| | |  Business News | September 2009 
Carstens: Mexico has Been Addicted to Oil
 Reuters
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September 18, 2009
Mexico City - The Secretary of Finance Agustín Carstens urged lawmakers to approve new taxes to offset lower oil revenues, saying the country's struggling energy industry would not recover quickly.
The government of President Felipe Calderon has proposed hiking income and consumption taxes in 2010 to offset lower revenues from crude exports as output from Mexico's state-run oil industry is expected to remain weak.
"This fall (in oil production) is going to last for years ... Mexico has been addicted to oil for many years. We've been avoiding an important decision about how to give the state resources that allow it to carry out its functions," Carstens said at a congressional hearing on the budget proposals."
Oil production has fallen by nearly one-quarter since peaking at 3.38 million barrels per day in 2004, far faster than state oil monopoly Pemex had expected.
Mexico has traditionally relied on taxes on oil production to pay for nearly 40 percent of government spending, but yields at its aging fields have pushed production down to near 20-year lows.
Standard & Poor's and Fitch Ratings have both warned they could cut Mexico's sovereign debt rating unless action is taken to shore up public finances.
The Calderon government's budget proposal forecast that oil output will average 2.5 million bpd in 2010, and that production will remain flat through 2012.
Mexico produced an average of 2.619 million bpd over the first seven months of this year, according to state oil monopoly Pemex.
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