NEWS FLASH: A gain of 106,155 new Mexico jobs was announced for the month of November. This gain reverses the unemployment increases seen during most of 2009.

Mexico President Calderon Indicates Recession is Over

Speaking at a recent business forum, President Felipe Calderon announced that Mexico's worst recession since the Great Depression "has come to an end." The President said that clear signs of recovery are apparent and emphasized that his efforts have been focused on reviving robust growth and job creation.

According to Calderon, the Gross Domestic Product (GDP) for the 3rd Quarter of 2009 increased by 2.7%, over the same period in 2008. The President indicated the Mexican economy has created more than 200,000 new jobs, some 80,000 alone in October of this year.

These declarations came after Calderon pushed minor tax increases through the Mexican Congress, on November 1st, as part of a reform plan seeking to spur new economic growth and shore up deficits in Mexico.

Growing U.S. Demand For Autos Aids Mexico’s Recovery

A rebound in the demand for automobiles in the U.S. is playing a significant role in aiding the recovery of the Mexican economy. The impact of this growth can be seen in recent increases in the sale of auto parts from diverse companies, such as Alfa and Grupo Kuo.

Mexico’s automobile industry represents 4% of the country’s gross national product. Automobile production in Mexico grew 26% in October, over the previous month, to 184,769 units – while exports grew 24%, to a high of 145,761 units, during the same time frame.

According to Rafael de la Fuente, chief economist for Latin America with BNP Paribas in New York, the growth in Mexico’s auto production is an indicator that “the worst of the crisis is behind us.”

The Geopolitics of Car Batteries

As global concerns about energy security and carbon emissions skyrocket, hybrid vehicles are capturing greater market share and global attention. While a variety of raw materials can be used to produce the batteries that power hybrid vehicles, lithium is the most efficient raw material for battery production.

Countries with large lithium deposits, and the technology to process lithium, are playing an increasingly important role in enabling the growth and stability of the hybrid vehicle market. An estimated 70 percent of the world’s lithium chloride (LiCl) deposits are found in South America, with Chile being the world’s largest LiCl producer.

Currently, the main producers that have the required capital and capacity to manufacture lithium batteries are joint ventures between auto manufacturers and technology firms. Seven of these producers are based in Japan, two in the U.S., two in Korea and one in China. However, the most specialized step in lithium processing, the production of electrolytic salt, is only provided by the Japanese producers.

As auto manufacturers ramp up hybrid vehicle production, Japan’s technology centers and Chile’s lithium mines will become increasingly important to the global economy.

Mexico’s Shadow Government

Some countries, such as the U.K., have shadow governments, complete with shadow cabinet members made up of the opposition. However, these groups do not often claim to be the actual government, as is the case with Mr. López Obrador, Mexico's so-called “Legitimate” President.

Obrador, the former Mexico City mayor, lost the 2006 election by a small margin. He cried fraud, held a mock inauguration, and created a parallel executive branch of government that proposes new laws, issues statements, and holds elections.

After three years, Obrador will soon have toured all of Mexico's 2,438 municipalities. His “presidential” speeches are part populist rally, part earnest policy discussion. Obrador’s audacious style was especially evident with his "alternative" grito (cry of independence) held on Mexico’s Independence Day, when half of a million Mexicans flooded the main square, as the “President” waved a flag and shouted revolutionary slogans.

According to a poll reported earlier this year in the Mexican daily La Reforma, support for Obrador hovers at around 16% of the population – approximately half of the support he received in the 2006 election.

Houston-Mexico Railroad Business Surges

The Kansas City Southern Railroad (KCSR) reports significantly increased business volumes along the Houston to Mexico corridor, due to improved service and new routing options. The improved service has been made possible by the newly rehabilitated Victoria-to-Rosenberg Texas line, the opening of an intermodal shipper facility at Kendleton, Texas, and a relationship with the Port Terminal Railroad Association (PTRA) in Houston which enables more traffic to be interchanged at the intermodal shipper facility.

According to KCSR, approximately 3,000 carloads have originated or terminated on PTRA year-to-date in 2009, versus just over 1,400 for the same time period in 2008. Most of this increase has occurred since the railroad line rehabilitation was completed in May 2009.

"Approximately 700,000 to 800,000 truckloads are moving in the Houston to Mexico lane each year,” said KCSR’s executive vice president of sales and marketing, Pat Ottensmeyer. “There is tremendous opportunity in this corridor when you consider the significant value that the KCS International Intermodal Corridor can provide in a market where there has not previously been truck-competitive, intermodal service."

The Vital Role of 'Gatekeepers' in the Smuggling Business

Until now, little has been revealed about the all-important role of “gatekeepers” in managing the trafficking of narcotics from Mexico into the U.S., spearheading the cartel’s money-laundering operations, and overseeing the flow of money back into the hands of Mexico’s drug lords.

In drug-trade lingo, the gatekeeper controls the “plaza," the transhipment point off of one of the main highways on the Mexican side of the border where drugs and other contraband are channeled. The main plazas in Mexico along the Texas border are in Matamoros, south of Brownsville; Reynosa, across the border from McAllen; Nuevo Laredo, across from Laredo; Juarez, south of El Paso; Piedras Negras, opposite Eagle Pass, and Ojinaga, opposite Presidio. These locations provide access to the U.S. interstate highway system, which the cartels use to deliver their drugs to the markets they control in major U.S. cities.

With the gatekeepers’ ability to influence Mexican law enforcement and government officials, through cash payouts and intimidation, stopping the flow of drugs and other cartel activities will be no easy feat. A major law enforcement effort on both sides of the entire border is required to shut down the plazas and bring down the gatekeepers.

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Sources of Information: In preparing this document, the following sources of information, among others, have been utilized: North American Super Corridor Organization (NASCO), The Wall Street Journal, Stratfor, Sentido Común and Banco de México.

December 2009
Building Potential