August 19, 2010 / 9:05 PM / 7 years ago

UPDATE 1-Mexican finance minister wants low debt in budget

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MEXICO CITY, Aug 19 (Reuters) - Mexican President Felipe Calderon will propose cutting the deficit in 2011 as the country recovers from a deep recession, Finance Minister Ernesto Cordero said on Thursday.

Calderon is due to submit his budget plan in early September. This year's budget calls for a deficit equivalent to 2.8 percent of gross domestic product.

"We think that we should continue that tendency and send a budget that cuts the deficit level to something lower than" last year, Cordero said.

Earlier this year, Cordero said the government was planning a fiscal reform bill, but he has since backtracked, saying the government proposal must take into account the political climate.

"Everything is on the table," Cordero said. "It's important that we send a proposal that can win a majority in Congress."

Mexico's main opposition party, the Institutional Revolutionary Party, has vowed to oppose extending the country's value-added tax to food and medicine after shooting down the proposal when last hatched by Calderon in 2009.

Mexico is limping back from one of the steepest economic contractions seen anywhere in the world last year. Cordero said it was crucial for Mexico to maintain fiscal discipline so that investors remain confident in its ability to pay its debts.

"Our budget will put a priority on stable finances," he told reporters. "It would be irresponsible, at this moment, to put at risk the strong finances that Mexico has established."

Cordero repeated his view that the Mexican economy will grow between 4 and 5 percent this year.

Mexico is due to report its gross domestic product for the second quarter of 2010 on Friday at 9 a.m. local time (1400 GMT). (Reporting by Patrick Rucker and Jason Lange; Editing by Leslie Adler)

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