Mexico's Calderon urges more fiscal, energy reform

By Adriana Barrera

MEXICO CITY, Sept 2 (Reuters) - President Felipe Calderon called on Wednesday for an overhaul of Mexico's finances and a rationalization of bloated state energy monopolies days before Congress is to begin 2010 budget deliberations.

Calderon provided few concrete details of his 10-point plan but said his budget proposal would seek to free up funds for social spending by reducing outlays on bureaucracy.

"Because time and resources are running out, because the needs of the population are increasingly pressing, today a deep reform is not only the best option, but the only option," Calderon said in his state of the nation speech.

Mexico's public finances have been battered by a deep recession and a continued slide in oil production.

The government is expected to propose a medium-term fiscal reform to boost revenues from non-oil taxes but the opposition parties that control the lower house of Congress have warned they are opposed to higher levies on basic necessities.

Bond rating agencies have warned they could downgrade Mexico's debt due to the budget's heavy reliance on the fading oil industry.

Mexico relies on oil export revenues to fund nearly 40 percent of the federal budget but output has fallen nearly a quarter since 2004 as aging oil fields lose production capacity.

Calderon said Mexico should further reform the oil industry and power utilities to boost the profitability of the state monopolies that dominate both sectors.

High electricity tariffs for businesses and relatively poor service have been fingered by investors as impediments to industrial growth in Mexico.

Mexico this year plunged into its deepest recession since the 1930s as the economic slowdown in the United States pummeled demand for Mexico's exports.

Economists polled by the central bank in late August expected on average the economy would contract by 7.2 percent this year. Output is forecast to rise by 2.9 percent in 2010. (Editing by James Dalgleish)