Fiscal surplus rises sharply in first quarter amid higher oil revenues
In the first quarter, the public sector balance registered a surplus of 47.2 billion pesos (US$ 4.3 billion), a 66.1% increase in real terms compared to the same period last year.  The sharp increase in the fiscal surplus was attributable to strong growth in oil-related revenues.  As a result, total budgetary revenues reached 445.1 billion pesos (US$ 4.3 billion), a 5.5% real increase over the same period last year and 5.3% (22.6 billion pesos or US$ 2.1 billion) above the government’s projected revenues.  More than 80% (18.1 billion pesos or US$ 1.6 billion) of the above-projected revenues were oil related.  Oil related revenues increased 12.4% in real terms due to the higher oil price and the increase in the oil export platform.  The Federal Government’s non-tax revenues reached 4.5 billion pesos (US$ 409 million) and revenues from public entities totalled 1.4 billion pesos (US$ 127 million).  On the other hand, non-oil tax revenues were 1.5 billion pesos (US$ 136 million) lower than originally programmed, even though value-added and income tax collections rose by 5.6% and 4.6% respectively over the first quarter last year.  Budgetary expenditures totalled 394.8 billion pesos (US$ 35.9 billion), which was 1.5% higher in real terms than the expenditures recorded for the same period in 2003.  The buoyant oil price is likely to continue to buffer Mexican public finances.  In fact, Consensus Forecast panellists have maintained their forecast for the fiscal deficit this year unchanged over last month at ___0.4___% of GDP. 

Central Bank tightens monetary policy in surprise decision
In April, consumer prices increased 0.15%.  The actual rate was below last month’s Consensus Forecast of 0.21%.  Higher transport prices constituted the main driver for the April price increase, contrasted by falling prices for food, beverages and tobacco.  The April reading is the second consecutive month of below-average price developments. Annual headline inflation remained unchanged from last month at 4.2%.  The price index for core inflation, which excludes the erratic shifts in prices for oil and fresh fruits and vegetables, rose by 0.36% in April, but the annual rate also remained unchanged from March at 3.5%.  Thus, while headline inflation remains at the upper limit of the Central Bank’s one percentage point tolerance around a 3.0% central target rate for this year, the core inflation rate is well within the established limits.  Nevertheless, on 27 April, the Central Bank surprised markets by tightening its policy with raising its money market "short" (corto) to 37 million pesos per day from 33 million pesos.  An increase in the corto reduces overnight lending to banks and indirectly forces up interest rates.   While this was the first time the Bank has acted to influence rates between its twice-a-month policy meetings started last year, Consensus Forecast panellists maintained their forecasts for inflation and interest rates unchanged over last month.  Panellists still believe that year-end inflation will hover close to the upper limit of the Central Bank’s target at 4.0% and see the year-end interest rate at 6.6%.