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Thursday, December 31, 1998 Published at 22:47 GMT

World: Americas

Mexico budget deadlock broken

Budget agreement could mean tough times ahead for Mexicans

By Mexico City correspondent Peter Greste

Mexico's Congress has approved the government's budget after months of debate, narrowly averting a national constitutional crisis with hours to spare.

Rival congressional deputies pushed the debate to the wire to win concessions in the last hours of 1998.

If they had failed to reach an agreement before the start of the New Year, constitutional experts predicted that the government would have been paralysed, unable to spend money or collect taxes.

At issue was a series of radical taxes that the ruling Institutional Revolutionary Party said were essential to making up a $3bn shortfall in income caused by the collapse in world oil prices.

But the opposition argued that the taxes, including a 15% hike on phone charges, would hit the poor hardest.

Tough times ahead

It wanted the government to cut its own fat and make the wealthiest and most politically powerful Mexicans pay.

The debate was complicated by the fact that in 1997 the government lost its majority in Congress for the first time in 79 years.

Until now, passing the budget had been a formality. This time the opposition flexed its new muscle and dragged the debate into a marathon session on Wednesday night to try to reach a compromise before the New Year.

Just after dawn they did it. The final deal - no new phone taxes, $1.4bn in spending cuts, higher taxes on business and the top earners and higher import tariffs on goods from countries that Mexico doesn't have free trade deals with.

One economist said the deal solves the immediate problems of government but it means tough times ahead for all Mexicans.

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