Voluntary Report - public distribution

**Date:** 4/28/2006

**GAIN Report Number:** MX6034

MX6017

**Mexico**

**Agricultural Situation**

**Weekly Highlights and Hot Bites #16**

**2006**

**Approved by:**

![](media/image1.wmf)David J. Williams

U.S. Embassy

**Prepared by:**

Luis Chavez, Gabriel Hernandez, Dulce Flores, Salvador Trejo, Bruce
Zanin, and Jeff Nawn

**Report Highlights:**

-   Wine consumption continues to grow

######### New Business Structure Available to Lenders

-   New Business Structure Available to Lenders

-   MORE FRUCTOSE IS BEING IMPORTED INTO MEXICO

-   MEXICO'S ECONOMIC GROWTH LEADS IN LATIN AMERICA

-   U.S. Company To Invest In Mexico

-   Legislators Request Thorough Inspections OF U.S. Meat

-   Senate Approves Bio-Fuel Law

-   WHITE CORN SUPPLY MAY SPUR SHIFTS in PLANTINGS

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Mexico \[MX1\]

\[MX\]

######### Wine consumption continues to grow

Anecdotal evidence shows that 2005 was another record year for wine
sales in Mexico. Domestic wineries are saying that sales increased by 20
percent, while importers claim their sales went up 18 to 25 percent.
(*Reforma*, 4/28/06)

######### New Business Structure Available to Lenders

The Mexican Lower House unanimously approved a proposed law which will
allow finance companies with a limited scope of business (SOFOL) to
convert to finance companies with a broad scope of business (SOFOM).
Essentially, the change means that finance firms can now lend in more
than one sector -- agriculture, housing, and international trade, for
example -- rather than being limited in their activities by government
regulations. There will be a transition period for SOFOL's to transform
themselves into the new SOFOM structure. The change should improve the
lending flow, particularly to smaller businesses, as customers will now
have the option to go to one financial institution for most of their
lending needs. (*Reforma*, 4/26/06)

######### MORE FRUCTOSE IS BEING IMPORTED INTO MEXICO

In January/February of 2006 Mexico imported U.S. \$13 million worth of
high fructose corn syrup (HFCS), compared U.S. \$4 million during the
same period in 2005. According to legislators and sweetener industry
sources, greater HFCS imports are a result of the WTO decision against
the 20 percent tax on fructose used in soft drinks, and the 250,000 MT
pound-for-pound sugar for fructose exchange agreement with the U.S. One
legislator noted that since the WTO declared the soft-drink tax illegal
soda bottlers have sought numerous court injunctions against the tax.
The legislator predicted that the imported fructose will displace
domestic sugar, cause sugar prices to plummet, and drive up Mexican
sugar inventories. The President of the Chamber for the Sugar and
Alcohol Industries, Ruben Garcia, predicted that the sugar industry will
lose about \$650 million pesos (U.S. \$59 million) as a result of U.S.
HFCS imports. In order to mitigate this damage Garcia, proposed that the
U.S. accept Mexican sugar free of the current U.S. \$70 per ton tax.
(SOURCE: Reforma 4/27/06)

######### MEXICO'S ECONOMIC GROWTH LEADS IN LATIN AMERICA

According to a recent report by the World Bank, between 1995 and 2004
Mexico experienced the largest growth amongst the three biggest Latin
American economies. Between 1995 and 2004 Mexico's growth rate averaged
3.3 percent per year, surpassing Brazil, which grew by 2.0 percent, and
Argentina, which grew by barely 0.1 percent. (Source: El Universal,
04/28/06)

U.S. Company To Invest In Mexico

Larry N. Prosser will go from real state and golf course development to
investing in Mexico's agricultural sector. His first project will be a
U.S. \$30 million fruit and vegetable distribution center in the state
of Yucatan. The new company being formed for this project, Peninsular
Farm Products, will harvest, pack, distribute, and export papaya. The
company will provide employment opportunities to henequen (hemp fiber)
farmers who went out of business after the fiber market was flooded by
Brazilian imports. Project manager Arturo Lopez commented that
state-of-the-art technology will be used to renovate the former henequen
plantations. (MILENIO, APR. 24)

