Bloomberg

Mexico’s fiscal accounts may be heading toward “unsustainable deficits” as a decline in oil production cuts government revenue, according to Morgan Stanley.

Mexico may need to curb spending growth to keep the deficit in check should the government fail to push through changes to tax laws that buoy revenue, Morgan Stanley analysts Luis Arcentales and Daniel Volberg wrote in a report published today.

The prospect that Mexican legislators can increase taxes, broaden the tax base, or tax food and medicine has become “more challenging” after President Felipe Calderon’s National Action Party lost its status as the biggest in the lower house in midterm elections held July 5, Arcentales and Volberg wrote.

“We find that, absent a tax reform, a major spending adjustment would be required to avoid meaningful medium-term fiscal deterioration,” Arcentales and Volberg wrote. “Our work suggests that on its current path Mexico’s fiscal accounts may be heading towards unsustainable deficits.”

Mexico’s fiscal deficit may approach 6 percent of gross domestic product in 2015, from about 2 percent this year, assuming annual economic growth averages 1.5 percent by then and outlays grow by 3.6 percent each year, half the pace of the past five years, according to Arcentales and Volberg. The fiscal gap may grow to 3.6 percent of GDP should the economy expand 3 percent on average starting in 2010, the analysts wrote.

Production of oil, which makes up 37 percent of the Mexican government’s revenue, fell 6.5 percent in May from a year earlier after falling 9.2 percent in 2008. Output may drop about 20 percent more by 2017 if state oil company Petroleos Mexicanos doesn’t find new fields, according to the Energy Ministry.

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Bloomberg

Mexico’s peso dropped to the lowest in more than two months on mounting concern that the Latin American economy will take longer to recover than investors previously estimated.

“Given the slump that is being forecast for Mexico, investors are searching for more attractive investment alternatives,” said Omar Martin del Campo, a currency trader at Banco Ve Por Mas SA in Mexico City.

The peso declined for a sixth day, falling 1.1 percent to 13.8331 per U.S. dollar at 10:54 a.m. New York time, compared with 13.6879 on July 10. It earlier touched 13.8450, its weakest since May 1.

The currency is heading for its longest losing streak since October. It has fallen 4.3 percent since July 3, the worst performance against the dollar among the six most-traded Latin American currencies.

Mexico sank into its first recession in eight years as the U.S. slump curbed demand for the nation’s exports. Finance Minister Agustin Carstens last week predicted the economy will shrink more than previously estimated, contracting at a pace similar to the decline in gross domestic product during the 1995 peso crisis, when it fell 6.2 percent.

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Dow Jones
Mexico's auto production and exports could fall as much as 30% this year amid feeble demand from the U.S. and Europe, the head of the Mexican Auto Industry Association said Monday.

"It doesn't sound crazy to think that, given the recessionary indicators abroad, the drop could be closer to 30%," said Eduardo Solis, president of the association, at a press conference.

The trade group, known as AMIA, had previously forecast a 25% decline in auto output from the 2.1 million vehicles produced in Mexico last year.

AMIA said Monday that Mexico's auto production sank 48% in June from the year-ago month to 101,991 vehicles. Exports fell 45% to 84,934.

In the first six months of the year, production plunged 43% to 602,374 units, while exports slumped 42% to 484,689.

"There is an enormous amount of uncertainty in the market at the international level and of course in our country," Solis said, referring to the outlook for the auto industry for the rest of the year.

One factor likely to affect Mexico's export-oriented production will be the success of programs that some countries are implementing to stimulate vehicle demand.

The U.S. "cash for clunkers" program, which was passed last month and offers new-car buyers up to $4,500 in vouchers to scrap old gas-guzzlers and buy fuel-efficient models, could boost Mexico's auto industry during the second half, Solis said.

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Reuters

Mexico's automobile production slumped by nearly half in June as a deep recession in the United States crimped demand for new vehicles, shattering hopes for a near-term recovery in Latin America's second largest economy.

The Mexican Automotive Industry Association, or AMIA, said on Monday production slid 48.1 percent compared to the same month last year, while exports plunged 44.6 percent.

"We see with great worry that we have yet to hit bottom and the industry continues to be in freefall," Eduardo Solis, the head of AMIA, told reporters.

Around 72 percent of cars produced in Mexico go to the U.S. market, which is suffering its worst downturn in almost 30 years.

Mexico's economy has been hit hard by the collapse in auto production and is expected to shrink more than 6 percent in 2009 -- its worst downturn in at least 15 years.

Prospects of a rebound in the short term appeared increasingly uncertain given the auto industry's fortunes.

"Today's auto sector data confirm what we have long-feared -- that the auto sector would be in severe decline for a prolonged period given the deep decline in U.S. demand and the restructuring pressures centered around GM and Chrysler," said Nick Chamie, global head of emerging markets research at RBC Capital Markets.

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just south of Piedras Negras. He tells me the Zetas now control the area. That if you get caught out after 2 am they take your pickup.

Reminds me of the Sicilian Mafia or of the Taliban, minus the religon.

Defacto government.

I did inhale.

