15 minutes with...; Leticia Navarro: Tourism secretary lays out government's prospects on a US$8.5 billion industry in this time of upheaval.

During this time of global uncertainty--marked by the threat of war, economic lethargy and heightened security--Tourism Secretary Leticia Navarro faces a daunting array of challenges. Charged with protecting and developing Mexico's third-largest source of foreign currency regardless of the present adversity, she remains upbeat about the competitiveness of the nation's tourist infrastructure and the future prospects of the industry.

In an exclusive interview with BUSINESS MEXICO at her office in the wealthy Polanco area, the Cabinet member touted the tourism sector's economic growth despite the global economic slowdown. Additionally, she spoke on other factors that are currently big news in the industry, namely polluted beaches in Guerrero, the threat of violence against foreigners in Chiapas and the safety of Mexican tourist spots in case of U.S.-led war with Iraq.

We have been in a prolonged recession since last year, what is your opinion about the performance of the tourism sector during this time?

Well, to be able to answer you, we have to look at what's happened in the world. According to data from the World Tourism Organization (WTO), last year--despite the impact of 9/11 and of slow economic performance in general and in the world's most important economies--there was a 3% increase in the amount of international tourism. Although the economic impact generated by the greater number of tourists was not reflected by greater spending, Mexico's performance last year can be considered quite satisfactory. We didn't increase in the number of international visitors, but we did grow 5.4% in terms of the foreign currency spent by tourists.

We arrived at US$8.858 billion compared to US$8.4 billion in 2001. That's a record number. And I insist, under the general perception that there will not be growth, economically speaking, of the world's tourism sector, those are very important statistics, especially in a region that, also according to the WTO, is not showing growth but a decrease. The regions that are showing growth in the number of tourists are in Europe and Asia. So, under that global perspective we feel very satisfied that Mexico's tourism sector in its totality, all of the participants, are following the same guidelines, are working in the same manner, with a lot of synergy and these are the results.

You just made reference to the quantity of money that Mexico attracts from foreign tourists. Talking about domestic tourism, what will be done to promote it during this difficult time, to possibly negate the effects that external factors might have on the flow of foreign tourists?

For us, domestic tourism is a fundamental element of the country's tourism policy. Up to 85% of income, that is to say, the maintenance of infrastructure, of jobs depends on the extremely elevated proportion of domestic tourism. For that reason, we have, since last year, been investing a larger portion of the budget on promoting domestic tourism. I'll give you a figure. In 2000, only 20 million pesos were invested in the promotion of domestic tourism. Last year, that figure was 170 million, combining the efforts of the federal government plus cooperative programs that were done with the states and other commercial partners.

So for us, the effort that was achieved resulted in 1.3% growth in the number of tourists staying in hotels. We still don't have figures on how that growth is economically reflected. The INEGI [National Geographic and Statistic Institute] won't have that information for a couple more months, but I definitely insist it [domestic tourism] is a central part of our strategy.

In the news lately, there have been reports that certain parts of the Guerrero coast, particularly Acapulco and Zihuatanejo, have very high pollution levels, and possibly levels that are too high to be safe for swimming. Do you think those reports are true and what will the Secretariat do to calm those concerns?

Within this administration's tourism policy are sustainable destinations. One of the tools we are using in sustainable destinations is the application and the development of Agenda 21. for local tourism, which was devised and presented last year. Agenda 21 has the obligation to ensure that any tourist development, whether it be current or in the future, has all the facets and certifications of sustainable development. The studies that have been released today unfortunately are not precise enough to avoid generalizations.

To begin with, it is not all Zihuatanejo. There are problems, we have to accept and recognize them. We cannot close our eyes to that reality but it is not all Zihuatenejo, it is one or two beaches and we have as a responsibility to update those studies, which is being done through monthly monitoring.

