Mexico To Cut 1999 Budget
MEXICO CITY (AP) _ Mexico will cut its 1999 budget projections in the face of the steepest drop in oil prices in recent decades, finance officials said. Mexico had already pared its budget to the bone when oil prices began plummeting earlier this year.
The acknowledgment Friday that the budget may have to be trimmed again is another setback for President Ernesto Zedillo, who already faced heated criticism over austerity measures, tax increases and a bailout of private banks that may cost taxpayers more than $67 billion.
``We are working with congress to find ways to compensate for the loss in public revenues, and at the same time make an efficient attempt at austerity,″ Zedillo said Friday.
The Finance Secretariat announced that oil revenues ``may be $850 million to $1.7 billion lower than forecast″ in the 1999 budget proposal sent to congress three weeks ago, which projects $102 billion in spending for 1999.
``During the last month, the average price of Mexican oil has fallen by about three dollars, and today reached $7.50 per barrel, the lowest level in modern history,″ Energy Secretary Luis Tellez wrote Thursday in a letter to Finance Secretary Jose Angel Gurria, which was faxed to The Associated Press.
The original estimate in the 1999 budget draft forecast an average oil price of $11 per barrel.
Oil exports account for about a third of government revenues.
Mexico reduced its programmed spending three times in 1998 as oil prices fell sharply, eventually cutting about $3.6 billion from the budget, or 0.96 percent of the gross domestic product.
The government also gradually reduced its average oil price estimate for 1998 to $11.50 a barrel from an original estimate of $15.50 a barrel.
Finance Secretary Jose Angel Gurria submitted the 1999 budget proposal to Congress Nov. 13, calling it the most ``austere″ budget in 20 years. Spending allocated in the budget for government programs is 0.5 percentage-points lower in relation to gross domestic product than it was in 1998 after the three rounds of cuts.
The 1999 budget aims for economic growth of 3.0 percent and inflation of 13 percent, while keeping the fiscal deficit to 1.25 percent of GDP.
The budget also estimates average crude oil exports at 1.645 million barrels a day, unchanged from current levels. As part of a wider agreement by oil producers, Mexico in June agreed to cut oil exports by 200,000 barrels a day in an attempt to shore up flagging prices.
Tellez said last month Mexico was willing to maintain that export level to the end of 1999 from the current deadline of June 30, if members of the Organization of Petroleum Exporting Countries, or OPEC, would do the same.
OPEC members failed to reach an agreement at their meeting in Vienna in late November, sending oil prices to new lows.
Boston-based Cambridge Energy Research Associates estimates the average price of West Texas Intermediate crude in 1999 at $13 a barrel. Mexico’s basket of export crude oil generally trades around $3 to $3.50 a barrel lower.
Another OPEC meeting is scheduled for March 1999.