Voluntary Report - public distribution

**Date:** 3/4/2005

**GAIN Report Number:** MX5020

MX5000

**Mexico**

**Agricultural Situation**

**Weekly Highlights and Hot Bites, Issue #7**

**2005**

**Approved by:**

![](media/image1.wmf)Suzanne E. Heinen

U.S. Embassy

**Prepared by:**

Benjamín Juárez, Dulce Flores, Gabriel Hernández, Marissa Chavez, and
Carlos González

**Report Highlights:**

-   MEXICO CAPTURES 36 PERCENT OF LATIN AMERICA'S DFI

-   DEVELOPING MARKET FOR SWEETENERS

-   MEXICO APPROVES BIOSECURITY LAW

-   PRESIDENT FOX ANNOUNCES MEXICAN ECONOMIC GROWTH HIGHER THAN THE U.S.

-   APPLE PRICE AGREEMENT WILL NOT GO INTO EFFECT

-   ENHANCE NAFTA WITH UNITED STATES AND CANADA, SERRA SUGGESTS TO FOX

-   THE UNITED STATES AND CENTRAL AMERICA \"SAVE\" MEXICO\'S TRADE

-   \"DANGER SIGNS\" FACING MEXICO\'S AGRICULTURE DUE TO NAFTA

-   JAPANESE MARKET: AN OPPORTUNITY FOR MEAT PRODUCTS

-   WAL-MART INVESTS NEARLY US\$ 740 MILLION

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Mexico \[MX1\]

\[MX\]

# 

# MEXICO CAPTURES 36 PERCENT OF LATIN AMERICA'S DFI

Attracting over US\$ 13.5 billion in productive capital, Mexico captured
36 percent of Latin America's Direct Foreign Investment (DFI), the most
of any Latin American country. According to the annual publication
*Preliminary Overview of the Economies of Latin America and the
Caribbean*, DFI destined for the Mexican economy increased by 43
percent. Brazil ranked second among countries attracting DFI, with 28.2
percent. Among preferred cities to conduct business in, Sao Paulo ranked
third while Monterrey ranked fourth. (Source: *El Financiero*, 2/16/05;
[ATO Monterrey Comment]{.underline}: From January 2004 to September
2004, the Food, Beverage and Tobacco Industry received 7 percent, or
about US\$ 1 billion of Mexico's DFI).

## DEVELOPING MARKET FOR SWEETENERS 

Increasing demand for low-calorie products and the launchings of new
light beverages have led to the development of the artificial sweetener
market in Mexico. According to Mario Villas, president of the Food,
Beverage, and Tobacco Industry Council for CANACINTRA (a national food
processors and manufacturers association), consumption of these products
grew 50 percent in the last three years. Nutrasweet and Splenda are
among the most highly demanded sweeteners by soft drink bottlers and
general beverage companies. Distinctions are also made between aspartame
and saccharin, which are both utilized in beverages. According to data
from CANACINTRA, products and beverages low in calories now contribute
20 percent of the industry's sales and will contribute 50 percent within
the next 10 years. Consumer health concerns will continue to strengthen
the market, providing a great opportunity for American companies that
produce and export artificial sweeteners. (Source: *Reforma*, 2/16/05)

### MEXICO APPROVES BIOSECURITY LAW

Mexico's Senate recently approved a new piece of legislation known as
the GMO Bio-security Law, which seeks to regulate the use and trade of
GMOs, including imports and exports. The new piece of legislation
encompasses a wide array of topics including the encouragement of
scientific investigation and technology as well as guarantees for
appropriate and efficient levels of protection for animal and plant
health, the environment, and biological diversity. One aspect of the new
law requires that all products containing GMOs and destined for human
consumption must explicitly label their nutritional composition when
they differ significantly from conventional products. The new
legislation also calls for the development of a National Biosecurity
Information System and a National Biosecurity and GMO Registry, along
with the restructuring of the Intersecretarial Commission on Biosecurity
and GMOs (CIBIOGEM). The Commission's task will be to formulate and
coordinate the politics of the federal government on transgenic issues.
Penal sanctions and fines have been drafted for those who violate the
new law. (Source: *NotiMex*, 2/15/05; [Note]{.underline}: This is the
same law passed by the Lower House as reported in December 2004.)

**PRESIDENT FOX ANNOUNCES MEXICAN ECONOMIC GROWTH HIGHER THAN THE
U.S.**\
\
President Vicente Fox affirmed that Mexico has already compiled six
consecutive quarters of economic growth at \"a higher rate than the
United States economy.\" Also, he assured that in his government\'s
first two years in office, extreme poverty decreased 16 percent in
Mexico. This was made possible by the rapid increase in national and
foreign investment, in addition to public sector investment. The
President made this statement after the Treasury Secretary, Francisco
Gil-Diaz, announced the creation of a US\$ 250 million venture capital
fund to encourage investment in small and medium-sized companies in
Mexico that, supported by other investors, could reach US\$ 3.0 billion.
(Source: *La Jornada*, 02/24/2005)

