Oil Hedge, Infrastructure Boost Mexico

Put options to sell oil at $70/barrel over the next few years and more than MXP100bn in the budget for infrastructure projects should allow Mexico to maintain a constant fiscal policy in 2009, says finance undersecretary Alejandro Werner. “We will be able to implement the 2009 budget without any problem,” the official tells investors gathered at an EMTA event in New York, despite a forecast of 1.8% for 2009 economic growth that could trend toward the downside. Werner says the hedge and about MXP96bn in 3 oil stabilization funds will allow the government to adopt strong countercyclical fiscal policy for more than the next 12 months. He also expects the government’s infrastructure agenda – including MXP35bn in toll road concessions, MXP30bn in suburban train projects and the MXP50bn+ Punta Colonet port project – to stimulate growth. Funds from the MXP270bn Fonadin infrastructure fund and development bank Banobras can fill the void left by private sector lenders, Werner says.