| | |  Business News | June 2009 
Mexico Finance Minister Reiterates Need for Reform
 Robert Campbell & Luis Rojas - Reuters
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June 18, 2009
| | Mexico Finance Minister Agustin Carstens | |
Mexico City - Finance Minister Agustin Carstens reiterated his call for an overhaul of Mexico's finances on Thursday despite skepticism from politicians, including ruling party members over the need for reform.
Bond rating agencies have warned Mexico's sovereign debt rating is at risk of being downgraded due to excessive reliance on the fading state-run oil industry for revenues.
Rumors that Mexico's rating was about to be cut roiled the peso last week although analysts expect the agencies to wait until after July 5 mid-term elections for the lower house of Congress before acting.
"We have to promote a structural reform agenda that guarantees in the medium and long term not only sustainable public finances (but also) the competitivity of the economy," Carstens told a banking conference.
"These reforms, which can only be created through a wide consensus and a genuine sense of urgency, are particularly important so that the Mexican economy not only returns to growth but also so that growth accelerates," he said.
Mexico depends on oil revenues to fund more than a third of the federal budget, but export volumes have fallen to near 20-year lows as output from the giant Cantarell field, the industry's backbone for decades, has begun to decline rapidly.
Income and sales taxes are equivalent to only 8.8 percent of Mexico's gross domestic product, less than half of what developed nations take in and below the 11.3 percent average for Latin American countries, according to the central bank.
Nevertheless, politicians have been reluctant to embrace talk of fiscal reform as they battle through the final weeks of the election campaign.
The head of the ruling National Action Party (PAN), which faces an uphill fight to remain the largest bloc in the lower house of Congress, said in an interview this month the party would not support tax hikes "under any circumstances."
Other politicians have been equally emphatic, arguing that raising taxes as the country exits its worst recession since the mid-1990s "Tequila Crisis" could kill off any recovery.
Central Bank Governor Guillermo Ortiz, an advocate of fiscal reform, has urged the Congress to enact a medium-term program of gradual reform that will protect the economy while bolstering Mexico's credibility with debt markets.
(Editing by James Dalgleish) |
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