
TELEGRA
STATES or
UNCLASSIFIED 8272
PAGE 01
MEXICO 15826 170145Z
ACTION ARA-10
INFO OCT-01 ISO-00 SP-02 USIA-15 AID-05 EB-07 NSC-05
CIEP-02 IRSE-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
SIL-01 AGRE-00 /091 W
036947 /21
R 162300Z DEC 76 16
FM AMEMBASSY MEXICO
TO SECSTATE WASHUC 9235
INFO TREASURY WASHDC
UNCLAS MEXICO 15826
International Information Center
E.O. 11652: N/A
TAGS: EFIN MX
SUBJ: COMPARISON OF 1976 AND 1977 BUDGETS.
REF: MEXICO 15770
1. PARAGRAPH 2 BREAKS DOWN THE SPENDING BY MAJOR ENTITY
AS PROPOSED IN 1977 BUDGET, COMPARED TO 1976 BUDGET.
PARAGRAPH 3 BREAKS DOWN TOTAL SPENDING BY SECTOR FOR
1976 AND 1977, EXCLUDING THE COMPENSATING OPERATIONS.
THE FIGURES IN PARENTHESES ARE FOR INVESTMENT. PARAGRAPH
FOUR SHOWS REVENUE ESTIMATES FOR 1976 AND 1977. THIS
FIGURE INCLUDES THE COMPENSATING TRANSACTIONS. THESE
ARE TRANSFERS OF TAX REVENUE TO LOCAL GOVERNMENTS, SUBSIDY
PAYMENTS FINANCED BY TAX REVENUES AND MEMORANDUM ACCOUNTS
OF PUBLIC SECTOR ENTITIES. WE DO NOT HAVE A BREAKDOWN
OF ESTIMATED SPENDING FOR 1976. JUDGING FROM THE 1977 BUDGET
PRESENTATION, ESTIMATED SPENDING IN 1976 IS 443,7 BILLION
PESOS, 12.2 PERCENT ABOVE THE ORIGINAL BUDGET. THIS IS
SOMEWHAT LOWER THAN SPENDING OVERRUNS IN PREVIOUS YEARS
WHICH WAS 15 PERCENT IN 1975, 20 PERCENT IN 1974 AND
17 PERCENT IN 1973. ALL FIGURES IN FOLLOWING
FORD
GERALD
LIBRARY
UNCLASSIFIED
0
23
FORM
DEPARTMENT OP STATE
*
UNITED AMERICA
Department of State
TELEGRAM
STATES or
UNCLASSIFIED
PAGE 02
MEXICO 15826 170145Z
PARAGRAPHS ARE IN BILLIONS OF PESOS. COMMENT IS
BEING REPORTED IN A SEPARATE CABLE.
2, SPENDING BY ENTITY.
1976
1977
A, FEDERAL GOVERNMENT
209.5
313.7
MINISTERIAL BUDGETS
94_9
144.5
INVESTMENTS
22.1
30.9
ADDITIONAL EXPENDITURES
47.5
57.5
PUBLIC DEBT (PRINCIPAL
AND INTERST)
45.0
80.8
B. PUBLIC SECTOR
182.9
302.6
PEMEX
49.6
94.9
CFE
21.8
42.7
CONASUPO
22.6
24.8
SOCIAL SECURITY
27.4
38,7
OTHER
61.5
101.5
C. SUBTOTAL
392.4
616.3
D. COMPENSATING OPERATIONS
47.2
61.1
FEDERAL GOVERNMENT
28.5
35.1
PUBLIC SECTOR
18.7
25.0
E. TOTAL
439.6
677.4
3. SPENDING BY SECTOR.
1976
1977
A, AGRICULTURE
78.5
103.5
(21.7)
(31.0)
R.FORD LIBRARI
UNCLASSIFIED
20
FORM
PREARTMENT or STATE
.
*
ANITED and AMERICA
Department of State
TELEGRAM
STATES or
UNCLASSIFIED
PAGE 03
MEXICO 15826 170145Z
B. INDUSTRIAL
116.6
205.5
(33.0)
(59.5)
C. SOCIAL DEVELOPMENT
90.0
134.4
(8.2)
(16.0)
D. TRANSPORT. & COMMUNICATION
39.9
44.8
(15.2)
(15.7)
3, TOURISM
1.4
2.2
( (7)
(1.0)
F. ADMINISTRATION
66.0
125.9
( 2.0)
( 3.6)
TOTAL
392.4
616.3
(80.2)
(126.9)
4. REVENUE
A. TAX REVENUE
146.9
201.0
1. INCOME TAX
56.0
76.6
2. TAX ON PRODUCTION &
COMMERCE
35.5
42.9
3. GROSS RECEIPTS TAX
28.5
40.6
4, IMPORT TAXES
14.6
17.3
5. EXPORT TAXES
4.4
13.1
6. OTHER
7.9
10.5
B. MISCELLANEOUS REVENUE
8.0
13.4
C. SOCIAL SECURITY
24.3
37.0
D. INCOME OF PUBLIC SECTOR
ENTITIES
143.5
205.0
19th
FORD i LIBRARY GERALD
UNCLASSIFIED
0
23
DEPARTMENT On STATE
UNITED AMERICA
Department of State
TELEGRAM
STATES or
UNCLASSIFIED
PAGE 04
MEXICO 15826 170145Z
E. REVENUESFROM BORROWING
117.1
221.0
TOTAL
439.6
677.4
THOMPSON
FORD i LIBRARY DERALD
UNCLASSIFIED
23
December 22, 1976
TO:
Chairman Burns
FROM: George B. Henry
m
Attached are the latest cables on the
Mexican economic situation.
