SCENARIOS-Possible outcomes of Mexico mid-term election

MEXICO CITY, July 2 (Reuters) - Mexico will elect a new lower house of Congress, six state governors and hundreds of mayors in mid-term elections on Sunday. [ID:nN02354233]

The congressional vote will be key for conservative President Felipe Calderon's reform agenda for the remaining three years of his term, with analysts keen for new laws to shore up declining oil output and raise tax revenues.

Calderon's National Action Party, or PAN, is already hampered by not having a majority in the 500-seat chamber, and the Institutional Revolutionary Party, or PRI, which it relies on to pass laws is expected to overtake it to become the biggest party in Congress.

Following are possible scenarios for the outcome:

A CLOSE RESULT THAT ONLY SLIGHTLY CHANGES CONGRESS

Most pollsters predict a close result that will leave the PRI as the biggest party in Congress but lacking a majority and with the PAN only 40 or so seats behind.

That, or an even closer result, will leave the balance of power pretty much where it is today and most analysts expect it will mean the PRI continues a strategy of working with the PAN on reforms but mostly watering them down.

That would leave Calderon with some room to pass laws over the next three years but also risks him becoming an early lame duck if far-reaching oil sector, tax and labor reforms are out of the question before a change of government in 2012.

This scenario may be the most risky in terms of ratings agencies moving to downgrade Mexico's sovereign credit rating.

Fitch and Standard & Poor's both have negative outlooks on Mexico's BBB-plus credit rating amid concern about declining fiscal income and a likely drop next year in oil revenues.

Calderon's party is keen to resolve that with new tax and oil laws, but the most likely scenario is that he will remain completely dependent on the centrist PRI's support.

OPPOSITION PRI SCORES BIGGER-THAN-EXPECTED WIN

Many voters plan to punish the PAN for the country's worst recession since 1995, with families hit by a drop in migrant remittances and a swathe of painful job cuts.

With the left-wing opposition in tatters, disaffected voters from left and right are flocking to the centrist PRI.

Ousted by the PAN in 2000 after 71 years of dictatorial rule, the PRI has flourished in opposition in the last few years. It has worked with Calderon on economic reforms, albeit watering them down, and is shedding its old image as an authoritarian party wedded to state control of the economy.

Currently the No. 3 party in Congress behind the PAN and the left-wing opposition, the PRI is pegged to leap ahead, doubling its seats to between 210 and 240 from 106, meaning a simple majority is not entirely out of reach.