By BRENDAN M. CASE / The Dallas Morning News

MEXICO CITY – The Mexican government said Tuesday that it would cut spending by $1.12 billion in 2002 to compensate for an even larger revenue shortfall
during the first three months of the year.

In a sign of continued financial weakness south of the border, government revenue for the first quarter will be $1.89 billion less than expected, the Finance Ministry
said. Authorities said large expected gains in oil revenue in the next few months would let them trim spending by the smaller $1.12 billion, which is about 0.7 percent
of the $160 billion annual budget.

During the first three months of the year, the public till suffered from two problems. Tax revenue failed to meet the Finance Ministry's targets due to a recession that
has dragged on more than a year, and oil exports generated less revenue than expected.

Oil prices ranged below the budgeted level of $17 per barrel, and the strong peso meant that dollar-based exports were worth fewer pesos back home.

"A passive attitude in the face of lower public revenue would provoke a larger budget deficit," the Finance Ministry's statement said, warning that a rising deficit could
provoke a financial crisis.

The budget cuts could exact a political cost from President Vicente Fox, whose popularity ratings have already slipped to about 50 percent. The Finance Ministry
said Tuesday's cuts would not affect Mr. Fox's goals for social spending, although it provided few details.

Many economists welcomed the news as further proof of Mr. Fox's commitment to sound financial management. He ordered three budget cuts last year, plus
additional savings by government agencies. At the same time, interest rates and inflation fell to historic lows.

This year, Finance Minister Francisco Gil Díaz has vowed to limit the budget deficit to no more than 0.65 percent of gross domestic product.

"The markets will see this as a positive," said Raúl Feliz, a professor at the Center for Economic Research and Teaching in Mexico City.