Mexico City (Platts)--24Jul2009

Lower oil prices, a slump in domestic crude production and the global
economic slowdown have left Mexico with a record $36 billion budget deficit,
Finance Minister Agustin Carstens said late Thursday, announcing the country's
second budget cut for the year.
The planned reduction now totals Peso 85 billion ($6.4 billion), with the
latest Peso 50 billion cut coming on top of a Peso 35 billion cut announced in
May, or 3.6% of its initial Peso 2.3 trillion budget.
"One fact that weighs heavily on all the figures I have presented is that
the volume of oil production has fallen 500,000 barrels/day during this
administration," Carstens said at a media conference. "That has had a big
impact on government income and we must do something to replace it."
The current Mexican administration took office in December 2006. Oil
accounts for about one third of the government's income.
Carstens said he was planning to raise taxes in order to boost non-oil
income and draw on about $7.5 billion in oil hedges in order to close the gap,
as well as slash spending.
He made no mention of cuts in spending by state oil company Pemex.
--Ronald Buchanan, newsdesk@platts.com