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 Business News | September 2005 
Fox, Lawmakers Ready For Clash
 El Universal & Wire reports
| | Opposition lawmakers say the president's spending bill for 2006 is overly conservative. |
Mexico City – President Vicente Fox and opposition lawmakers seem headed for a clash over the 2006 budget, even as an ongoing dispute over this year's budget has yet to be resolved.
Next year's spending bill, which was sent to Congress late Monday, is balanced, and projects an average oil price of US31.50 per barrel of Mexican crude, even though oil prices are currently over US51. It calls for spending of 1.88 trillion pesos (US176 billion) and a fiscal surplus equal to 0.2 percent of gross domestic product. It predicts economic growth of 3.6 percent.
With no party dominating in Congress, the budget has become an annual battle for Fox, and he has gone on the offensive early this year following early signals from legislators that changes will be made.
"We hope the legislative branch, and in particular the Chamber of Deputies, take a responsible attitude to agree on a budget that the country needs," presidential spokesman Rubén Aguilar said on Tuesday.
Fox and his aides have said a cautious budget for 2006 is necessary, in order to ensure economic stability in an election year in which Fox's successor will be chosen.
Congress has until Nov. 15 to debate, modify and approve the budget for next year.
However, lawmakers from the Institutional Revolutionary Party (PRI) and the Party of the Democratic Revolution (PRD) have called the prediction for oil prices overly conservative, and want a spending bill that puts the price per barrel in the range of US36 to US44.
Fox's plan would use excess revenue from higher-than-expected oil prices to pay down the country's international debt. According to the Finance Secretariat, the proposed budget would allow Mexico to cut foreign-currency debt to 6.8 percent of gross domestic product from 9.8 percent in June.
"The key question mark is whether there will be political willingness to approve a budget surplus proposal in the congress," said Alonso Cervera, an economist from Credit Suisse First Boston, in an interview with Bloomberg News. "Most of the oil windfall has been spent in recent years." Mexico managed to save only US1 billion of about US30 billion in unexpected oil revenue it has earned since 2003, said Cervera.
Much of that revenue has gone to state governments.
Another point of contention is a proposal to cut taxes on national oil company Pemex. While Pemex earns billions of dollars annually, it is unable to carry out exploration projects to replace dwindling reserves because about two-thirds of its revenues go to the federal government.
Fox recently vetoed the proposal approved by Congress, saying the bill would have excessively restricted federal spending. He has since called for a more gradual reduction in taxes for Pemex.
Last year, Fox's budget ran into trouble when opposition lawmakers in the lower house of Congress slashed funding to the cabinet and boosted education, farming and infrastructure spending.
Calling the bill "inviable," Fox presented a constitutional challenge to the Supreme Court, which then froze the portions of the budget that were in dispute. The court has ruled that a twothirds vote in the lower house can overturn a presidential veto. Lawmakers have yet to vote on the matter, however.
AP and Bloomberg News contributed to this report. |
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