Mexico Plans More Budget Cuts for 2017 Due to Weaker Exports, Low Oil Production Anthony Harrup - WSJ.com
go to original April 3, 2016

The Mexican government plans to cut spending by an additional $10 billion in 2017 amid moderate economic growth, lower oil production and continued low oil prices, the Finance Ministry said Friday.

In a preliminary outline of next year’s budget, the ministry said it would reduce spending by 175 billion pesos, in addition to the 132 billion pesos cut from this year’s budget.

The 2017 budget proposal will be based on an estimated crude-oil price of $35 per barrel. That is above the $25 per barrel it expects for this year, although the government has hedged 2016 oil revenue at $50 per barrel.

Crude-oil production is seen falling to 2.03 million barrels a day in 2017 from 2.12 million this year, partly as a result of the budget cuts at state oil company Petróleos Mexicanos.

President Enrique Peña Nieto has to submit next year’s budget proposal to Congress by Sept. 8, and some of the macroeconomic assumptions could change by then.

The Finance Ministry reiterated its commitment to not to increase taxes or resort to higher debt to cover spending. A tax overhaul in 2014, and the drop in oil prices, has lowered the government’s dependence on oil to less than 20% of the budget, when in previous years it accounted for more than a third.

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