Mexico Peso Gains for 2nd Week on Bets Budget Reforms Will Pass
Oct. 16 (Bloomberg) -- Mexico’s peso rose for a secondstraight week on mounting speculation Congress will approve thegovernment’s deficit-cutting measures.
The currency gained 1.5 percent this week to 13.111 perU.S. dollar at 5 p.m. New York time, from 13.3070 on Oct. 9. Itfell 0.2 percent today.
President Felipe Calderon last month proposed a 2010 budgetthat would increase consumption and income taxes while reducingspending by 218 billion pesos ($16.6 billion) as he seeks torein in a deficit that’s widening as oil output falls. Standard& Poor’s said it may cut Mexico’s BBB+ credit rating before theend of the year, depending on the tax laws Congress enacts.
“The expectations are high that something will come out ofthese negotiations and that a durable fiscal reforms packagewill be passed, therefore averting a sovereign creditdowngrade,” said Paresh Upadhyaya, who helps manage $21 billionas a senior vice president at Putnam Investments in Boston.
Both S&P and Fitch Ratings have a negative outlook onMexico’s ratings, the third-lowest investment grade.
Lawmakers from the Institutional Revolutionary Party, thecountry’s biggest opposition party, are split over some aspectsof the proposal, especially a plan for a 2 percent consumptiontax on all products. The lower house finance committee isdebating the budget, and deputies are scheduled to vote on theincome portion of the budget by Oct. 20 and the spending segmentnext month.
The central bank today kept its benchmark interest rateunchanged at 4.5 percent for a third month, saying the economymay have touched bottom and started an “expansion” phase.
The yield on Mexico’s 10 percent bond due December 2024 wasunchanged at 8.09 percent, according to Banco Santander SA.
To contact the reporter on this story:Catarina Saraiva in New York at asaraiva5@bloomberg.net
Last Updated: October 16, 2009 17:27 EDTSource: Bloomberg
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