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Mexican Government Unveils USD5.6bn Stimulus Package

by Mary Swire,, Hong Kong

05 March 2008

Felipe Calderon, President of Mexico, on Monday unveiled his plans to introduce an economic stimulus package worth around 60 billion pesos (USD5.6bn). The package is designed to cushion the country's economy in the face of a likely slowdown with its biggest trading partner, the United States.

In order to achieve this, the President is proposing to temporarily reduce income tax rates by 3% until June 2008.

He additionally unveiled plans to introduce a 5% cut to social security taxes to boost employment and to give a 1,000 pesos discount to any small businesses and the self-employed who file taxes online. New discounts of up to 20% on electricity rates were also announced.

"A discount has been authorized, a reduction of 3 percent on provisional business income tax payments and the flat rate business tax," Calderon announced, according to a Reuters report.

"Since last year, the economic performance of our principal trading partner (the United States) has show signs of deceleration," Calderon explained at a ceremony to announce the package, adding that: "The problems in its financial sector and housing market make its prospects for growth in 2008 not very encouraging."

"In the face of these adverse prospects, the Mexican government has taken unprecedented steps to diversify exports and strengthen the domestic market, mainly through investment in infrastructure, farming and housing to reduce the effects on our economy," Calderon went on to add, according to the Associated Press.

As the US economy continues to slow, the President has decided to use oil revenue to boost spending. The government is currently anticipating a fall in economic growth rate from 3.3% in 2007 to 2.8% later this year.

Despite the introduction of these economy-boosting measures, however, Calderon was keen to stress that the Mexican banking and financial systems continue to perform well.

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