UPDATE 2-Rating agencies need further Mexico budget details

(Adds comment from Moody's Investors Service, background)

By Daniel Bases

NEW YORK Nov 2 (Reuters) - Standard & Poor's and Fitch Ratings both told Reuters on Monday that even with a somewhat watered-down Mexican fiscal reform package, they need to see a final budget before making any changes to the country's sovereign rating.

On Saturday, Mexico's Senate approved a version of President Felipe Calderon's fiscal reform package to raise taxes and reduce Mexico's dependence on its waning oil industry.

Both S&P and Fitch rate Mexico at BBB-plus with negative outlooks and Both have raised concerns about the government's fiscal position, especially its dependence on oil revenues.

Moody's Investors Service has Mexico similarly rated at Baa1, with a stable outlook. All three ratings are three notches above junk status.

"While the reform makes an attempt to increase the revenue base of Mexico, we have to decide whether it goes far enough in reducing Mexico's vulnerability of public finances in case of future shock to either economic activity or oil income," said Shelly Shetty, sovereign ratings analyst at Fitch Ratings.

The Congress and the Senate supported a measure to raise the value added tax rate, or VAT, to 16 percent from 15 percent and raise the top income tax rate to 30 percent from 28 percent. [ID:nN31447563] [ID:nN01396043]

A new 3 percent tax on telecommunications that would exclude Internet services was also passed.

"For us, in terms of the broad budget picture, we need to see the full context of the budget ... and we wanted to make sure if there were other measures potentially forthcoming, those would be additional pieces that we want to include in our analysis," said S&P sovereign ratings analyst Lisa Schineller.

Mexican financial markets were closed Monday for a national holiday. In international markets, the Mexican peso rallied as much as 0.78 percent to 13.095 per U.S. dollar in low trade volume MXN=MEX01.

The fiscal package sets next year's federal budget deficit at the equivalent of 0.75 percent of gross domestic product and set a budget forecast that estimates Mexican crude exports will sell for an average $59 per barrel in 2010.

Oil revenues fund nearly 40 percent of the federal budget.

Mexican government revenues have plunged this year because of a severe recession and a slump in oil production, which is down by about a quarter from 2004 levels.

"Given that things did not change, which is what we anticipated and the government will stick to its low deficit target, we are keeping the stable outlook for now," said Mauro Leos, sovereign credit analyst in charge of Mexico at Moody's Investors Service.

VICTORY OF SORTS

The budget vote marks a partial victory for Calderon, whose original plan would have broadened Mexico's tax base but was rejected in the lower house last week.

"With this income law we know the revenue base is going to increase to close to 11 percent of GDP in the medium term, which is quite low," said Fitch's Shetty.

"At the same time dependency on oil revenues will still be over one-third and the fiscal buffers in terms of the federal government's oil stabilization fund would be depleted in 2009," she added.

Both Fitch and S&P say that while it is important to get through the budget process for 2010, their ratings will take into account medium-term factors that go beyond the immediate political wrangling in the Mexican Congress. (Additional reporting by Michael O'Boyle; Editing by Leslie Adler)