| | |  Business News | September 2009 
Mexico Sells $2.4 Billion in Bonds to Help States
 Associated Press
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September 15, 2009
Mexico City - Mexico sold 32 billion pesos ($2.4 billion) in bonds to compensate state governments for a drop in federal funding as a result of an economic crisis, the finance secretary said Monday.
The bonds, sold domestically, are backed by a 13 billion peso stabilization fund that absorbs windfall oil income, Finance Secretary Agustin Carstens said at a news conference. He said the government exceeded its goal of selling 26 billion pesos in bonds because demand was higher than expected.
The bonds have a maturity of 13 years. Proceeds will be distributed among all 32 Mexican states.
Mexico, mired in one of its worst economic downturns since the 1930s, has seen a steep drop in income from oil and other exports. It also has seen a huge plunge in the amount of money sent home by Mexican migrants in the United States.
The central bank estimates the economy could contract up to 7.5 percent in 2009.
In July, Carstens said the world financial crisis and lower oil prices have slashed expected revenue for Mexico's government by 480 billion pesos - the biggest shortfall on record. He said Monday that federal transfers to state governments have dropped 20 percent.
Last week, President Felipe Calderon proposed eliminating three government departments and raising some taxes in an austerity plan to free money for fighting poverty.
Carstens said 10,000 people would be laid off under the proposal.
The plan would roll the Department of Tourism into the Economy Department, reduce the Public Administration Department to a comptroller's office and split the duties of the Agrarian Reform Department between Agriculture and Social Development.
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