Mexico opposition sees more funds from budget tweaks

MEXICO CITY: Mexico's main opposition party aims to revise central forecasts for next year's draft budget to put an extra $7 billion in state coffers in case a cloudy economic outlook worsens.

Lawmakers from the Institutional Revolutionary Party (PRI), the strongest faction in the lower house of Congress, said on Tuesday they expected higher oil prices and a stronger dollar to deliver more pesos from crude exports than projected.

As Congress negotiates the 2012 draft, PRI officials also said Mexico should allow for a slightly larger budget deficit to free up resources lest a global slowdown accelerates, putting pressure on Latin America's second biggest economy.

The combined measures should create an extra 100 billion pesos ($7.28 billion), estimated officials from the PRI, which ruled Mexico for 71 years until 2000. The centrist party is now in pole position to retake the presidency next July.

The outlook for the Mexican economy has darkened in recent months due to a slowdown in the neighboring United States, where Mexico sends nearly 80 percent of its exports.

Mexico is the world's No. 7 oil producer and PRI economic expert Jesus Cano said the finance ministry's assumption in last month's draft budget that crude would average $84.9 per barrel in 2012 ought to be ratcheted up.

"All the analysts forecast the price of a barrel of oil will be around $100 next year, so it could be four or even five dollars higher," Cano said, adding that exchange rate forecasts should also be adjusted to reflect the peso's recent fall.

The Mexican government relies on oil sales by state-owned monopoly Pemex to fund nearly a third of its budget. Because crude oil prices are factored in dollars, a stronger greenback will generate a higher return for Mexico in peso terms.

The draft budget predicted an average exchange rate of some 12.2 pesos per dollar in 2012, but the Mexican currency has fallen sharply since early August to nearly 14 per dollar.

President Felipe Calderon's finance ministry had hoped to trim next year's budget deficit to around 0.2 percent of gross domestic product (GDP) -- a figure excluding investment by Pemex -- from a shortfall of some 0.5 percent in 2011.

Yet the PRI said it made more sense to seek a deficit of 0.5 percent next year too, echoing a stance taken by the leftist opposition Party of the Democratic Revolution (PRD).

Along with Calderon's conservative National Action Party (PAN), the PRD and PRI are the three main parties in Mexico.

"The assumptions made for the draft budget are going to be altered," said PRI deputy Sebastian Lerdo de Tejada, a member of the lower house finance committee.

The budget is due to be approved in two steps: one by the end of this month, and the following by mid-November.