Mexico's Calderon Trying to Patch Washington Relationship

| Mar. 4, 2011 |

Published by Minyanville

Mexican President Felipe Calderón was in Washington this week meeting president Barack Obama as part of a two-day visit to talk about the interlinked issues of business and  the drug crime afflicting Mexico.

The meeting comes three weeks after a US Immigration and Customs Enforcement Agent was killed by drug violence in Mexico.

Calderón's tactics in Mexico are not popular with the population. His escalation of the war on drugs has led to more than 35,000 deaths since he came to power in December 2006. A diplomatic cable released by WikiLeaks talked of corruption in the state and expressed frustration at the government's inability to curb the violence.

During her visit to Mexico in January, US Secretary of State Hillary Clinton heaped praise upon Calderón's escalation strategy.She  accepted that US drug consumption combined with the flow of weapons south of the US border were major factors contributing to the violence. However, Clinton’s previous comments have done much to upset the Mexican administration, describing the problem as an “insurgency” and suggesting that the US military may need to intervene.

Tensions between Washington and Mexico City run high. Just last week, in an interview with El Universal, Calderón lashed out at America's lack of cooperation with Mexico. He described the revelations of the WIkILeaks cables as “ignorant” and “distorted”.

Mexico is hoping to shake off its image and enter the world’s top five tourist destinations. “[This could] generate more than 4 million direct jobs, perhaps 12 million indirect jobs and increase foreign currency income to $40 billion,” the president told leaders of the tourism industry. He claimed that the country welcomed 22.3 million international visitors in 2010, not including those that came on cruise ships. However, at least three US cruise lines have cited drug violence as reasons for pulling out of Mexico.

And Texan officials have warned students not to travel to Mexico for their traditional Spring Break holiday. The Department of Public Safety issued the warning citing drug violence in the country, which has affected Acapulco but little of the country’s other popular tourist resorts such as Cancun.

The airline industry took a slight hit as Mexican authorities suspended the sale of Mexicana, the state-owned airline, as it claimed would-be owners PC Capital lacked the funding necessary. The airline served 65 international and domestic destinations before financial strife caused it to suspend operations in August 2009. This suspension has led to air fares increases across the region.

State-owned oil company Pemex announced that fourth-quarter after-tax losses were smaller than the previous year. The company reported an after-tax loss of $2.11 billion, less than half the same period last year. Increased sales, higher prices and lower operating costs were cited. As the company is state-owned, it pays higher taxes and royalties than the world’s private oil companies and often reports net losses.

In a bid to increase production in Mexico's heavily regulated oil industry, the private sector will begin to engage in oil exploration and production with the first “integrated” contracts announced by Pemex on Tuesday. The company is offering six fields in the Gulf coast state of Tabasco that were fruitful in the 1960s but have since been ignored. They currently produce 13,000 barrels of oil per day but Pemex says this could increase to 50,000 with improved technology.

Experts believe that oil reserves will soon be exhausted and deep-water exploration must be carried out. The oil fields in Tabasco, however, are all land-based.

Walmart de Mexico (WMT) is to invest $1.56 billion into its Mexican and Central American operations, paving the way for huge growth in 2011 and 2012. More than half of the funds will go into opening new stores. The company is expecting to open an additional 365 stores in Mexico and 80 in Central America this year. Last year 267 stores were opened in Mexico with 30 in Central America. Walmart reported a 14% rise in profits for the fourth-quarter thanks to the new Central American stores.

Mexican drinks giant Femsa (KOF) saw fourth-quarter profit rise 21% from the same period in 2010. Its chain of Oxxo convenience stores are thought to be the driving force behind the rise, with 8,426 open for business across Latin America. The company also controls the largest Coke bottler in the world.

Brushing aside his row with two of Mexico’s major TV networks, world’s richest man Carlos Slim on Tuesday unveiled his new art museum in Mexico City. It will include priceless works by Leonardo da Vinci, Auguste Rodin and Mexican muralist Diego Rivera, whose work adorns the national palace. Those present included Colombian writer Gabriel Garcia Marquez, talk show host Larry King and Calderón himself.