UPDATE 2-Mexico finance minister sees sustained oil slump, 2016 budget hit

miércoles 18 de marzo de 2015 13:08 GYT
 

(Adds details on possible further cuts)

By Alexandra Alper

MEXICO CITY, March 18 (Reuters) - Mexican Finance Minister Luis Videgaray said on Wednesday he does not expect the recent plunge in oil prices to be temporary and that Mexico's public finances will face major difficulties next year as a result.

Mexico is an oil exporter and the drop in crude prices has pushed its peso currency to record lows, leading the country to slow the pace of foreign currency purchases and ramp up dollar auctions to stem the slide.

"Our opinion is that there's a low probability that we'll see a quick recovery in the export oil price, not in the next few weeks, nor even years," Videgaray said at an event in Mexico City.

Videgaray said that low oil prices will hit the country's public finances hardest next year. Revenue from state oil company Pemex funds about a third of the federal budget.

The oil slump has already led to drastic public spending cuts, and Videgaray started courting the private sector last week, placing greater emphasis on concessions and public-private partnerships to fund growth-stimulating infrastructure projects.

Nevertheless, he said he was encouraged by increased job creation and lower electricity costs, and forecast that private consumption will strengthen this year.

Videgaray said he will wait to see the latest Pemex oil production figures before deciding on whether to make further spending cuts. "As long as we don't have confirmed information from Pemex, we won't make a cut," he said.

Oil output in Mexico has been declining for the past 10 years, and energy-sector reforms aimed at stemming the slide have been blunted by the slump in crude prices. (Reporting by Alexandra Alper; Writing by Gabriel Stargardter; Editing by Peter Galloway)