Attachments: Mexico 15993
Mexico 15963
cc: Governor Wallich
Customer as Greament is due
0 the with S U.S. Currement information
glid under Executive Order 10501
WHICH provides that "A document... shall bear $
@lassification at least as high as that of its
highest classified composent."
FORD & LIBRARY 038470
8a
on STATE
Mexico
*
*
Department of State
UNITED OF /
TELEGRAM
STATES
EMT,SS
CONFIDENTIAL to 4844
PAGE 01
MEXICO 15993 2121442
ACTION ARA-10
INFO OCT-01 ISO-00 NSCE-00 INRE-00 PA-01 PRS-01 USIE-00
SS0-00 AID-05 CIAE-00 COME-00 EB-07 FRB-03 INR-07
NSAE-00 XMB-02 OPIC-03 SP=02 CIEP*01 LAB-04 SIL-01
OMB-01 NSC-05 SS-15 STR-04 CEA-01 ABF-01 /075 W
085221 /66
0 2121252 DEC 70 ZFF-6
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC IMMEDIATE 9314
INFO TRSY WASHDC IMMEDIATE
N
0
14
N
A
MEXICO
15993
dal 7/25/07
E.O. 11652:608
TAGS:EFIN MX
SUBJ: BANKS RE-ENTER FOREIGN EXCHANGE MARKET.
1. SUMMARY: BANK OF MEXICO HAS PERMITTED THE COMMERICAL
BANKS TO RE-ENTER THE FUREIGN EXCHANGE MARKET. SEVERAL
NEWSPAPER ARTICLES STATE THAT THIS IMPLIES THAT PESO IS
NOT AT ITS "DEFINITIVE" LEVEL. END SUMMARY.
2, EFFECTIVE DECEMBER 20, COMMERICAL BANKS WERE PERMITTED
TO REWENTER THE FOREIGN EXCHANGE MARKET FOR THEIR OWN ACCOUNT.
SINCE NOV 22, THE BANKS HAD BEEN EXCLUDED FROM THE
MARKET. AND FOREIGN EXCHANGE TRANSACTIONS HAD BEEN DONE FOR
THE ACCOUNT OF BROKERAGE HOUSES. BROKERAGE HOUSES CAN
CONTINUE TO ENGAGE IN FOREIGN EXCHANGE TRANSACTIONS.
3. THE BANK OF MEXICO APPARENTLY WANTED TO MAKE THIS CHANGE
WITMOUT ANY PUBLICITY, BUT WORD SOON CIRCULATED AND MOST
MEXICO CITY NEWPSPAPERS OF DEC 21 CARRY THE STORY;
SEVERAL HEADLINE THE STORY. FOR THE PUBLIC, THERE IS
VIRTUALLY NO DIFFERENCE IN THE WAY THEY BUY AND SELL
FOREIGN EXCHANGE SINCE MOST TRANSACTIONS Th WERE HANDLED
THROUGH BANKS.
FORD
GERALD
LIBRARY
CONFIDENTIAL
PEPARTMENT
OF
STATE
UNITED
Department of State
TELEGRAM
it
OF
CONFIDENTIAL
PAGE 02
MEXICO 15993 212144Z
4. THE EXCLUSION OF THE COMMERICAL BANKS FROM THE
FOREIGN EXCHANGE MARKET WAS CONSIDERED & TEMPORARY
MEASURE. A BANK OF MEXICO SOURCE TOLD US THAT HIS
TIME WAS PICKED BECAUSE THE CHRISTMAS HOLIDAYS HAVE
BEGUN AND THE FOREIGN EXCHANGE MARKET IS NORMALLY QUIET,
ALSO, THE SUPPLY OF DOLLARS IS RELATIVELY STRONG AT THIS
TIME OF YEAR. VERY LIKELY, THE DEMAND FOR DOLLARS IS
DOWN BECAUSE OF THE DECLINE IN OUTWARD TOURISM.
APPARENTLY THE BANK OF MEXICO IS REMAINING OUTSIDE THE
MARKET FOR THE TIME BEING, BUT ACCORDING TO OUR
SOURCE AND THE NEWSPAPER ACCOUNTS, THE BANK OF MEXICO
IS RESERVING THE RIGHT TO INTERVENE WHEN AND IF NECESSARY
OUR SOURCE DECLINED TO ELABORATE ON WHAT THIS MEANT,
EXCEPT THAT THE CENTRAL BANK WOULD PREVENT "WIDE"
SWINGS IN THE RATE.
5. THE NEWSPAPER ACCOUNTS IMPLY THAT THE PRESENT EXCHANGE
RATE IS SUSTAINABLE. FOR EXAMPLE, EXCELSIOR STATES
"THERE IS A FIRM BELIEF IN FINANCIAL CIRCLES THAT THE
PESO IS NOW SEEKING ITS DEFINITIVE LEVEL." HERALDO
SAYS THE NEW MEASURE "IS A CLEAR INDICATION THAT THE
PESO IS REACHING ITS TRUE LEVEL."
6. WHILE THE ARTICLES DO NOT SUGGEST THAT THE BANK OF
MEXICO WILL SUPPORT THE PRESENT RATE, WE CANNOT HELP
BUT BE STRUCK BY YET ANOTHER INDICATION THAT MEXICANS
WHO SHOULD KNOW BETTER SEEM TO THINK THAT A 2011 EXCHANGE
RATE IS HERE TO STAY.
7. THE EXCHANGE MARKET WAS REPORTEDLY CALM ON
DECEMBER 21, WITH BUYING RATE OF ABOUT 20.5 AND
SELLING RATES AROUND 20.175. THIS IS ROUGHLY
THE SAME AS DECEMBER 17 QUOTATIONS.