Legislators Request Thorough Inspections OF U.S. Meat

Rep. Gonzalo Aleman, president of the Mexican Congress' Special
Commission on Livestock, announced today that Congress will require food
health authorities to thoroughly examine meat imports from the United
States in order to prevent bovine spongiform encephalopathy (BSE or
"mad-cow disease") cases in Mexico. The Commission scheduled meetings
with the two Mexican agencies that oversee food safety; the Federal
Commission for the Protection against Sanitary Risk (COFEPRIS), and the
National Agri-food Health, Safety, and Quality Service (SENASICA). Rep.
Aleman stated that Congress will request authorities to reject bone-in
beef imports, and to carry out random inspections in supermarkets in
order to locate and eliminate contaminated products. (LA PRENSA & EL
DÍA, APR. 24)

Mexico Maintains Compensatory Tariffs On U.S. Meat

Mexico's Ministry for the Economy (SE) announced today that the
compensatory tariffs on beef (with or without bone, fresh or
frozen/refrigerated) from the United States will continue for the next
five years. The decision was based on a study carried out by SE that
concluded that the elimination of the tariff would severely damage the
domestic meat industry. The study also prognosticates that there is a
serious threat of imports at dumping prices if the tariff is removed.
During a related press conference, Alejandro Gomez, Undersecretary for
Standards, Foreign Investment, and International Trade, pointed out that
this measure sends a clear message that Mexico will protect its domestic
industry against unfair trade. (EXCELSIOR & MONITOR, APR. 25)

Senate Approves Bio-Fuel Law

On April 27, 2006, Mexico's Senate approved the Bio-Fuel Promotion and
Development Law in an effort to support the country's energy
self-sufficiency through the development of alternative fuels. The
proposal will be sent back to the Lower House for discussion and final
approval, in accordance with Congress' legislative process. The Law
outlines the promotion of agricultural production and employment by
defining a "national bio-fuel strategy". It also assigns
responsibilities to Federal and State governments to support this new
industry by facilitating the establishment of processing plants that
will generate ethanol, bio-diesel, and other bio-fuels. (EL ECONOMISTA,
APR. 28)

######### WHITE CORN SUPPLY MAY SPUR SHIFTS in PLANTINGS

During the 1990's domestic yellow corn production was practically
nonexistent. By 2000 production had increased to 200,000 MT. It is
currently forecast to surpass the 1.2 MMT, largely driven by the
"agriculture by contract" schemes between producers and the starch and
fructose industries. Accordingly to the Mexico's National Corn Producers
Federation (CNPAMM), the yellow corn supply has increased as a direct
response to the demands of several industries such as the starch
industry, livestock producers, and the newly born bio-energy industry.
CNPAMM president Carlos Salazar said that this increase is also a
response to the current supply of white corn. "There is the need to
shift toward yellow corn production because there is a risk of
over-supply of white corn in certain regions." CNPAMM is currently
forecasting increased white corn yields in the States of Jalisco,
Mexico, and Chiapas, which will lead to significantly greater
production, and therefore depressed prices. Carlos Salazar urged
producers to continue to shift from white to yellow corn production, and
called for the timely publication of rules under which price supports
will be promulgated. (Source: El Financiero; 04/26/2006)

**REPORTS RECENTLY SUBMITTED BY FAS/MEXICO CITY**

+----------+-----------------------------------------------+----------+
| # NUMBER | # TITLE                                       | # DATE   |
+----------+-----------------------------------------------+----------+
| MX6033   | Citrus Semi-Annual                            | 4/27/06  |
+----------+-----------------------------------------------+----------+
| MX6032   | Mexico Announces the Continuance of           | 4/25/06  |
|          | Compensatory Duties on Beef Imports           |          |
+----------+-----------------------------------------------+----------+
| MX6031   | Weekly Highlights and Hot Bites #15           | 4/21/06  |
+----------+-----------------------------------------------+----------+
| MX6030   | Dried Fruit Annual                            | 4/11/06  |
+----------+-----------------------------------------------+----------+
| MX6029   | Sugar Annual Report                           | 4/10/06  |
+----------+-----------------------------------------------+----------+
| MX6028   | Oilseeds and Products Annual                  | 4/10/06  |
+----------+-----------------------------------------------+----------+
| MX6027   | Weekly Highlights and Hot Bites #14           | 4/7/06   |
+----------+-----------------------------------------------+----------+
| MX6026   | Weekly Highlights and Hot Bites #13           | 3/31/06  |
+----------+-----------------------------------------------+----------+