Mexico unveils emergency spending to combat crisis
Posted: Oct 9, 2008 04:58 PM MDT
MEXICO CITY (AP) - President Felipe Calderon on Wednesday unveiled plans for $4.4 billion in emergency spending on roads, schools, hospitals and an oil refinery next year to help Mexico combat the world financial crisis.
In a televised address, Calderon assured Mexicans the nation's banks are solid and haven't slowed lending to companies or individuals, despite a global credit crunch that has sent stocks here tumbling and seen the peso weaken to a record low against the dollar.
The 53 billion pesos ($4.4 billion) in additional investment for 2009 would be used "to build infrastructure projects that will bring direct social benefits to millions of Mexicans and help keep our economy on track," Calderon said.
The proposal, which was sent to Congress on Wednesday, "is not a financial rescue package, but will focus on strengthening the motors of our economy" to mitigate the negative effects of the crisis, he said.
The proposal includes 10 billion pesos (US$837 million) for energy projects, including a new oil refinery. The refinery will be the first built in almost 30 years, he said.
The plan also calls for spending some 26 billion pesos (US$2 billion) on building roads, houses, schools and prisons.
Calderon said the plan would also support small- and medium-sized businesses by expanding their credit and allowing them to bid in government projects.
Calderon said a 28 billion pesos (US$2.3 billion) decrease in public income is expected for next year due to a drop in remittances, falling oil prices and a slowdown in tourism.
Earlier Wednesday, Mexico's central bank moved to auction off $2.5 billion in reserves to prop up the struggling peso.
Bank of Mexico President Guillermo Ortiz said the bank received 59 bids of US$1.7 billion. Of those, 31 were accepted for a total sale of US$998 million. The bank will continue auctioning off the rest of the designated reserves on Thursday.
Wednesday's dollar auction came hours after the peso dropped below a record 14 to the U.S. dollar. It recovered to around 12 to the dollar after the bank's announcement, but was still down significantly since closing last week at 11.1 to the dollar.
If the peso falls more than 2 percent in value from the day before, the bank said it will auction off an additional US$400 million more a day.
Mexico's economy, long dependent on its northern neighbor, had weathered the global crisis relatively well until the peso's fall.
Government officials announced they would revise the 2009 budget to take account of falling oil prices and shrinking credit markets.
By OLGA R. RODRIGUEZ, Associated Press Writer