JOVA
GERALD FORD LIBRARY
CONFIDENTIAL
DEPART
OF
STATE
Mexico
*
*
Department of State
AMERICA
TELEGRI
STATES OF
EMT:SS
UNCLASSIFIED 3964
PAGE 01
MEXICO 15963 2113422
ACTION EB-07
INFO OCT-01 ARA-10 ISO-00 AID-05 CIAE-00 COMEMBE
INR-07 NSAE-00 USIA-15 XMB-04 OPIC-06 SP=02 CTER-PT
LAB-04 SIL-01 OMB-01 /066 Vi
21
080198 153
R 210008Z DEC 76
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9301
INFO TREASURY WASHDC
UNCLAS MEXICO 15963
E.O. 11652: N/A
TAGS: EFIN MX
SUBJ: TAX CHANGES
1. SUMMARY: PROPOSED TAX CHANGES INCLUDE 10 PERCENT
INVESTMENT TAX CREDIT, "EXCESS" PROFITS TAX LOWER INCOME
TAX RATES FOR INDIVIDUALS EARNING UP TO 50,003 PESOS A
YEAR, HIGHER SALES TAXES ON BEER, TOBACCO AND & VARIETY
OF LUXORY GOODS, AND HIGHER AUTOMOBILE-USE TAXES. END SUNNARY,
2. INCOME TAX. RATES ON INDIVIDUALS WITH INCOMES UP TO
50,000 PESOS ANNUALLY, OR APPROXIMATELY DOUBLE THE MINIMUI
WAGE WILL BE REDUCED. RATES ABOVE THIS LEVEL WILL REMAIN
THE SAME. REDUCTION IN RATES FOR LOWER INCOME GROUP LABELLED
A FINANCIAL LOSS, BUT NECESSARY TO MAINTAIN PURCHASING
POWER OF THESE GROUPS. RATES ON INCOMES ABOVE ROUSHLY
50,000 PESOS WERE NOT CHANGED WHICH MEANS THEIR TAX BURDEN
WILL INCREASE.
3. A TEN PERCENT TAX CREDIT TO BE USED AGAINST CORPORATE
INCOME TAX LIABILITY WAS INTRODUCED. THE (A) CREDIT
HAS TO BE TAKEN OVER A FOUR-YEAR PERIOD AND MILL bE
GRANTED FOR INVESTMENT IN NEW MACHINERY IN ACCORD
WITH RULES YET TO BE RELEASED. THE ENTYRE AMOUNT OF
GERALD FORD LIBRARY
UNCLASSIFIED
0
40
DE:
STATE
*
Department of State
of / AMERICA UNITED
TELEGRA
UNCLASSIFIED
PAGE 02
MEXICO 15963 2113422
THE NEW INVESTMENT CAN BE DEPRECIATED.
4. AN EXCESS PROFITS TAX WAS ESTABLISHED, OSTENSIBLY
TO CAPTURE GAINS MADE AS A RESULT OF THE DEVALUATION.
BASIS FOR DETERMINING IF THERE ARE EXCESS PROFITS
WILL BE THE SUM OF GROSS PROFITS OVER THE PREVIOUS
THREE FISCAL YEARS DIVIDED BY THE SUM OF TOTAL REVENUE
OVER THE SAME PERIOD. THE QUOTIENT WILL BE COMPARED TO
THAT FOR THE PREVIOUS FISCAL YEAR. THE LEARGER OF THE
TWO WILL BE MULTIPLIED BY TOTAL REVENUES FOR THE CURRENT
YEAR. THE RESULT IS THE AVERAGE GROSS PROFIT OF THE
TAXPAYER. THE BASE FOR THE EXCESS PROFITS TAX WILL BE
THE DIFFERENCE BETWEEN GROSS PROFITS FOR THE CURRENT
YEAR MINUS THE AVERAGE GROSS PROFIT FIGURE. THE TAX
RATE WILL BE THE QUOTIENT OF THE BASE DIVIDED BY INCOME
DURING THE CURRENT YEAR TIMES 1000, BUT SHALL NOT EXCEED
FIFTY. THIS SEEMS VERY COMPLICATED.
5. OTHER CHANGES IN THE INCOME TAX LAW INCLUDE THE
PROVISION THAT FOREIGN EXCHANGE LOSSES MAY BE TAKEN IN
THE YEAR THEY OCCUR, OR MAY BE TAKEN OVER FOUR YEARS,
THE COST OF MAINTAINING LARGE AUTOMOBILES ARE NOT
DEDUCTIBLE FOR INCOME TAX PURPOSES. THE RULES ON
CAPITAL GAINS FROM REAL ESTATE WERE TIGHTENED SOMEWAHT.
6. THE SPECIFIC TAX ON BEER AND TOBACCO PRODUCTS
HAS BEEN INCREASED SO THAT THE EFFECTIVE RATE IS
RESTORED TO WHAT IT WAS PRIOR TO THE PRICE INCREASES
GRANTED THIS YEAR.
7. THERE HAVE BEEN A NUMBER OF INCREASES IN THE GROSS
RECEIPTS OR SALES TAX (INGRESOS MERCANTILES). THE
NUMBER OF FIRMS OR INSTITUTIONS SUBJECT TO THE TAX HAS
BEEN INCREASED, TO INCLUDE ASSOCIATIONS AND OTHER GROUPS
WHOSE ACTIVITIES ARE ESSENTIALLY COMMERCIAL THIS MAY
APPLY TO "NON-PROFIT" ORGANIZATIONS. THE BASIC SALES
FORD
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on
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Department of State
UNITED OF 1)
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MEXICO 15963 2113422
TAX IS 4 PERCENT.
