In Berlin at the EU summit, French President Nicholas Sarkozy and German Chancellor Angela Merkel reached late Wednesday night a “common position” on the Greek rescue. The final details will be hammered out Thursday, but a preliminary sketch revealed that the plan includes a 90-billion-euro debt reduction by creditors, and another 50 billion euros that will come from new taxes to European banks.

The Franco-German agreement was submitted to European Council president Herman von Rompuy, and European Central Bank chairman Jean-Claude Trichet acknowledged it will serve as the basis for a final pact that should be ironed out by all the ministers in Brussels Thursday.

European Commission president Jose Manuel Durao Barroso had warned hours before the Franco-German deal was announced that the situation was extremely serious, and that any type of deal required the participation of the private sector.

Telcel Profits Rise

Telecoms giant América Móvil, whose main unit is Mexico’s mobile leader Telcel, posted revenues of 159.7 billion pesos (about US$13.42 billion) in the second quarter, up 7.8% from the previous quarter, while net income or profits rose 14.1% to 24.15 billion pesos or US$2.02 billion, thanks in large measure to a substantial increase in subscribers in Brazil and Colombia.

In the line item relating to financing costs, which reflects the company’s financing strategy, the integral cost dropped 42.3% on a year-to-year basis, while net interest payments were basically unchanged and were partially compensated by currency exchange income.

As a result, the company’s shares traded on the Mexican Stock Exchange posted a significant rise, as did ADRs traded on the Big Board in New York. The favorable results came as the company, facing legal tangles in Mexico from an array of rivals, expanded markets throughout Latin America, with hefty investments in Brazil.

Gold Buys Denied

The central bank said Wednesday that a story by El Economista the previous day, stating that it had conducted a second purchase of gold this year, was incorrect. The story indicated that for the second time this year, the central bank increased its gold purchases as a component of international reserves, reaching 3.41 million ounces of fine bullion, the equivalent of US$5.234 billion, according to the central bank’s quarterly report to the International Monetary Fund at the close of June. The figure was an increase of 12.8% over the March number of US$4.638 billion.

As it clarified the story, central bank spokesman Ricardo Medina pointed out that the increase in the value of gold holdings was mainly due to the increase in the value of gold. The central bank strategy to boost gold reserves, is merely a way to diversify reserve holdings. Medina said the only purchase this year was reported on May 4, involving 100 tons, which brought gold holdings from US$294 million in January and US$985 million in February to US$4.638 in March, when total reserves were US$128.3 billion. As of July 15, Mexico’s monetary reserves stood at US$131.2 billion, in addition to a US$70 billion facility from the IMF.

Funds Eye Projects

According to private fund surveys and fund managers, private investment funds in Mexico are extremely liquid at this time, with up to US$3 billion ready to be channeled to strategic sectors. One fund manager, Fausto García, asserts that the most appealing sectors for fresh capital deals in Mexico today include health services, education, consumer goods and leisure, all of which are developing markets with huge long-term potential and sufficient demand.

Private capital funds are firms devoted to investments in medium-sized firms with over five years in their markets, with capital requirements of 50 million pesos or more. Private hospitals are a sector that offers enormous potential, since wage-earners are devoting more resources to private health care, the same as private education, in which universities have increasingly been turning to private funds for expansion financing.

One of the chief obstacles that private funds face in today’s environment, according to surveys, is the Mexican business culture, wherein business owners are still reluctant to share in management ruties with new partners, even though private funds are experienced in running businesses and enjoy key contacts.

Family Income Drops

Between 2008 and 2010, the average quarterly income of Mexican families dropped by 12.3%, while spending decreased 3.8%, according to a biannual study released by the National Statistics Institute, INEGI. During the same comparative period, general income decreased from 39,823 to 34,936 pesos. Outlays fell from 31,809 to 30,596 pesos.

According to INEGI’s National Home Income and Expenditure Survey, the monetary portion of total income fell more than the non-monetary component, decreasing 13.6% and 6.8%, respectively. Within monetary revenues, the biggest drops came in independent work with 38.9%, and property rentals with 34.8%. In non-monetary current income, fringe remunerations fell 43.6%, while auto-consumption dropped 21.4%.

INEGI, which provides very little information on methodology, says that of the 10 segments in which the population’s income levels are divided, says the 10th segment, corresponding to the highest incomes, was the one that suffered the greatest setback with 17.8%, while the first segment, representing the poorest families, experienced an income drop of 7.6% during the period covered by the survey.

Also, check out the following opinion columns:

“Rich and Powerful”, by Marco A. Mares

There are five groups of investors interested in acquiring the pension fund ING Afore. Unofficially, the fund¿s market value is US$2 billion. It is ranked third in the Mexican market, with assets of over 200 billion pesos. Outright divestiture is one of the options being analyzed. The ING data room is now open to interested parties. Among the playes are Banorte along with a Chilean partner, as well as Profuturo, which would vie along with another Chilean partner. The sale has its origins on the international financial crisis, after which the Dutch group decided to divest non-banking assets, to comply with a Dutch government bailout of 10 billion euros. In Mexico, the pension fund market shows a clear tendency towards consolidation, because margins have been squeezed to the limit.

“The Great Depression”, by Enrique Campos

Perhaps the greatest virtue of the proposal being cooked by the Gang of Six U.S. senators is that it involves sheer common sense. Maybe their names or the states they represent won’t tell us much, but the point is they are a bipartisan group, including Democrats Mark Warner of Virginia, Kent Conrad of North Dakota and Dick Durbin of Illinois; and Republicans Clarence Saxby Chambliss of Georgia, Mike Crapo of Idaho and Tom Coburn of Oklahoma. They’ve come up with a viable financial solution and a possible political plan to hike the debt ceiling, with the blessing of the White House. The basis to win supporters is that the plan esentially eliminates permisiveness on the size of the debt. It seeks to cut spending and, just as importantly, acknowledges that new taxes are indispensable to improve government revenues. Taking off with a spending cut of half a trillion, the plan would also eliminate tax exemptions. It’s a compromise plan that looms as the only solution today.

“Strongbox”, by Luis Miguel González

This week’s outlook: Rescue Thursday or Black Friday. There should be an agreement on Thursday, but Germany and France cannot agree, or if they do, they come up with something that Mediterraneans won’t accept. A solution to the Greek debt crisis is a must. If a deal is reached, it will be a first step to calm markets and avoid PIIGS contagion in Portugal, Ireland, Italy and Spain. If they don’t, it will be a tsunami. And it won’t be limited to Europe. The IMF warns of dire global consequences. How bad? About as bad as it was with the Lehman collapse. Bank busts and sharp drops in stock markets. Sharply higher borrowing costs for individuals, companies, countries. A comprehensive impact on the global economic growth outlook. The ECB’s Jean-Claude Trichet says that Europe’s problem is that is lacks a single voice. Same old selfishness.

rmena@eleconomista.com.mx