* Bill would create voluntary system to rein in state debt
* Opposition demanding lawmakers set debt limits
* Debate on bill may set tone for coming economic reforms
By Michael O'Boyle
MEXICO CITY, Feb 12 Mexico's ruling party on
Tuesday submitted a bill to limit the growth of state debt
through a voluntary framework that falls short of opposition
demands for direct regulation by the Senate.
Senators from President Enrique Pena Nieto's Institutional
Revolutionary Party, or PRI, propose allowing the finance
ministry to guarantee state debt but only when local governments
meet certain criteria - stopping short of imposing absolute
limits on debt levels.
Opposition lawmakers have submitted bills that would empower
the Senate to set debt limits for individual states. The PRI
bill would instead encourage governments to meet standards that
could help them obtain lower financing costs in debt markets.
"This creates incentives for financial discipline, and these
incentives would imply their own rewards and punishments," said
PRI Sen. Manuel Cavazos, one of the party's experts on financial
Pena Nieto aims to push an ambitious raft of major economic
reforms through a divided Congress during his first year in
office. Although the state debt debate is not seen to be as
important as expected fiscal and energy reforms, it could set
the tone for future discussions.
Some Mexican states have seen their debt balloon in recent
years but official figures often understate the total. Still,
state and local government debt remains relatively small for the
size of Latin America's second-biggest economy.
Last month, Finance Minister Luis Videgaray said the
government would submit a bill in February to rein in excessive
borrowing by states and municipalities.
After opposition lawmakers pushed their own bills, PRI
senators submitted their proposal, under the guidance of the
finance ministry, lawmakers said.
Overall state and local government debt is less than 3
percent of Mexico's gross domestic product, but some states owe
more than double their annual federal government transfers,
their main source of income.
The PRI proposal would seek to keep total local and state
debt below 3 percent of GDP and the finance ministry would only
guarantee debts that are below 75 percent of the state's income.
Senators from the conservative National Action Party (PAN),
which held the presidency for 12 years until last December,
submitted their own bill on Tuesday that would give the Senate
oversight of state debts and let lawmakers set limits every
year. The left-wing Party of the Democratic Revolution (PRD)
submitted a similar bill last month.
The PRI controls roughly two-thirds of local and state
governments and opposition lawmakers said the administration is
unwilling to impose tough restrictions on an important support
"They want to turn back the clock to before reforms in 2000,
when the finance ministry had the power and control," said PRD
Sen. Armando Rios Piter, who wrote the PRD bill.
"We can not accept that the finance ministry becomes an
all-powerful agency again," he said.