(Corrects to attribute "extreme situation" quote to chief
MEXICO CITY Oct 14 Mexico has the liquidity
necessary to handle the extreme and unlikely event of any debt
default by the United States, Mexico's Central Bank Governor
Agustin Carstens told a local newspaper in an interview.
Highlighting Mexico's $170 billion in reserves and its
flexible credit line from the International Monetary Fund, for
use in cases of emergency, Carstens said he was confident Mexico
could face any U.S. default.
"Mexico is well prepared to confront it," Carstens told El
Economista in an interview published on Sunday evening. "We have
taken due care in the management of international reserves and
we are well provisioned."
"The problem is so serious because the obstacle is political
in nature, not financial nor economic."
While there were promising signals emerging from U.S. Senate
negotiations on Sunday, there were no concrete moves toward
passing legislation needed to fund the government and raise its
borrowing authority in time to avoid a default later on
Chief economist at Mexico Finance Ministry Ernesto Revilla
said last week Mexico's slowing economy could face an "extreme
situation" if the United States fails to raise its debt ceiling.
Mexico's economy has stumbled this year amid slack U.S.
demand for local exports and a drop in domestic construction.
The United States is Mexico's top trading partner, the
destination of about 80 percent of Mexican exports.
Following Mexico's shock economic contraction in the second
quarter and devastating floods last month, the government has
repeatedly cut back its growth forecast and now expects gross
domestic product to expand by around 1.7 percent this year.
Carstens told El Economista he believed Mexico's slowdown
would be temporary, but that the central bank would have to
revise its forecast of between 2 percent and 3 percent economic
growth for 2013 in its next inflation report.
The International Monetary Fund last week slashed its 2013
growth outlook for Mexico after a weaker-than-expected first
part of the year, and it also dialed back expectations for
growth in Brazil next year.
The IMF said Mexico's gross domestic product (GDP) would
grow 1.2 percent this year, down from a 2.9 percent expansion it
forecast in July, due to low government spending, a drop in
construction and slack U.S. demand for local exports.
(Writing by Alexandra Alper; Editing by Simon Gardner; Editing
by Theodore d'Afflisio)