**APPLE PRICE AGREEMENT WILL NOT GO INTO EFFECT**\
\
Per instructions from Mexico's 16^th^ District Court Judge, the
Secretariat of Economy (SE) must stop the implementation of the
Resolution published in December 29, 2004. This resolution suspended the
application of the 46.58 percent duty on imported U.S. Red and Golden
Delicious apples from the Pacific Northwest and established a new
reference price system. The Apple Producers Association from Chihuahua
successfully requested a court injunction ("amparo") against the SE
decision that was to enter into effect on February 28, 2005. Since the
Judge required SE to re-initiate its antidumping investigation against
US apples, it appears the most probable outcome is that all stakeholders
will meet with SE to find a joint solution to this issue. (Source: *El
Financiero*, 02/25/05)

**ENHANCE NAFTA WITH UNITED STATES AND CANADA, SERRA SUGGESTS TO FOX\
**\
The Trade Secretary in former President Carlos Salinas de Gortari\'s
government, Jaime Serra Puche, stated that now is the moment to
renegotiate and adapt NAFTA to Mexico\'s new circumstances and better
prepare to face China\'s competition.  He recommended that the
government of President Vicente Fox supplement the trilateral agreement.
Only this way will Mexico will be able to face, among other things, the
obstacles that the United States imposed with the new Bioterrorism Law,
he said. (Source: *El Financiero*, 02/28/2005)\
\
**THE UNITED STATES AND CENTRAL AMERICA \"SAVE\" MEXICO\'S TRADE**\
\
The Bank of Mexico announced that the United States and Central America
were the only regions in which Mexico reported a commercial surplus in
2004, while it had a trade deficit with Asian countries.  Mexico
achieved a trade surplus of US\$ 54.2 billion with the United States, a
growth of 39.3 percent compared to 2003, and a surplus of US\$ 782
million with Central American countries, although it decreased 20.4
percent when compared to the previous year. (Source: *Reforma*,
02/28/2005)

**\"DANGER SIGNS\" FACING MEXICO\'S AGRICULTURE DUE TO NAFTA\
**\
According to Andres Rosenzweig, external consultant of the Economic
Commission for Latin America (CEPAL) in Mexico, there are "danger signs"
facing the domestic rural sector due to the complete trade
liberalization of agricultural products like corn and dry edible beans
foreseen in the North American Free Trade Agreement (NAFTA). The
specialist noted that all agricultural products have been liberalized
since 2003, with the exception of corn, dry edible beans, powdered milk,
and orange juice.  These products will be under free market forces among
the NAFTA countries, beginning in 2008.  He stated that, according to
estimates, at least 51 percent of Mexico\'s countryside population lives
in poverty, while 32 percent of day laborers lack salaries and others do
not even earn the equivalent of two minimum wages (which is not enough
to support a family). Therefore, Andres Rosenzweig outlined the
importance of encouraging development and social-welfare promotion
policies that favor small and medium agricultural growers. (Source:
*Excelsior*, 02/28/2005)

**JAPANESE MARKET: AN OPPORTUNITY FOR MEAT PRODUCTS**\
\
Mexican producers have the opportunity to enter the Japanese market by
offering high quality products like beef, poultry meat and fresh
oranges, said the Japan External Organization (JETRO) General Director
Masakuyi Kawashima. Meanwhile, a Secretariat of Agriculture, Livestock,
Rural Development, Fishery and Food (SAGARPA) press release confirmed
that these Mexican products comply with JETRO\'s stringent food safety
requirements. SAGARPA stated that Mexico\'s "BSE-free" status is
expected to help Mexico become one of the Japanese market\'s main beef
suppliers. In addition, poultry meat product exports are expected to
thrive based on the efficient eradication of AI from the Mexican poultry
sector.\
\
Meanwhile, after concluding a business mission to Japan, the Head of the
Foreign Trade Unit at the National Poultry Association (UNA), Humberto
Arenas, said that Mexico has the ability to meet Japanese demand for
poultry products in a timely manner. He further projected that Mexico
will begin exporting value-added poultry products in the second half of
2005. "This results from Mexico's freedom from Avian Influenza and
Newcastle Disease, which are key Japanese requirements for granting
trade authorization for these products," Arenas concluded. (Source: *El
Financiero*, 02/28/2005)

# WAL-MART INVESTS NEARLY US\$ 740 MILLION

According to Eduardo Solorzano Morales, president and general director
of Wal-Mart of Mexico, Wal-Mart will invest nearly US\$ 740 million for
the opening of 70 stores and restaurants, a 30 percent increase from
2004. Of the total units that will be put in operation this year, 47
will be self-service stores: 9 Wal-Marts, 24 Bodegas Aurrera, 6
Superamas, and 8 Sam's Clubs. Three new Suburbia stores and 20 Vips
restaurants will also be opened. Wal-Mart currently manages nearly 700
stores and restaurants at the national level. Last November, the company
initiated pilot tests of a new format designated "Mi Bodega Aurrera",
which is similar to a Bodega but smaller in size and designed for small
towns and rural areas. According to analysts, one of Wal-Mart's
competitive advantages is their ability to redesign some of their store
formats to better penetrate smaller cities, offering great potential to
the retail giant. (Source: *El Norte*, 2/24/05)

REPORTS RECENTLY SUBMITTED BY FAS/MEXICO CITY

+----------+------------------------------------------------+----------+
| # NUMBER | # TITLE                                        | # DATE   |
+----------+------------------------------------------------+----------+
| MX5019   | Weekly Highlights and Hot Bites, Issue #6      | 02/25/05 |
+----------+------------------------------------------------+----------+