8. SALES TAX RATES ON NEW AUTOMOBILES ARE AD VALOREM
BUT BASED ON THE OFFICIAL PRICE OF THE CARS. THE
AD VALOREM RATES REMAIN THE SAME, BUT THE OFFICIAL
PRICES TO WHICH THEY APPLY HAVE BEEN RAISED. FOR EXAMPLE,
THE 5 PERCENT RATE APPLIED TO 1975 MODEL CARS WHOSE
PRICE WAS LESS THAN 48,000 PESOS. THE FIVE PERCENT
RATES WILL APPLY TO 1977 MODELS WHOSE PRICE IS LESS
THAN 87,000 PESOS, THE TEN PERCENT LEVY WILL NOW APPLY
TO LIGHTERS, COSMETICS, SOME TYPES OF SPORT EQUIPMENT,
HIGHER PRICED WOOD FURNITURE AND LAMPS, HAIR DRYERS,
ETC. THE 15 PERCENT RATE WILL APPLY TO AUTO ACCESSORIES,
CRYSTAL. THE 30 PERCENT RATE WILL APPLY TO EXPENSIVE
WATCHES, DIAMONDS AND OTHER PRECIOUS STONES AND THEIR
SETTINGS, EQUIPMENT FOR POLO, GOLF, RIDING, AND
SWIMMING POOLS, AND TO CABLEVISION.
9. THE YEARLY AUTOMOBILE-USE TAX HAS ALSO BEEN
INCREASED. THIS IS A FIXED RATE TAX THAT HAS BEEN
ADJUSTED ONLY TO COMPENSATE FOR INFLATION, ACCORDING
TO A TREASURY SPOKESMAN.
10. SEVERAL ANTICIPATED CHANGES WERE NOT MADE. THE
15 PERCENT SALES TAX ON RESTAURANT MEALS REMAINS AS
DOES THE 21 PERCENT ON INTEREST PAYMENTS ABROAD.
JOVA
BERALD FORD LIBRARY
UNCLASSIFIED
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
1976DEC 23 PM 4: 20
RECEIVED
December 23, 1976
OFFICE OF THE CHAIRMAN
TO:
Chairman Burns
FROM:
George B. Henry
Attached are the latest cables on the
Mexican economic situation.
Attachments: Mexico A-05
Mexico 15786
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."
GERALO R. FORD LIBRART
Hand
P760187-1463
HANDLING
ASSIFICATION
MESSAGE FRENCE NO.
LIMITED OFFICIAL USE
A-05
FADRC/DA/WC
TO:
AmEmbassy MEXICO
INFO:
Department of State, ARA/MEX
GERALD FORD LIBRARY
-j DEC -2 PM 2: 14
CG.2
AMB
PARTMENT OF STATE
DCM
POL
FROM:
AmConsulate MERIDA
DATE: Nov. 23, 1976
ADM
E.O. 11652:
N/A
ECON
TAGS:
MX, ECON, EFIS, CVIS
SUBJECT:
Monthly Report: October 16 November 23, 1976
CHRON
REF:
DEPT. DISTRIBUTION
return to
ORIGIN ACTION ARA
POLITICAL-ECONOMIC
international Information Center
576 DEC 15
AF
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The strike by the shrimp fishing cooperatives was settled
shortly after submission of last month's report. The strik
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which lasted for 34 days and involved some 1200 boats, cost
Campeche and parts of Tabasco millions of pesos. The cooper-
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tives finally gave in to the boat owners plan, although the
fishermen did realize an overall gain of about 67% in their
REP
SCI
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income. When the second devaluation came, there was talk of
another strike for additional increases, but both sides were
so exhausted that they decided to continue operations under
the new agreement. A reduction by 50% in the new export duties
AGR
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on shrimp was an added stimulus to keep on the job.
CIA
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The decrease in export duties for fish fillets, lobster and
other sea food put the other fishing Fleets back to work and
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the paralysis that had taken over in fishing towns such as
Progreso came to a halt.
NAVY
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While the fishermen were prospering to a degree, the campesinos
STR
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remained in difficulties. A cattlemen-farmer dispute, in the
old classic style, broke out in the central part of the State
XMB
of Yucatan. The ejidos claimed the private cattlemen were
fencing off their land and the cattlemen protested that the
land did not belong to the ejidos at all. The situation was
complicated by the fact that the cattlemen were backed by the
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1-60-30
AmConsul MERIDA: ROBERT S. ASHFORD
CLEARANCES:
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Yucatan State President of PRI - who apparently had a financial interest
in the cattle. While it is suspected that the campesinos will come off
second best in this particular dispute, some five thousand campesino
families in the Yucatan finally received title to lands they had been
occupying for 39 years. The delay was attributed to "
bureaucratic
error". It is interesting to note that in this case the indemnization
for the land will go to several ejido organizations. These five thousand
families are, ideologically, on the side of the "pequeño propietario";
therefore, the situation in the Yucatan is quite a bit different from that
existing in Sonora and Sinaloa. Reaction to events in those two states has
been completely against the President and in favor of the land owners.
Several sources, including a Mexican Federal official, believe the decision
made to expropriate the lands in Sonora was done deliberately to divide the
nation. In fact, the local Chamber of Commerce is meeting on November 24th
to decide if they should adopt the course of the Chamber of Commerce in
Sinaloa. If they decide to do so, most business, commercial and agricul-
tural activities will stop until December 1, 1976.
Meanwhile, to add to the woes brought about by devaluation, CORDEMEX reports
its exports for the first half of 1976 fell some 23.6% over last year's
figures; further, the amount of land devoted to the cultivation of henequin
has been reduced by 30,000 hectares in the past three years. As a result,
unemployment of campesinos, always a major problem in the Yucatan, now has
reached an all-time high.
Flight of capital from this area has been increasing over the past two years
--as previously reported in some detail. However, activities during the week
of November 15 approached the panic level as persons of all walks of life
attempted to convert pesos to dollars. While no figures have been released,
one bank manager stated that the run on dollars reached an unprecedented high
on Friday, November 19.
