Mexico's congress to get 2010 budget bill after Senate approval
By Jens Erik Gould
and Adriana Lopez Caraveo
Bloomberg
after Mexico's Senate passed the 2010 budget legislation and new fiscal rules late Friday, the lower house of congress was scheduled Saturday to debate legislation aimed at shoring up the country’s credit rating.
Senators approved an increase in sales tax to 16 percent from 15 percent as well as higher income taxes, going along with measures passed last week by the lower house.
The Senate changed a proposal for a 3 percent levy on telecommunications by excluding Internet services.
Mexican President Felipe Calderon has pledged to strengthen public finances as oil production declines.
The Senate’s passage of the sales-tax increase and its decision to keep other portions of the legislation approved by the lower house might be enough for Mexico to avoid a credit rating cut, said Paulo Leme, chief Latin America economist at Goldman Sachs Group Inc.
“The effort warrants not changing the rating and keeping it on negative outlook,” Leme said in a telephone interview.
The legislation still needs final approval by the lower house, which by law must pass the income portion of budget Saturday. The spending portion must be approved by Nov. 15.
Mexico, which in 2000 became the second country in Latin America after Chile to earn an investment-grade rating, has a negative outlook from both Standard & Poor’s and Fitch Ratings, who rate the nation’s debt BBB+.
The rating companies say they might downgrade Mexico should the government fail to contain the deficit. Moody’s Investors Service rates Mexican debt Baa1, also three levels above junk.
