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MEXICO CITY (Dow Jones Newswires), October 9, 2008
Mexican President Felipe Calderon said Wednesday he is proposing to Congress giving autonomy to state oil monopoly Pemex to free the company from federal budget restrictions and give the government more money to spend next year.
The proposal was one of a number of measures that Calderon said the government is seeking to counter the negative effects on the economy of the global financial crisis.
The plan comes as the government and Congress consider the impact lower growth will have on next year's budget.
Calderon said effects such as lower growth and lower oil prices are likely to shave 28 billion pesos ($2.34 billion) off next year's expected revenue.
But rather than curb spending, Calderon said the government will seek to promote growth through investment in infrastructure.
"Instead of being obliged to cut public spending, we can propose measures to stimulate investment and mitigate the negative impact of the international financial turbulence," he said in an address at the presidential residence.
Among proposals for Pemex is the construction, beginning at once, of a new oil refinery using MXN12 billion in funds in a Pemex stabilization fund.
If the Congress approves autonomy for Pemex, and the state company is removed from the federal budget, it will be able to obtain its own financing without pushing the federal budget into deficit, Calderon said. That would give the federal government an additional MXN78 to spend next year, he added.
For years, Pemex has used project finance to fund its investment budgets, creating liabilities that show up in Mexico's public sector borrowing requirement but not in the federal government's debt.
Calderon said he is proposing to Congress that the financing scheme be eliminated, including paying off part of those obligations with available funds or Pemex's own resources, with the rest to be considered as Pemex debt.
Other measures include making MXN165 billion available for credit from government development banks to counter the international liquidity crunch, which is also having an effect on Mexican companies.
The proposal also includes measures to make public spending more efficient, a simplification of foreign trade procedures to make imports cheaper and easier, and facilitate the establishment of companies in Mexico.
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