By Manuela Badawy and Noel Randewich
NEW YORK/MEXICO CITY, Sept 25 (Reuters) - Mexican President Felipe Calderon and Central Bank Governor Guillermo Ortiz said on Thursday a widening U.S. credit crisis could crimp Mexico’s economic growth but that their country’s financial system is healthy.
Calderon told investors at the New York Economics Club that Mexico has strengthened its finances in recent years — cutting foreign debt, building foreign reserves, increasing taxes and balancing its budget.
But he warned that a deeper slowdown in the U.S. economy would also be felt in neighboring Mexico.
“We may need to revise our estimate for economic growth in Mexico this year,” Calderon said.
Earlier this month, Mexico’s finance ministry cut its forecast for 2008 growth to 2.4 percent from 2.8 percent.
Fears that the U.S. credit crisis could deepen and stall economic growth have slammed Mexican markets, erasing about 8.0 percent of the peso’s MXN= MEX01 value so far this month.
A slowing U.S. economy will mean less money sent home from Mexican migrants working in the United States, with remittances likely to fall between 7 and 8 percent this year, Finance Minister Agustin Carstens told lawmakers in Mexico City.
Remittances help Mexico’s economy by boosting consumer spending.
At an event in Mexico City on Thursday, Central Bank Governor Guillermo Ortiz said the U.S. credit crisis would have only a minor impact on Mexico’s financial system.
“The consequences on the financial system are marginal in as much as the Mexican financial system is well capitalized,” Ortiz told reporters.
But Ortiz also warned that any “deepening of the recession” in the United States, Mexico’s chief trading partner, would crimp domestic expansion.
“It affects us from the side of exports, from the side of remittances, but it is very difficult at this moment to make a precise projection given the rapidly changing situation,” Ortiz said.
The economy of Mexico, which sends around 80 percent of its exports to the United States, is expected by analysts to grow 2.4 percent this year, down from 3.2 percent in 2007.
Mexico’s banks, owned by foreign players like Citigroup (C.N), BBVA (BBVA.MC) and Santander (SAN.MC), have largely avoided turmoil from the credit crisis because their focus has been on traditional lending, not dabbling in risky subprime niches or unpredictable derivatives.
Carstens said the government has reduced foreign debt in recent years to 5.0 percent of gross domestic product, a move meant to keep foreign financial havoc from making its way into Mexico.
“We have managed to block that transmission channel, which in other occasions has hit us very hard,” he said at an economists’ event in Mexico City. (Additional reporting by Chris Aspin, Michael O’Boyle and Luis Rojas Mena in Mexico City; Editing by Louise Heavens)