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NEWS & POLITICS - Arrivals Growth

2008 Arrivals Growth Encouraging Full-year 2008 tourist arrivals figures released by the Ministry of Tourism (Sectur) indicated that arrivals growth increased in 2008. International tourist arrivals totalled 22.6mn, representing growth of 5.9% year-on-year (y-o-y) from the 21.4mn registered in 2007. This was a sharp increase from 2007, when arrivals grew by only 0.1% y-o-y.

Indeed, 2008 arrivals slightly overshot our forecast, following a spike in arrivals in December, reflecting increased visits home for Christmas by Mexicans living in the US. In addition, tourism receipts rose, although at a slightly lower rate, growing by 4.6% y-o-y to total US$10.8bn. These data are particularly encouraging given that Mexico's economic prospects have been slumping sharply since mid-2008, in line with the recession in the US. Higher arrivals figures may actually represent greater arrivals from the US, as US citizens choose to take holidays in nearby Mexico rather than in more distant and expensive regions such as Asia and Europe.

In addition, potential visitors may have become inured to the worsening security situation in Mexico, with 2008 tourists now fully aware of the risks. However, these positive 2008 figures are unlikely to be carried over into 2009. With the global economic slowdown continuing throughout the year, and the US in particular forecast to remain in recession throughout 2009, Mexico will suffer in line with the global tourist industry. As such, we are maintaining our 2009 forecast of 22.1mn arrivals in 2009.

US Boosts Support To Mexico

In early April the US government indicated that it would increase funding to Mexico in order to help combat cross-border crime. This would represent an increase in the Merida Initiative, a US$1.4bn three year aid program intended to increase US-Mexico co-operation on border crime. Thus far, the US government approved US $400mn in 2008, and in March approved a further US $300mn. The Mexican government intends to use these funds to purchase weaponry and equipment, including five new helicopters, as well as providing support for training initiatives. Although the initiative specifically rules out joint military operations between US and Mexican forces, co-operation will be increased in terms of intelligence, with the aim of curtailing the activities of the drug cartels in the border areas.

Between January 2008 and March 2009 cartel violence has caused more than 7,000 killings, largely concentrated in the border areas. Mexico Seeks To Attract Medical Tourism With tourist arrivals weakening, the industry is seeking new markets to bolster numbers. In particular, the industry is looking to medical tourism, long a strong component of tourism in countries such as India. Given the high costs of medical insurance and medical procedures, Mexico is seeking to position itself as a lower cost alternative for Americans.

In particular, with unemployment rising in the US and wage increases slowing, more families and individuals are unable to afford medical insurance or lose it along with their jobs. As such, in early 2009 national airline Aeroméxico agreed a partnership with the Medical Tourism Association in order to encourage more US patients to visit Mexico. Under this agreement, discount airfares will be available for US health insurance companies and providers in order to ease the transfer of treatment to Mexico.