Photo: Mexican pesos
Mexico’s federal government will submit a bill in February aimed at getting the fiscal houses of states and municipalities in order, Finance Secretary Luis Videgaray said.
He told the media that the federal government cannot bail out indebted states and municipalities because no budget provision exists for that purpose and such an action would set an undesirable precedent.
But due to the urgency of the matter, a bill addressing excessive borrowing by state and local governments will be presented next month, Videgaray said.
He recalled that President Enrique Peña Nieto, who took office on Dec. 1, pledged that a bill restricting the ability of states and municipalities to run up public debt would be one of his administration’s first 13 initiatives.
The issue of fiscal responsibility also was included in the so-called Pact for Mexico signed early last month by Peña Nieto, of the Institutional Revolutionary Party, or PRI, and leaders of the country’s two other main political parties: the conservative National Action Party, or PAN, and the leftist Party of the Democratic Revolution, or PRD.
In a radio interview Tuesday, Videgaray said not all Mexican states and municipalities have run up excessive debt but that “those cases of excess that put the country’s economic and financial stability at risk cannot keep occurring.”
According to the Finance Secretariat, the overall debt of states and municipalities has risen from roughly 1.7 percent of Mexico’s gross domestic product in 2008 to 2.8 percent of GDP in 2011.
The total debt of Mexico’s states and municipalities stood at 406.8 billion pesos (roughly $32.1 billion at the current exchange rate) on Sept. 30, 2012.