April 20, 2006

Mexico City defends leftist candidate’s debt record

By Noel Randewich

MEXICO CITY (Reuters) - Mexico City's government defended
the fiscal record on Thursday of its former mayor, the leading
candidate in the country's presidential race who critics say
would spend irresponsibly and pile up debt.

Mayor Alejandro Encinas said he and Andres Manuel Lopez
Obrador, his predecessor and now the presidential favorite,
have improved the sprawling city's finances over the past five
years and denied accusations they covered up heavy spending and
put the capital deep in debt.

"We not only have nothing to hide, we want to be crystal
clear to put an end to myths, fantasies, lies and other false
arguments that have gone around about the handling of the
city's debt," Encinas said.

Critics and presidential rivals say Lopez Obrador overspent
as mayor of Mexico City from late 2000 to mid-2005 by launching
an ambitious highway construction project and handing out
monthly pension payments to senior citizens.

But Mexico City's head of finance Arturo Herrera said his
former boss was more frugal than his predecessors.

Mexico City will run a deficit of no more than 1.8 percent
of the budget this year, compared to 15 percent before Lopez
Obrador became mayor, Herrera said.

"This is clearly a political issue," he said.

Lopez Obrador has led opinion polls for months ahead of the
July 2 vote, although recent surveys have shown his advantage
slipping to just three or four percentage points.

Conservative presidential candidate Felipe Calderon said on
Thursday that Lopez Obrador's leftist Party of the Democratic
Revolution has tripled Mexico City's debt since it took power
in Mexico City in 1997.

Herrera countered that since Lopez Obrador took office in
2000, the city's total debt has increased by only 3 percent per
year, slower than any previous government.

As a federal district, Mexico City's debt is guaranteed by
the federal government and must be approved by Congress.

In 2001, Calderon was among the National Action Party
legislators in the lower house who voted unanimously to approve
the city's budget, Herrera said.

The city government now owes about 45 billion pesos ($4
billion), he said.

Rather than spending irresponsibly, Lopez Obrador, often
labeled a populist, improved Mexico City's fiscal standing
during his time in office, HSBC said in a recent report.

Encinas was appointed by Lopez Obrador last year when he
stepped down to launch his presidential campaign.