On Monday, November 22, the restrictions on the convertibility of the peso
gave the business community of Merida a traumatic blow from which they still
are reeling. The Pan American flight, with more than 70 reservations for
Miami, left with three passengers. The Consulate had three visa applicants
on Monday, an all time low! Reportedly five shirt factories closed their
doors while hotels and tourist agencies, recently cheered-up by an increasing
tourist trade, ground their teeth in despair. A number of US visitors came
to the Consulate looking for somebody who would change their travelers checks.
The confusion and despair was evident everywhere; commercial activity and
business transactions practically came to a halt. There were a number of
cases of tourists who were grossly taken advantage of at the airport when
they desperately needed fifty pesos to pay the departure tax and all they
had was a $50 or $100 US travelers check. As of this writing, things are
somewhat more normal. Tourists have found ready sources of exchange for
their dollars with enterprising taxi drivers and hotel clerks getting a
piece of the action. Dollars in reasonable amounts also are available, but
through the Bank of Mexico only.
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Although dollars no longer are available readily in large quantities,
the run on the banks continues. This time it is to withdraw pesos from
savings accounts before they are in some way confiscated or controlled
by the Government. With the worst of their expectations realized with
respect to devaluation and convertibility of the peso, it is not difficult
to understand the public giving rumors of this nature such currency.
As in other parts of Mexico, all sorts of rumors, some of them quite
macabre, permeated Merida from the 15th of November right up to the time
of this writing. At the high point of these rumors, President Echeverria
was dedicating petro-chemical plants in the State of Tabasco -- so this
enabled the more discriminating citizens to discount some of the rumors
pertaining to the person of the President and properly categorize them as
mere wishful thinking.
In the midst of the confusion and pain related to the peso, the Bank of
Mexico inaugurated its magnificent new regional headquarters building in
Merida. Built at a published cost of 30 million pesos, the building
boasts of the most modern security and fire alarm system in Mexico.
Furnishings and equipment cost an additional amount which was not disclosed.
Although a very modern and truly handsome building, the government was
severely criticized by news media and private individuals for its extrava-
gance at this point in time.
MISCELLANEOUS:
On November 17th, it was reported that an armed group of students had taken
over the University of Tabasco and that one student had been machine-gunned
by the insurgents, who were identified as being members of the Frente
Estudiantil Demócrata. A quick call to a close contact in Villahermosa
revealed that the problem was between two groups of students, but that it
was not believed to be very serious. Nothing further was published
regarding this incident and it appears to have been "swept under the rug".
In spite of the economic set-backs, optimism appears to bloom eternal in
the Yucatan insofar as the tourist trade is concerned. FONATUR, the Govern-
ment backed Tourist Development Agency, announced it had started construction
of two modern hotels in the Yucatan, one at the Ruins of Chichen Itza and
the other at the Ruins of Uxmal. While the private hotels at these locations
sometimes are full at the height of the winter season and at Semana Santa,
it does not appear to the reporting officer that projects of this size and
nature can be justified at this time unless of course FONATUR plans to
put the private hotels out of business -- a supposition which to the owners
does not appear unreasonable.
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In addition, TACA Airlines, a privately owned airline based in E1 Salvador,
inaugurated thrice weekly flights between El Salvador, Belice, Merida and
New Orleans. Equipment in use will be a BAC One-Eleven. Notables from
Salvador and New Orleans were poured off the inaugural flights to Merida
amid great fanfare. Oddly enough, apparently no commercial air agreement
exists between Mexico and Belice. Therefore, no passengers from Belice
may deplane in Merida or visa versa. This is a serious bone of contention
with businessmen in this area who feel both countries would profit through
closer commercial ties.
Devaluation has lead to serious unemployment problems particularly in Cancun
where the flow of new building supplies from abroad has come to a halt. In
spite of the Government's resolve not to permit favella developments of poor
people seeking employment in Cancun, the worst has happened and the service
city of Cancun is almost surrounded by a second "shack city". With the spigot
of plenty turned off these people are in serious trouble. Without a number
of critical building supplies and hardware from the USA, new construction and
maintenance jobs no longer are plentiful. Further, the tourist zone in Cancun
is the only real source of work in the area - the rest is wilderness, The
construction industry in general is suffering the effects of devaluation
because all products, whether manufactured in Mexico or abroad, have under-
gone a dramatic increase in price. Campeche in particular has reported that
the construction industry practically is at a standstill. The unemployment
brought about thereby is of real concern to the officials of that city.
CONSULAR:
As noted in previous reports, devaluation of the peso has brought about a
dramatic decrease in the number of nonimmigrant visa applications. In October,
the number of applicants was a mere 365 while through the 22nd of November
only 226 persons made application. This is, roughly speaking, down 40% over
a comparable period last year. Work associated with an increasing volume of
American tourists has, however, begun to supplant the nonimmigrant visa
workload.
