Mexico News and Analysis: August 23-29, 2010

1. MEXICANA CANCELS ALL FLIGHTS
2. TRAVEL WARNING FOR PARTS OF MEXICO
3. CALDERON TO PROHIBIT LARGE CASH TRANSACTIONS
4. SEVENTY-TWO IMMIGRANTS KILLED BY CARTEL


MEXICANA CANCELS ALL FLIGHTS
Mexicana de Aviacion and its low-cost affiliates, Click and Link, canceled all national and international flights as of as of midnight Friday, leaving hundreds of pilots, baggage handlers and stewards unemployed and stranding thousands of passengers around the world.  Mexicana is Mexico’s largest airline and has benefited from numerous government bailouts over the years.  The Mexican hotel chain Grupo Posadas bought the airline from the State in 2005 for US$165.5 million.  The Calderon administration refused to offer State funds this time. Tenedora K, a group of private investors, purchased the airline earlier in the week for a symbolic payment, but then backed out of a rescue plan after failing to reach agreements on draconian wage cuts and layoffs with Mexicana unions.  Investors tried to fire all the flight attendants under bankruptcy law, then rehire about a quarter of them.  The plan, which would have resulted in lower severance pay than called for in their union contract, was rejected by federal authorities.   Mexicana declared bankruptcy in US and Mexican courts earlier in the month after two of its planes were seized by creditors in Canada.


TRAVEL WARNING FOR PARTS OF MEXICO
The US State Department issued a revised travel warning on August 27, authorizing the departure of family members of US government employees from the Consulate in Monterrey.  Restrictions on family members of consular officials stationed in the border cities of Tijuana, Nogales, Ciudad Juarez, Nuevo Laredo and Matamoros remain in place.  The updated travel warning was issued in response to increased activity by narcotics cartels struggling for control of the lucrative Monterrey market and transshipment routes.  Officials estimate the city generates US$40 million per day in illicit profits.  Traditionally a refuge for cartel leaders and home for wealthy northern businessmen, over the past six months Monterrey has become the center of a struggle for control of border transshipment routes.  Cartels battle each other, the army and marines have an increasingly public presence throughout the city, and several local politicians have been killed.  Cartels often hire unemployed youth from poor barrios to block major highways.


CALDERON TO PROHIBIT LARGE CASH TRANSACTIONS
In an effort to control money laundering, the Calderon administration introduced a series of initiatives in Congress that would prohibit cash purchases of over 100,000 pesos (about US$7,600).  The proposal includes purchases of real estate, jewelry, automobiles, airplanes or boats.  Violators would face prison terms of five to fifteen years.  Mexicans are accustomed to conducting business in cash and the new rules will likely prove a boon to the formal banking system, already among the most profitable in the world.