| | |  News Around the Republic of Mexico | November 2009 
Mexico House Committee Passes Spending Part of Budget
 Adriana Lopez Caraveo & Thomas Black - Bloomberg
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November 16, 2009
 |  | The Congress earlier this month approved tax increases for the revenue side of the budget to keep deficit spending in check and help Mexico avoid a drop in its sovereign-debt rating. |  | | |
Mexico’s finance committee in the lower house of Congress approved the spending portion of the 2010 budget, calling for 3.18 trillion pesos ($243.9 billion) in total outlays.
The legislation calls for a deficit not including debt from state-owned oil company Petroleos Mexicanos of 0.75 percent of gross domestic product. The shortfall including Pemex debt will be 2.75 percent of GDP, the widest since 1989, according to Gabriel Casillas, chief economist at JPMorgan Chase & Co. in Mexico City.
The Congress earlier this month approved tax increases for the revenue side of the budget to keep deficit spending in check and help Mexico avoid a drop in its sovereign-debt rating. Standard & Poor’s said in May it may reduce Mexico’s BBB+ debt rating as Pemex’s production drops and tax revenue sinks during Mexico’s worst recession since the 1930s. Mexico’s economy shrank 9.2 percent in the first half of 2009 from a year ago.
The budget bill approved by the committee shifts 96.6 billion pesos of spending to infrastructure, agriculture, education, health and social programs from Mexican President Felipe Calderon’s original proposal. The funds were taken mostly from operational spending, the committee said.
Spending Cuts
The bill slashes operational spending by more than 90 billion pesos by capping salaries, eliminating positions through attrition, consolidating supply purchases and limiting the use of third-party consultants and services. Savings the government achieves will be reported to the Congress every three months and posted publicly on the Finance Ministry’s Web site.
Under a “national program for public spending reduction,” the bill would require Calderon to submit on March 15 a report on how to cut spending, including elimination of duplicate jobs and reducing salaries of high-level officials.
The legislation increases estimated revenue by raising the forecast for next year’s average oil price to $59 a barrel from $53.90 in Calderon’s proposal.
The full lower house of Congress is scheduled to vote on the bill later today. It’s not expected to be changed because the legislation already is running behind a Nov. 15 deadline mandated by law for passing the spending budget. The lower house of Congress, the only legislative branch that needs to approve the spending budget, extended an earlier session until today to comply technically with the deadline.
The lower house and Senate already approved the revenue portion of the budget this month.
To contact the reporters on this story: Adriana Lopez Caraveo in Mexico City at adrianalopez(at)bloomberg.net; Thomas Black in Monterrey at tblack(at)bloomberg.net
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