ASHFORD
All
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MEXICO 15788 161759Z
ACTION ARA-10
INFO OCT-01 ISO-00 CIAE-00 DODE-00 PM=04 H-01 INR=07 L-03
NSAE-00 NSC-05 PA-01 PRS-01 SP-02 SS=15 USIA=06 STR-04
EB=07 OMB-01 COME-00 FRB-03 TRSE-00 CIEP-01 1072 W
031404 163
R 161744Z DEC 76 16
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC 9218
LIMITED OFFICIAL USE MEXICO 15788
Please return to
International Information Center
E.O. 11652: N/A
TAGS: EGEN, MX
SUBJECT: MEXICAN GOVERNMENT REORGANIZATION
REF: MEXICO 15787
1. IN COURSE OF DISCUSSION REPORTED REFTEL, FOREIGN MINISTRY
DIRECTOR GENERAL INTERNATIONAL ECONOMIC AFFAIRS DIAZ THOME
GAVE EMBOFFS GLIMPSE OF PROPOSED ECONOMIC MINISTRY ORGANIZA-
TION TO BE EFFECTIVE JAN 1. SECRETARIAT OF INDUSTRY AND
COMMERCE (SIC) WILL BE SPLIT IN TWO:
A) SECRETARIAT FOR INDUSTRIAL DEVELOPMENT WILL DRAW ALL
INDUSTRIAL FUNCTIONS FROM SIC, AS WELL ADMINISTRATION
OF PARASTATAL COMPANIES FROM PRESENT PATRIMONIO NACIONAL
B) SECRETARIAT OF COMMERCE WILL ASSUME ALL COMMERCE RESPON-
SIBILITIES FROM THE PRESENT SIC, AND WILL ITSELF BE DIVIDED
INTO 3 DIRECTORATE GENERALS: INTERNAL COMMERCE, FOREIGN COM-
MERCE, AND PLANNING. FOREIGN COMMERCE WILL DRAW MERCHANT
MARINE RESPONSIBILITIES FROM THE PRESENT MARINA SECRETARIAT
(MAKING MARINA A NAVY MINISTRY). FOREIGN COMMERCE WILL ALSO
DRAW SUCH MATTERS AS RATE STRUCTURE CONTROL AND OTHER AS YET
UNKNOWN RESPONSIBILITIES FROM THE TRANSPORTATION AND COMMUNI-
CATION SECRETARIAT, AND CUSTOMS POLICY AND ADMINISTRATION AND
TRADE POLICY AND NEGOTIATION FROM HACIENDA (FINANCE MINISTRY).
i
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THIS LATTER WOULD INCLUDE COMMERCE CONTROL OVER GOM PARTICI-
PATION WITH SUCH ORGANIZATIONS AS GATT. IMCE (INSTITUTE OF
FOREIGN TRADE) WILL BE OPERATIONAL ARM DIRECTLY UNDER SUPER-
VISION OF FOREIGN COMMERCE.
2, DETAILS OF NEW ORGANIZATION ARE SKETCHY AS YET BUT WILL
UNDOUBTEDLY CLARIFY BY NEW YEAR. IT IS CLEAR, HOWEVER, THAT
CENTRALIZATION OF INDUSTRY AND COMMERCE FUNCTIONS IN NEW
MINISTRIES WILL GREATLY INCREASE THEIR SCOPE AND STRENGTH
VIS=A=VIS COMPETING GOM BUREAUCRACIES. AT PRESENT, IT IS A
MOOT POINT WHETHER THE NEW INDUSTRIAL DEVELOPMENT SECRETARIAT
IS ABSORBING PART OF PATRIMONIO NACIONAL OR VISA VERSA.
THOMPSON
LIMITED OFFICIAL USE
BOARD OF GOVERNORS
FEDERAL RESERVE SYSTEM
OF THE
4976
OFFICE
RECEIVE CHAIRMAN
FROM: TO: Ted Chairman Truman Burns EMT
Attached is the latest cable on the Mexican economic
situation.
Attachments: Mexico A-40
cc: Governor Wallich
to Defense the classification of this document is
inclusion of U.S. Government int due
which officially classified under Exacutive A. at mail n
highest at least as high as that on. of its 1
classilication provides that "A document shall 1499
classified component."
GEBALD R. FORD
DEPAR
amexico
АДКЕВАЙ
P760191-1024
HANDLING
CLASSIFICATION
MESSAGE REFERENCE NO.
UNCLASSIFIED
A-40
TO:
Amembassy MEXICO for CRU
EMT
(Sugg. Dist: AMB, DCM, POL, ECON (2), ADMIN, CG (2), CHRON)
INFO:
Department of State ARA/MEX, Amcongen MONTERREY, Department of
Commerce/BIC/OIM/ CMM-MEX
FROM:
Amconsul Guadalajara
DATE:
December 8, 1970
CLEASE
E.O. 11652:
NA
CENTER
TAGS:
PINT, ECON, BGEN, MX
976 DEC 22 AM 9
SUBJECT:
November 1976 Highlights from Guadalajara, Mexico
59
REF:
Guadalajara A-39 of November 5, 1976
DEPT. DISTRIBUTION
SUMMARY: The prophets of doom and rumors of revolution were
RIGIN'ACTION
ARAI
proved wrong as November progressed, and by the December 1
Inauguration attention had refocussed on pressing economic
AF
ARA
CU
EA
problems, such as the peso float, inflation, employment,
fiscal and monetary policy, etc. Guadalajara
EB
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its fair share of crime, a new student union pregident
selected by his peers, State and Municipal elections were
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held in early December with no surprises, and land invagions
V.I L\ 3:3
both within and without this district were of continuing
EP
SCI
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SY
interest. END OF SUMMARY.
ARTMENT OF STATE
Political
GR
AID
AIR
ARMY
1. Rumors, Rumors Everywhere: As the day approached (December 1)
CIA
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for the change in Administration, Guadalajara's rumor mills
worked overtime to create even more uncertainty and fear
RB
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2
in an already unstable atmosphere. Reaching a crescendo in
the days prior to November 20, anniversary of Mexico's second
AVY
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revolution, the tales of revolution, coup d'etat, imprisonment
and murder allegedly occurring in Mexico City were-extraordinary,
TR
TAR
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even temporarily overshadowing the usually overwhelming interest
in the movement of the peso and its related effects. When
MB
November 20 came and passed peacefully, attention refocussed
on the peso's third devaluation in three months and subsequen,
recovery as the Presidential inauguration approached. A new
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CG: MJOrtwein (in draft)
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- 2
wave of fear-creating rumors hit Guadalajara during the last week in
November as pessimists insinuated that President Echeverría would
never leave office on the appointed day, but the local hysteria never
approached its earlier level. By December 1, the local populace,
including businessmen, began to feel more optimistic that democratic
traditions would survive for the moment in Mexico, and a considerably
more positive tone could be heard in private conversations.
