Mexico announces $1.68 billion budget cut after Brexit

The budget cut will ensure that the government reduces its financing needs and meets its fiscal deficit goal, Videgaray said.

Published: 24th June 2016 10:50 PM  |   Last Updated: 24th June 2016 10:50 PM   |  A+A-


MEXICO CITY: Mexico's government announced on Friday a $1.68 billion budget cut to deal with the fallout from Britain's vote to leave the European Union.

At the same time, the Latin American country said it would negotiate a free trade deal with Britain if London severs all commercial agreements with the EU.

"The British people have surprised the world," Finance Minister Luis Videgaray told a news conference.

The budget cut will ensure that the government reduces its financing needs and meets its fiscal deficit goal, Videgaray said.

"At this moment of higher complexity in international financial markets, it is key that the Mexican government reduces its outside financial needs," the minister said.

It follows a $7.3 billion budget reduction earlier this year, mostly at state oil firm Pemex, which will not be required to trim further in this second spending cut.

The Mexican currency surged to around 19.50 pesos to the dollar early Friday after Britain voted to ditch the EU, but it later settled at around 18.80-18.90 pesos, he said.

But authorities will only take actions to defend the peso if it is hit by a "specific speculative phenomenon" that threatens inflation goals, Videgaray said.

Mexico's stock market, meanwhile, opened down 2.52 percent.

The "Brexit" vote will not have a "relevant impact" on Mexico's current account or trade balance, however, he said, noting that trade with Britain represents just 0.7 percent of the Latin American nation's global trade.

Economy Minister Ildefonso Guajardo said Mexico will negotiate a free trade deal with Britain over the next two years if London completely ends commercial ties with the EU.

There would be no need to negotiate a deal, however, if Britain remains in a free trade arrangement with the EU, Guajardo said.

The foreign ministry said in a statement that it was ready to boost ties with the EU as well as "continue strengthening the excellent friendly relations, significant commercial exchanges and investment" with Britain.

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