* Further crackdown on state and local finances planned
* Official data underestimate total state, local debt
* Officials see no systemic risk to economy from debt
(Recasts, adds details)
By Krista Hughes
MEXICO CITY, Jan 15 Mexico's government will
seek to rein in excessive borrowing by states and municipalities
in a bill planned to go before Congress next month, Mexico's
finance minister said on Tuesday.
Some Mexican states have seen their debt balloon in recent
years but although official figures often understate the total,
state and local government debt remains relatively small for the
size of Latin America's second-biggest economy.
Finance Minister Luis Videgaray said debt did not represent
a systemic risk to the economy but it was a key aim of the new
government to put state finances on a sustainable footing.
The reform, which would be submitted to lawmakers once
Congress resumes on Feb. 1, would place limits on excessive
borrowing while also recognizing that most local governments
have not racked up too much debt, he said.
"The objective of the bill will be to reduce the cost of
borrowing contracted by municipalities today in a responsible
and correct way," Videgaray told reporters in Mexico City.
Although overall state and local government debt is less
than 3 percent on average of their gross domestic product, some
states owe three or four times more than their annual federal
government transfers, the main source of income.
State and municipal debt registered with the finance
ministry has doubled in less than four years. One state,
Jalisco, and eight local councils, including Acapulco, are
officially in default after missing repayment deadlines.
But the finance ministry figures understate the extent of
the problem by not including short-term debt to banks and money
owed to suppliers, experts say.
Central bank figures show state and local government debt to
banks is 17.9 billion Mexican pesos ($1.42 billion) higher than
the amount registered with the finance ministry, while the
banking regulator has separate data showing an even wider gap.
Jalisco's failure to repay a 1.4 billion peso loan in
December came as a surprise because finance ministry figures
show its debt is moderate at 2.8 percent of state GDP. But the
loan was not included in the data as it was short-term.
Ratings agencies responded with credit ratings downgrades
which will make future borrowing more expensive.
Mexico has already passed reforms to increase the
transparency of local government books after increasing concerns
about failure by some to disclose debts.
In 2011, the northern state of Coahuila was found to be
massively in the red, sparking rating downgrades and a political
Coahuila remains the most indebted state, with debt worth
7.9 percent of its GDP and 300 percent of federal transfers as
of September 2012, according to the finance ministry.
But Chihuahua, Nuevo Leon, Quintana Roo and Veracruz also
have debt worth more than their annual transfers.
($1 = 12.6567 Mexican pesos)
(Additional reporting by Luis Rojas and Michael O'Boyle;
Editing by James Dalgleish)