2. State and City Elections: The PARM Party (Partido Auténtico de la
Revolución Mexicana, a subsidized satellite of the PRI) announced a
list of candidates on November 9 for Guadalajara municipal posts.
Candidate for mayor is Carlos MORETT Sedano who is unlikely to defeat
the PRI candidate, Guillermo REYES Robles in the municipal elections on
December 5. REYES Robles has been actively campaigning for two months
and there is no real opposition candidate, now that the PAN party
(Acción Nacional) is quiescent and not placing any candidates in state
or municipal elections in Jalisco this year. Flavio ROMERO de Velasco,
PRI candidate, is sure to be Jalisco's next governor following elections
on December 5. He has been widely quoted as favoring a general
disarmament of the local populace and an end to the system of powerful
minor politicians ruling the countryside (caciques, from the Arawak
Indian word, kassequa, chief). (Note: All PRI candidates were elected
on December 5 as expected.)
3. New FEG President: The new president of the powerful student union
of the University of Guadalajara (Federación de Estudiantes de Guadala-
jara or the FEG) will be Raúl PADILLA López, ex-president of the student
union of the School of Philosophy and Letters and also press secretary
for the FEG. PADILLA López received the approval of representatives of
63 associated schools in Jalisco at a meeting held in Guadalajara on
November 9. He will represent the 150,000 students at the University
of Guadalajara and affiliated schools throughout Jalisco for the
1977-1979 term. Law student Rafael CASTELLANOS will be vice president
and medical student Miguel MOYA Alvarez will serve as secretary general
of the FEG. PADILLA López reiterated the usual phrases, describing the
FEG as a revolutionary organization of the people working for the
principles of nationalism, democracy, socialism, and anti-imperialism.
He succeeds Félix FLORES Gómez who has been elected Federal Deputy from
Guadalajara's Third District.
4. Crime Rate Normal: While Mexico City newspaper articles sought to paint
a lurid picture of Guadalajara as a sort of "Fear City" where outlaws
reign (a case of the pot calling the kettle black), the real situation
was somewhat calmer. Although there certainly existed a troubled
atmosphere during the October student elections at the University of
UNCLASSIFIED
BERALD FORD LIBRARY
Guadalajara A-40
UNCLASSIFIED
-- 3 -
Guadalajara resulting in several deaths, November brought a return to
a relatively peaceful situation where there was more violent talk than
action. However, the month did have its bad moments. Although the
Jalisco State police were able to identify the members of the gang that
killed three students and wounded nine others in a restaurant shootout
in October (see refair, page 2, para. 4), only three of the eight
gang members are in jail while the leaders are still fugitives.
Several substantial bank robberies, the murder of a law student, and
the discovery of an apartment full of terrorist literature and equipment
in Guadalajara were the high points which is not all that bad for a
city of this size. The crime situation is fairly well under control,
and hopefully will get no worse.
5. Land Invasions: The state delegate of the Secretary of Agrarian
Reform, Francisco Javier PUGA, is reported to have announced that there
are 24 parcels of agricultural land invaded by landless campesinos in
Jalisco at present for various reasons. The invasions are under study
with the objective of granting land to the invaders and relocating them
in some cases.
Meanwhile, in Colima, capital of Colima State, over 300 landless
campesinos occupied the local offices of the Agrarian Reform from
November 10-12, holding 35 employees as unwilling guests, or in effect,
hostages, until the Secretary of Agrarian Reform in Mexico City invited
the leaders to come to see him to resolve their problems. Governor of
Colima NORIEGA continues to have land invasion as well as student
problems.
Elsewhere in the district, relatively minor land invasion problems exist
in all six states, with campesino demands for land usually supported by
local student groups. All eyes are focussed on the major confrontations
in northwest Mexico, especially in Sonora, to see how the case of the
private small (and not so small) landowners fare faced with politically-
supported invasions of good agricultural lands. Agricultural private
investment and production will follow the example set in the fertile
northwest.
Economic - Commercial
1. Peso Float and Wage/Price Demands: Three devaluations within three
months have created an economic state of uncertainty, confusion, and
mistrust by local businessmen due to the myriad of production, pricing,
financing and other related problems that must be faced without sufficient
information with which to solve them (see refair, page. 4, para. 1).
The wave of confidence-shaking rumors prior to the November 20 weekend
instigated a run on the banks to withdraw all cash accounts and convert
UNCLASSIFIED
BERALD FORD LIBRARY
Guada jara A-40
UNCLASSIFIED
-- 4 --
much of it into dollars. The prophesy of a new devaluation, exchange
controls, and frozen bank accounts, became, in part, self-fulfilling.
The substantial flight of private capital in mid-November triggered
a third downward float on November 22 when the peso fell to 28.50 to
the dollar. However, since that date, recovery has been swift and
continuous, with the rate on December 2, the day after the inaugura-
tion of José López Portillo as President of Mexico and the end of
the Echeverría era, at 20 pesos to buy one dollar, 22 to sell by the
local banks. The improvement in the peso vis-a-vis the dollar must
stem mainly from a substantial and continuing conversion of dollars
into pesos by wealthy Mexicans, probably including some politicians,
as well as increasing confidence related to the changes being made in
the Federal Government. From the inaugural speech of President López
Portillo it is still unclear whether the government will continue its
policy of allowing the peso to float or will fix it once more at about
20 pesos to the dollar. ("What this country needs is a good five cent
peso", remarked a local economist).
