In Near-Unanimous Vote, Congress Approves Largest Budget in Mexican History

SourceMex Economic News & Analysis on Mexico, November 14, 2007 | Go to article overview

In Near-Unanimous Vote, Congress Approves Largest Budget in Mexican History


In a near-unanimous vote, the Chamber of Deputies approved the expenditures portion of the 2008 budget, authorizing the executive to spend about 2.57 trillion pesos (US$235 billion) during the year, about 152.5 billion pesos (US$13.9 billion) above the amount requested by President Felipe Calderon. In contrast, the 2007 budget was estimated at 2.32 trillion pesos (US$212 billion). The proposal--which contains a large increase in expenditures for social programs, public safety, and tourism--takes into account the recently approved tax reform and projections that global oil prices will remain high. The budget is the largest in Mexican history, administration officials said.

Calderon, whose original budget proposal did not include the tax reforms (see SourceMex, 2007-09-26), has said he supports the version approved by the Congress. The changes in the tax code include tax increases for business and gasoline (see SourceMex, 2007-09-19).

The expenditures budget (Presupuesto de Egresos de la Federacion), approved by a 449-to-6 margin, with three abstentions, received strong support from all the political parties represented in Congress. The initiative was approved on Nov. 12, just three days before the Nov. 15 deadline set by the Mexican Constitution. "This budget considers the proposals of all the different political parties," said Chamber of Deputies president Ruth Zavaleta, a member of the center-left Partido de la Revolucion Democratica (PRD).

Six dissenting legislators from the governing Partido Accion Nacional (PAN) cast a "protest" vote, accusing their floor coordinator Hector Larios of giving PRI legislative leader Emilio Gamboa Patron too much say in how the budget was shaped.

Tax reform, high oil revenues help boost spending

In October, the Chamber of Deputies approved the revenues portion of the budget (Ley de Ingresos de la Federacion), which, along with the tax increases, counts on the continuation of high global oil prices. The revenues budget, also set at 2.57 trillion pesos (US$235 billion), assumes an average oil-export price of US$49 per barrel, only slightly higher than the US$46.60 used in the Calderon budget plan.

The Calderon administration said the expenditures approved for 2008 are the largest in Mexico's history. "[This budget] is going to contribute to an increase in economic activity and job creation while reducing Mexico's economic risk," said Finance Secretary Agustin Carstens. He noted that the increase in government spending could help counter the negative effects of an expected economic slowdown in the US in 2008.

In addition to applying the anticipated increase in revenues, legislators funded large increases for social programs, health care, infrastructure, and education by chopping about 3.2 billion pesos (US$293 million) from the budgets of semi-autonomous agencies, including the judiciary (Poder Federal Judicial), the human rights commission (Comision Nacional de Derechos Humanos, CNDH), and the elections watchdog (Instituto Federal Electoral, IFE). Legislators said the cuts were relatively small when compared to the total budget allocated for the agencies, which totals about 47.8 billion pesos (US$4.4 billion). This compares with the 50.7 billion pesos (US$4.65 billion) contained in Calderon's proposal.

A share of the increased expenditures will go toward construction, improvement, and maintenance of highways and to upgrade and expand Mexico's water-distribution system. Funding was increased to 58.3 billion pesos (US$5.3 billion) for the Secretaria de Comunciaciones y Transportes (SCT), which will oversee the highway projects. …

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