GUSTAVO RUIZ

MORELIA, Mexico (AP) — Twelve people tortured, slain and dumped along a mountain road in a drug-plagued Mexican state were off-duty federal agents, an official said Tuesday. It is one of boldest attacks on federal forces since President Felipe Calderon launched his national war on drugs.

Mexico's national security spokesman Monte Alejandro Rubido said the 11 men and one woman were investigating crime in President Felipe Calderon's home state of Michoacan, which has been a center of his crackdown on organized crime.

They were ambushed by members of the La Familia drug cartel, Rubido said. Their bodies were found piled up along a mountain highway late Monday near the town of La Huacana.

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from the July 14, 2009 edition -

Drug cartels launch Mexico's 'Tet offensive'

Gunmen shot up police stations across the country in an apparent retaliation for the arrest of a suspected leader of La Familia drug cartel.
By Sara Miller Llana | Staff writer of The Christian Science Monitor

Mexico City

Revenge is not a new current in Mexico's drug wars. Journalists who investigate too deeply are often killed, making Mexico one of the most dangerous places to report from. Prosecutors seeking justice often face the same fate.

But suspected members of the La Familia cartel in the state of Michoacán gave new meaning to the word over the weekend – even in hardened Mexico – after gunmen shot up police stations across the country, killing five officers and two soldiers by the time the revenge attacks were over on Saturday.

Mexican authorities say the series of assaults, among the most brazen since Mexican President Felipe Calderón launched an antidrug offensive in Mexico in December 2006, were a direct response to the arrest of one of their alleged leaders early Saturday.

Mexico's 'Tet offensive'?

It was characterized as a Mexican version of the "Tet offensive" by one columnist – a turning point in a nation's loss of faith that Mexico can come out from under the force of organized crime. And that questioning is perhaps no greater than in Michoacán, Mr. Calderón's home state, where his military effort began, and where a grenade was launched in a public plaza last year.

"This attack and [the grenade incident] are not just simply examples of gang violence. They have a much more profound impact on the public psyche," says Bruce Bagley, a Latin America drugs expert at the University of Miami. "They erode confidence in Calderón's strategy and the legitimacy of the state response."

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Man claiming to be head of La Familia gang blamed for police murders tells TV show his group wants 'peace and tranquility'

* Matthew Weaver and agencies
* guardian.co.uk, Thursday 16 July 2009 11.51 BST

The alleged leader of a notorious drug-trafficking gang in Mexico has offered a truce in the country's brutal drug wars during a telephone call to a television show.

The offer , swiftly rejected by the government, was made by a man who identified himself as Servando "La Tuta" Gomez. He is the leader of La Familia, a cartel blamed for a wave of recent attacks, including the torture and shooting of 12 police officers found earlier this week.

In a call to a local TV show in the western state of Michoacán he said his gang was only responding to attacks by police. "What we want is peace and tranquillity. We want to achieve a national pact.

"We want the president, Felipe Calderón, to know that we are not his enemies, that we value him, that we are conscientious people."

The Mexican government, which launched a war on drug cartels in December 2006, rejected the offer.

The interior minister, Fernando Gomez Mont, said: "The federal government does not ever dialogue, does not negotiate, does not reach deals with any criminal organisation. There is no other alternative for their members but to submit to the law."

The government would not comment on whether the call was genuine.

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Tighter border enforcement has driven narcotics smugglers to share territory with migrants, adding to the dangers of the journey and possibly contributing to a drop in immigration.

Los Angeles Times, By Sacha Feinman, July 18

On a cloudless afternoon in northern Sonora, migrants and drug runners lounge in equal numbers under scattered mesquite trees, playing cards or sipping water. The sun climbs high and the temperature rises well over 100 degrees Fahrenheit. In such heat, nothing, human or otherwise, moves more than required.

Known simply as La Sierrita, this otherwise unremarkable patch of desert is a final stop for those looking to enter the U.S. illegally. The Arizona border is only a 40-minute walk north. As soon as the sun sets, everyone here will be gone.

It is not difficult to distinguish between those trying to smuggle themselves and the "burreros" looking to haul marijuana or cocaine. The former wear ill-fitting pants and keep their eyes cast toward the ground. The latter dress head to toe in black, a curious fashion choice for a trip through the desert. Some wear ski masks.

Angel de Jesus Pereda, the local coordinator for the governmental immigration agency Grupo Beta, approaches one of the burreros. With a weary sigh, he asks the man to stand up, lift his shirt, and turn around. The man complies; Pereda finds no weapons. He tells the young man to be careful in the desert. The man spits and turns back to the card game.

"My specific mission is to look for and protect migrants, to try and convince them to turn back," Pereda said. "There isn't anything I can do about guys like that. They might just be moving drugs, but they might also be planning to assault the others."

CNNA federal judge ordered 10 municipal police officers arrested Saturday in connection with the slayings of 12 off-duty federal agents in southwestern Mexico, the attorney general's office said.

story key points:
STORY HIGHLIGHTS
* Officers arrested Saturday are on the police force in the city of Arteaga
* Slain agents were found Tuesday on a remote highway in Michoacan state
* Governor calls infusion of federal agents in Michoacan an occupation
* Governor's half-brother, said to be key figure in drug cartel, still at large