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Identifier
Created
Classification
Origin
06MEXICO7064
2006-12-26 21:39:00
UNCLASSIFIED
Embassy Mexico
Cable title:  

MEXICAN CONGRESS PASSES SPENDING BILL, CLOSES IN

Tags:   EAGR  ECON  EFIN  ENRG  MX 
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VZCZCXRO4094
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #7064/01 3602139
ZNR UUUUU ZZH
P 262139Z DEC 06
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 4712
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RHMFIUU/CDR USSOUTHCOM MIAMI FL PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
						UNCLAS SECTION 01 OF 02 MEXICO 007064 

SIPDIS

SIPDIS

STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA, EB/ESC
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/ARUDMAN, ITS/TD/ENERGY
DIVISION
TREASURY FOR IA/ALICE FAIBISHENKO
USDA FOR ONU
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND SLADISLAW
STATE PASS USTR/EISSENSTAT/MELLE/SHIGETOMI
STATE PASS FEDERAL RESERVE/CARLOS ARTETA
STATE PASS USAID FOR EGET/EG AND AA/LAC
NSC FOR FISK AND PENDLETON

E.O. 12958: N/A
TAGS: EAGR ECON EFIN ENRG MX
SUBJECT: MEXICAN CONGRESS PASSES SPENDING BILL, CLOSES IN
SPIRIT OF PARTISAN COMITY

REF: A) MEXICO 7049 B) MEXICO 6934



1. Summary: After easily passing the revised revenue package
on December 21 (ref A), the Mexican Chamber of Deputies
passed a USD 208 billion spending bill on December 23 by a
vote of 440 in favor to 20 opposed, with five abstentions.
The final bills largely conformed with President Calderon's
budget proposal, but some changes were made to provide more
funding than he had initially requested for public
universities, pensions in rural areas, highway construction,
and social programs. To help offset these plus ups, the
Chamber of Deputies cut Calderon's requests for state oil
company PEMEX, the federal judiciary, the Congress, the
Federal Electricity Commission, and the Federal Electoral
Institute. Both the revenue and spending portions of the
2007 budget will be signed by President Calderon and
published in the Official Gazette in time for them to take
effect on January 1. End summary.



2. The official appropriations text has not yet been made
available, but summaries from the Finance Secretariat and
news media report that Congress has kept the vast majority of
Calderon's 2007 budget request intact. Congress boosted
revenues by USD 2.4 billion over what the executive branch
had proposed (reftel A), and cut USD 5.2 billion from the
President's spending proposal (see para 4), thus allowing an
additional USD 7.6 billion of spending for the
congressionally favored winners listed below.



--------------------------


More for the Poor


--------------------------





3. Deputies from the left-leaning Revolutionary Democratic
Party (PRD) pushed for additional spending on the poor that
had not been included in Calderon's original request. They
succeeded in securing enough support from other parties for
both a milk subsidy and a monthly pension of USD 46 for more
than a million rural inhabitants over the age of 70. In
return, they agreed to fund three of Calderon's campaign
promises: 1) refunds of social security taxes paid by
employers who hire recently graduated first-time entrants to
the workforce; 2) a criminal database; and 3) health care
insurance for newborns. The National Autonomous University
of Mexico (UNAM), the country's largest public college,
received USD 62 million more than had been called for by the
executive branch. As detailed in ref B, Calderon's proposed
level of spending on education -- considered low by the PRD
and many others -- had sparked controversy and led to
Calderon asking his finance secretary to work with Congress
on a deal. Others who made out better on the final version
of the bill include the Oportunidades program (ex-President
Fox's signature anti-poverty program that links payments to

poor families to school attendance by their children and
regular health check-ups), basic public education and health,
the agriculture sector, and other social programs. The
deputies also allocated a further USD 1.3 billion for
infrastructure and highways, much of which is destined for
poor states like Oaxaca and Chiapas.



--------------------------


Less for the Rest


--------------------------





4. To make up for the extra largesse distributed to the
above-mentioned institutions and programs, the Chamber of
Deputies had to slice Calderon's proposed appropriations for
other accounts (in addition to boosting the amount of
government income called for in Calderon's revenue proposal).
Despite declining oil production and calls for more
aggressive exploration, PEMEX instead will get two percent
less than the President requested. Deputies also cut funds
for the judiciary and legislative powers, the Federal

MEXICO 00007064 002 OF 002


Electricity Commission, and the Federal Electoral Institute.




--------------------------



--------------------------


Comment: How Long Will the Christmas Spirit Last?


--------------------------



--------------------------





5. Jorge Zermeno, the Chair of the Chamber of Deputies,
closed the 2006 congressional session with praise for the
cooperative spirit that marked the hurried deliberations over
the budget. His message was borne out by the large
majorities by which the Chamber of Deputies passed both the
revenue and spending bills (the Senate also approved the
former by a wide margin - it has no vote on spending bills),
neither of which ended up looking significantly different
from Calderon's original proposal. This constitutes clear
evidence that, despite the intense political acrimony of the
preceding months, Mexico's major parties are capable of
putting aside partisanship to take care of the basic business
of governing. However, these votes did not force decisions
on fundamentally thorny economic issues like expanding the
tax base and reducing the government's dependence on the
increasingly weak PEMEX, so it might be safer to chalk up the
easy passage of the 2007 revenue and spending bills to a
desire to get home in time for the holidays and a willingness
to defer to Calderon's mostly vanilla-flavored first budget
proposal. As meatier reform issues make their way onto the
agenda, congressional comity will be sure to face a sterner
test. End comment.


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