This is a theme that is not new for us, we have accepted it and taken it up for the more than two years we have been in this administration and we have transformed it into a strategy. Specifically in the case of Zihuatanejo, since last year, all of the entities involved have been working on a program of actions that clearly specifies what is required for the specific cleaning of these few beaches in the Bay of Zihuatanejo, where the three levels of government have been contributing resources. I think it is very important to precisely identify the specific problem because eventually it comes out of context and people think that all Zihuatanejo, and later on, all of Mexico's beaches are polluted and that's the last thing we want.

In December, a problem in Chiapas began in which a group of Indians demanded that some U.S. citizens who owned land there leave the area and, in the end, they said they would. Since then, the U.S. State Department has warned its citizens not visit some areas of the state. It also gave some recommendations for people traveling to Cancun for spring break or other reasons. What is your reaction to these warnings?

What we see at the end of the day are objective and practical figures. Since November 2001, the Tourism Secretariat has been conducting an exit survey, a survey to know the level of satisfaction of foreign tourists in our country. About 70% of tourists that visit us from abroad come from the United States [This figure does not include border tourism]. For us, it is very important to know their opinion once they have lived the experience of Mexico. Close to 20 million tourists visit us [annually] and in this study, we know that for more than 60% of them, it's at least the second time they have come to Mexico.

One element that has been consistent during the year and several months we have been conducting this study is that to them, Mexicans' hospitality, the manner in which we receive them and the way they are accepted in our society is highly satisfactory.

The only thing I can tell you is that Americans have always been welcome in Mexico and they feel it ... Before we began the interview, I spoke about the economic relevance this sector has and the benefits it generates for a lot of Mexicans. This sector gives Mexico close to 2 million direct jobs. So, many Mexicans benefit from this economic sector.

Something that all tourists tell us--not only Americans, but also Europeans and others from all over the world--is that they feel very happy in our country. We have a vibrant culture. We have a lot of history and a very rich and historic national heritage and very unique natural beauties. The mixture of all this makes tourists and even domestic travelers--a group six times larger than that of foreign visitors--feel good, and obviously we are pleased with that.

If you would allow me to change the subject, the peso has weakened against the dollar due to external factors, like Iraq. What repercussions will this devaluation of the peso have on Mexico's tourism sector? Do you think the number of tourists will increase?

We did an analysis some time ago to understand what are the effects of the peso-dollar relationship on the tourism sector, and it's very complex. It depends on if you ask me what happens in the areas where there is more international tourism versus what happens in places where the tourists are primarily nationals.

What we have seen, and this is historic, for example, when there was the great peso devaluation in Mexico at the end of '94 and the beginning of '95 is that when the devaluation is very strong--which in that case, we are talking about a devaluation that was 200% or something like that--we see gigantic growth in the number of visitors. [The 1994 devaluation] led to a record number of visitors in Mexico, but in terms of foreign currency, it was not that important.

From what we are watching nowadays, the peso-dollar relationship is not significant either in attracting more tourism or generating greater or less foreign currency. We are at a point where things seem to be more or less balanced.

If the United States were to attack Iraq, what general effects might it have on the tourism industry in Mexico?

I am going to answer that backwards and then tell you the way we are viewing it. Without a war, the number of arrivals to Mexico has the possibility of growing between 4% and 5%. We still do not have the statistics from January, as the Bank of Mexico is responsible for auditing the national tourism situation. But from the hotel occupancy rate that we have seen in January and so far in February, I would say to you we are already experiencing that level of growth compared to last year.

So, if there is not a war, this tendency could continue, and even grow, because with the investment we have made in publicity, specifically the [U.S.-targeted] ad campaign, "Mexico closer than ever," we are hoping to continue to enjoy this flow of tourists to our country.

What would happen inversely [if there were a war with Iraq] is very hard to answer because the scenarios are very varied. If you told me the war was going to start in a week or a month or within three months or within six months, that will determine the performance of the sector. What I can tell you is that we know no one will benefit economically from a war, especially this sector, a sector that has always been affected by bellicose conflicts.