Both the labor and business sectors seem willing to wait until January
before making new wage/price increase demands. The minimum wage annual
revision in January will set the tone for wage settlements in early 1977
and although businessmen are hoping for a modest 10% minimum wage increase,
unions are talking about 30%. The local commission on minimum wages
recently suggested a 17% increase for Jalisco in January. A 17-20%
settlement seems likely.
2. Inflation and Government Policies: Inflation continues as one of
Mexico's biggest headaches. Despite government denials that gasoline
and electricity rates would increase as a result of the September and
October devaluations, gasoline prices rose 33 1/3% and electricity rates
soared from a minimum of 10% for the poorest users to a whopping 106%
for the biggest industries in Jalisco (including the U. S. investment
in Celanese in Ocotlán, Jalisco) on November 15. Former subsidies to
municipalities for public services, especially street lighting, were
cancelled and Guadalajara's street lighting bill tripled from 750,000
pesos per month to 2,250,000 pesos per month, thus putting a further
considerable strain on the already weak municipal government budget.
Most small to medium business will pay 25-60% more for electricity.
The higher gasoline prices will also redound almost immediately in
higher costs of production and distribution. The two major local urban
bus companies have received approval to increase fares 40% to 1.40 pesos
and the taxi drivers are charging a 5 peso surcharge on metered rides
awaiting the authorization of higher fares. Domestic air fares and
long distance bus fares went up 20% at the end of the month and more
price rises are inevitable once the higher electricity and gasoline
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costs are incorporated in the manufacturers' and distributors' costs.
According to a newspaper report, a Banco Nacional de México (large
private bank) study shows that the money put into circulation in
September 1976 was 42% more than that issued in September 1975, or an
increase of seven billion pesos for that one month. From January through
August 1976 the money supply increased 22% with respect to previous year
figures, according to the same report. The conclusion is that the
Mexican government just prints more and more money to satisfy its public
spending programs and to finance private sector demands for money, which
is what many observers suspected for some time. With such considerable
monetary expansion accompanied by substantial price hikes in fuels and
transportation and impending pressures for wage/price increases in
January, it is difficult to imagine how the rate of inflation can be kept
down to manageable proportions, even assuming an "austere" fiscal policy
as promised.
3. Sonora Land Expropriation: The expropriation of 100,000 hectares
of prime agricultural land in Sonora by land invading campesinos sup-
ported by President Echeverría (despite federal court rulings to the
contrary that accorded ownership of the lands to private land holders)
caused quite a lot of unhappy talk in and around Jalisco state, but
the local chambers of commerce decided not to heed the call of Sonoran
businessmen for a general strike. The local chambers followed the lead
of their Mexico City counterparts and, while sympathetic to the plight
of the Sonoran landowner, declined to support that cause with strike
action, although businesses in seven other states (Sonora, Chihuahua,
Durango, Nuevo León, Coahuila, Veracruz, and Puebla) did shut partially
for a limited amount of time. Local ranchers and farmers are watching
developments in Sonora, however, very carefully in order to determine
the trends in private land ownership, and thus on private investment,
in the rural sector. In the mean time, agricultural production, already
hurt by the land invasions and poor weather conditions this year, will
further suffer.
A technical expert to the Secretary of Agrarian Reform who gave a seminar
at the University of Guadalajara during November on the subject of
agricultural production stated that recent statistics indicate that
54% of the total value of Mexican agricultural production is grown on
3.3% of the arable land and that the total production of 50% of
existing agricultural units is about 4.2% of the total value.
This polarization of productivity has occurred at the same time as. the
government has redistributed more than 86 million hectares to 2.8 million
campesinos and ejidatarios. The low productivity of the ejidal farm
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sector is caused by disorganization and extreme individualism, ac-
cording to the expert from Agrarian Reform, and the solution lies
in their collectivization, mechanization, industrialization, and
diversification. It was announced about the same time that nearly
60,000 hectares will be collectivized near the Jaliscan coast per
agreements signed by President Echeverría per requests by 12 coastal
communities. The basic dilemma remains - do the most productive
farmers get more of the most productive land and grow more food to feed
an exploding population or do the most productive as well as other
lands become fractionalized and redistributed to inefficient small
farmers who then must be collectivized to become moderately efficient?
Revolutions have been fought, both within Mexico and without, over just
such a question.
4. Tourism Failing: The School of Tourism at the University of Guadalajara
held a seminar on the impact of the devaluation on the hotel industry
and noted that the surplus from tourism of 1975 has become a deficit in
1976; that in 1970 tourism balanced 36% of the deficit on current
account, in 1975 only 21%, and in 1976 barely 14%. Tourism is doing
poorly, to put it mildly, and hotel owners and other tourist service
operators better price their services realistically and accept less
profit in order to compete more effectively on the world market,
concluded the participants.
5. Investment and Jobs in Jalisco: The head of the Department of
Statistics of the State of Jalisco released some interesting statistics
on the growth of the state and its economic priorities. Of the five
million inhabitants of Jalisco about one in four is working, or 1.3
million, the rest being dependents. In the first half of 1976 the
state's economic real growth was recorded at 5.5%, and the state
development plan calls for immediate attention to creating 18 regional
development poles in the largest provincial cities and 102 municipal
poles of development to deter the unprecedented, overwhelming migration
from the farms to Guadalajara, which is barely coping with the
public services required by its more than two million inhabitants today.
Job creation in the interior of the state is an absolute necessity.
In the past six years 300,000 jobs were created by investors, in Jalisco,
but this has hardly kept up with the demographic explosion. Of the
23.7 billion pesos of investment in Jalisco in the last six years 14.4
billion (or 61%) was made by public sector agencies and only 9.3 billion
by private industry. Work for the largely uneducated rural migrants
and city dwellers is Jalisco's top priority.
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