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Calderón administration slams Mexico's state governments for spiraling debt

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The administration of Mexican President Felipe Calderón has been warning in recent weeks that while the federal government does not have the debt
problem plaguing so many other countries, its state governments are a different story.

Some states are growing dangerously indebted, federal officials warn. Spending and debt ceilings have surged in up to a fifth of Mexican states, with total local debt almost doubling since 2008, the finance officials say.

Some states are not even reporting how much they really owe. On Friday, the S&P downgraded the northern state of Coahuila by several notches after the rating agency discovered their debt was four times greater than previously reported.

The clash over debt has become highly politicized as parties gear up for presidential elections next July.

The Calderón administration's conservative National Action Party (PAN) is in a pitched battle with the Institutional Revolutionary Party (PRI), which holds most state governments and is the early favorite to win the race.

The PAN has seized on state debt as a sign of the PRI’s fiscal irresponsibility. Of course, not all indebted states are led by the PRI. Yet, the former governor of downgraded Coahuila also happens to be the current leader of the PRI.

The PAN points out that, in contrast, the federal government has brought Mexico’s deficit to around zero, a responsible policy they say has kept the economy solid despite a global slowdown.

But playing the debt card may not be as effective on voters in Mexico as it has been in recent elections in the United States: see the Republican comeback in midterm elections on calls for austerity and smaller government.

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