PREVIEW-Mexico lawmakers to move on 2011 budget by Wednesday

* Lawmakers to vote on key budget points by Wednesday

* Opposition parties expected to raise spending

* Ratings agencies warn against more debt

By Miguel Angel Gutierrez and Patrick Rucker

MEXICO CITY, Oct 18 (BestGrowthStock) – Mexican opposition
lawmakers will likely vote on Wednesday to expand deficit
spending in 2011 in defiance of conservative President Felipe
Calderon and despite warnings from investors.

Calderon asked lawmakers to keep a lid on deficit spending
when he presented his 2011 budget in September, but opposition
legislators are likely to justify new outlays as Latin
America’s No. 2 economy struggles out of a deep recession.

A proposal backed by the populist Institutional
Revolutionary Party (PRI) would raise the deficit, not
including investment by state oil firm Pemex, to 0.6 percent of
GDP, compared to 0.3 percent in Calderon’s budget proposal.

The 2010 budget envisioned a non-Pemex deficit of 0.75
percent of gross domestic product (GDP).

PRI lawmakers, hoping to help states hurting after severe
rains and eyeing 2012 presidential elections, are also likely
to raise the expected price of oil to $67 a barrel compared to
Calderon’s proposed $63 a barrel — another move that could
justify greater spending in 2011.

The vote by the lower house treasury commission this week
on the revenue portion of the budget bill is the first step
toward passing a budget that will send investors a signal about
Mexico’s fiscal intentions in 2011.

A bulging deficit and greater spending could be a drag for
Mexico, whose debt was downgraded last year after a budget
battle in which Calderon won only a modest increase in the
value-added tax.

Some PRI lawmakers have signaled that they want to push the
VAT back down to 15 percent from the 16 percent Calderon passed
last year, but divisions have appeared within the PRI as some
of its governors call for more federal spending to help them
recover from a devastating hurricane season.

Economists and ratings agencies would likely grow uneasy if
lawmakers appeared to manipulate budget forecasts in order to
justify more spending.

“Revising upward the macroeconomic assumptions in order to
rearrange the federal budget will be imprudent given the
probable scenario of a global slowdown next year,” Alfredo
Coutino, senior Latin America economist at Moody’s Analytics,
told Reuters last week.

The revenue portion of the budget bill, after being
approved by the full lower house, must be passed by the Senate
by Oct. 31. The lower house must also approve a spending bill
before the budget is finalized.

Mexico’s tax take, as a percentage of economic output, is
on a par with Sierra Leone.

(Editing by Missy Ryan and Chizu Nomiyama)

PREVIEW-Mexico lawmakers to move on 2011 budget by Wednesday