Mexico to tackle state, municipal finances in reform proposal

MEXICO CITY Thu Jan 17, 2013 9:03pm EST

MEXICO CITY Jan 17 (Reuters) - Mexico will take a carrot and stick approach to tackling state and municipal finances in a new reform proposal to go before Congress next month, a senior Finance Ministry official said on Thursday.

Deputy Finance Minister for Revenue Miguel Messmacher said the plan would seek to limit excessive borrowing but also encourage state and local governments to levy their own taxes.

"We want to put a series of limits on indebtedness ... And deficits," he told Reuters. "And for those that behave well, they will have easier access to financing."

Messmacher declined to detail what level of debt the federal government, which provides most resources to the states in the form of federal transfers, saw as appropriate.

State and municipal debt registered with the finance ministry has doubled in less than four years although it remains low overall at less than 3 percent of gross domestic product on average.

Some states owe three or four times more than their annual federal government transfers, the main source of income. Jalisco and eight local councils, including Acapulco, are officially in default after missing repayment deadlines. 

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