MEXICO: President Felipe Calderon announces latest measures to combat global economic crisis

Record ID: 301016

  • Title: MEXICO: President Felipe Calderon announces latest measures to combat global economic crisis
  • Date: 8th January 2009
  • Summary: MEXICO CITY, MEXICO (JANUARY 07, 2009) (REUTERS) ATTENDEES DURING MEETING MEXICAN PRESIDENT FELIPE CALDERON GREETING ATTENDEES GENERAL VIEW OF MEETING CALDERON WITH ATTENDEES (SOUNDBITE) (Spanish) MEXICAN PRESIDENT FELIPE CALDERON, SAYING: "The economy of the United States fell into a huge recession in large measure due to the crisis in the financial system. This ph
  • Embargoed: 23rd January 2009 12:00
  • Keywords:
  • Location: Mexico
  • Country: Mexico
  • Topics: Domestic Politics
  • Reuters ID: LVADT3IC1QSSVU6ICI55PFSF5AIV
  • Story Text: Mexican President Felipe Calderon unveiled sweeping cuts to energy prices on Wednesday (January 07), his latest measure to soothe the impact of the global economic crisis on consumers and businesses.
    The steps announced by Calderon should help the central bank get a handle on inflation, currently at a more than seven-year high, and could prompt policy makers to start lowering borrowing costs soon to boost the economy.
    Factories in Mexico, which sends close to 80 percent of its exports to the United States, have been cutting production for several months and laid off more than 175,000 workers last year.

    "The economy of the United States fell into a huge recession in large measure due to the crisis in the financial system. This phenomenon of unprecedented magnitude has rapidly spread to all regions. Countries without distinction are being hit by its effects. Mexico is no exception, especially because Mexico's economy is strongly linked to the economy of the United States," Calderon said.
    Many economists think Mexico is following the United States into a recession, and expect the central bank to lower interest rates aggressively this year.
    Calderon said he would freeze gasoline prices and would lower household gas prices by 10 percent and electricity rates for businesses by up to 20 percent.

    "Gasoline prices will be frozen in the whole country during the whole year. Household gas prices will be lowered by 10 percent, keeping them at that level for the rest of the year. These two actions will expand the income of families and companies by a sum of $45.4 billion pesos which they will be able to safe or use for the acquisition of other goods and they will also benefit from lower inflation resulting from these actions."
    Mexicans have increasingly called for the government to lower gasoline prices, which the government administers, since oil prices tumbled from record highs late last year.
    Mexico is a major oil producer and gasoline is subsidized at the pump.
    The government accelerated price rises last year as soaring world prices made subsidies a bigger burden.
    Lofty inflation has kept Mexico's central bank from cutting interest rates to shore up economic growth, expected to take a hit this year as the United States stumbles through a recession.
    Calderon also announced measures to limit unemployment and to increase lending by government mortgage companies, though the finance ministry said this would not increase total government spending beyond the amount set in the federal budget.
    The government has been touting higher spending on infrastructure in recent months as a way to help the economy, though data has showed that even construction activity is suffering.
    Mexican bond prices jumped on expectations lower energy prices will help control inflation. The benchmark government 10-year peso bond rose 0.451 in price, pushing its yield down 7 basis points to 7.66 percent.
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