By Greg Brosnan
MEXICO CITY (Reuters) - Mexico's Congress could approve a long-awaited fiscal reform by September to help wean the country off its reliance on oil revenues, Deputy Finance Minister Alejandro Werner said on Wednesday.
A key bill to overhaul Mexico's government pension system easily cleared congressional committees this week and is expected to be approved by the lower house in a vote on Thursday, after which it goes to the Senate.
The bill's progress has fueled optimism the government can also pass an urgently needed tax reform, which is deemed vital by economists to achieve higher economic growth rates, but seen as a trickier proposal to get past divided lawmakers.
"It would be good to have it approved before September 8, which is when we have to send the 2008 budget (bill)," Werner said at the Reuters Latin American Investment Summit. "I think it is possible, although obviously it will mean intense work."
Werner also said Mexico's economy, which is expected to slow down this year as U.S. economic growth cools off, would likely expand between 3 percent and 4 percent in each of the first two quarters of 2007.
Mexico's economy is expected to grow 3.6 percent this year, compared with 4.8 percent in 2006. Werner said the construction and services sectors, both of which have benefited from strong internal demand, would continue to show dynamic growth.
Manufacturing -- which depends largely on U.S. demand for Mexican-made products, especially autos, and has flagged in recent months -- was the sector most at risk from volatility in the world economy, he said.
MORE WARRANTS
Mexican President Felipe Calderon, who took office in December, has vowed to follow in the footsteps of predecessor Vicente Fox in whittling down the country's foreign debt, preferring to borrow in less-risky pesos.
Mirroring a move by the previous administration, Mexico sold warrants last week letting investors exchange foreign bonds worth $2.66 billion for peso-denominated 'MBonos' at dates in September, October and November.
Werner said he did not rule out a new sale of such warrants before the end of the year.
He said warrant sales, which warn way in advance of a possible shake-up in the debt market, were preferable to straight bond swaps as a means of reducing foreign debt.
"It is part of our debt policy not to surprise the market with opportunistic measures," he said.
"Rather than us announcing in September that we're buying back debt, the market smoothly and gradually prepares for a possible exchange at a well known date," he said.
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