The world tourism industry could contract and obviously Mexico would not be the exception, but it is our responsibility in the face of this risk to develop a strategic contingency program, and that's what we have done. This contingency program allows us to ensure that if the size of the [world tourism] pie is reduced, Mexico will make a strong effort to maintain its standing in this market.

What does this mean? It means after 9/11 we saw a series of strategies that worked very well, and obviously we would look to strengthen them. Like what? I already spoke about the domestic market, which is extremely important. We see that at times of war, people--not only in Mexico but all over the world--concentrate more in regional trips. They stop taking long-distance flights and the decisions about taking a vacation are made more closely to the [planned departure] date because of the uncertainty that exists.

Considering all of these elements, we will continue to promote, in a very important way, domestic tourism. Our geographic proximity to the United States will help us a lot, and we will continue to strengthen it through the "Mexico closer than ever" campaign. In this sense, roadway tourism is very important, and we will continue reinforcing it and better communicating what we have achieved to facilitate tourism to our country.

And obviously we will not stop trying to attract European visitors through the diversification of our program. Europe has suddenly discovered Mexico. We returned from Spain a week ago and heard that Mexico is a hot item and very attractive, particularly in regards to cultural offerings. To them, Mexico is an exotic destination ... so, living an experience in Mexico becomes something very interesting for Europeans, and we will continue to capitalize on that interest.

Under that perspective, that is the way the Mexican tourism sector would react in the face of a wartime situation.

You just said people would begin to take more regional trips in a time of crisis, does this include people from the United States who would want to come to Mexico because of its proximity?

Of course. Just think that from the farthest point of the United States, arriving to Mexico takes 4 hours and is considered to be a regional trip, a trip within the zone. For visitors from the U.S. East Coast--who are more accustomed to Mexican Caribbean destinations--are beginning to show interest in the Pacific Coast. For example, Oaxaca is being discovered and is beginning to have an enormous influence on that market.

So, yes, without a doubt, many Americans are continuing to opt to travel to our country. And part of the publicity strategy we used last year besides "Mexico closer than ever" was to start selling the diversity of our country, not only sun and beach, but also the cultural part and the eco-tourism part.

We have focused our strategy on market segments with a greater buying power and you have seen us, without a doubt, and you will continue to see us very emphasized, working very hard in the segments of golf, of aquatic tourism, fishing. At the end of last year, we achieved passage in Congress of 0% IVA (Value Added Tax), starting in 2004, for all conferences, conventions and trade fairs that come to our country, which will make us more competitive in that kind of business.

Last month, there was a report in Reforma newspaper that Interior Secretary Santiago Creel, during a trip to the United States, said if there were a war with Iraq, there could be attacks against foreign and tourism interests in Mexico. What is your opinion regarding that declaration?

I think the world is living in a time of very dramatic change ... The only thing I can tell you is that Mexico continues to be a safe and trustworthy destination for tourists. If this were not the case, we would not have 20 million people visiting us (annually]. We would not be seeing the repeat tourists that we are seeing, and we would not be seeing the visitor profile that we have, with greater expenditure per capita, compared to last year. I think that at the same time that I tell you about the contingency plan we are anticipating in case there is a military conflict, all countries have to be prepared because the world dynamic is completely different.

You talked about preparation, what measures has Mexico taken to protect its tourist installations in case there is a war and in case there is some sort of threat?

Since the year before last, due to 9/11, we began a security commission for tourism activities in our country. This committee, which meets regularly and with which we work on a regular basis, works under six lines of strategic action and an important number of specific actions in each area, where the Navy, Defense Secretariat, Attorney General's Office, Public Safety Secretariat, etc. are involved. I think it is the responsibility of the whole country to be watching out for visitors' integrity.

It is within these groups, in which 13 government agencies participate, that we are always looking at what could be a threat for tourists and how to neutralize it ... We also, with a lot of success, last year began to create these security commissions at the local level. I insist, the rules of the game in the world today are very different.

Armanda Saliba is the associate editor of BUSINESS MEXICO.