MEXICO CITY (Reuters) -- Mexico's President Vicente Fox said on Tuesday
                 the government was standing by its target of keeping the fiscal deficit for
                 2001 within 0.65 percent of gross domestic product (GDP).

                 "Above all we are going to stand firm behind our commitment to a fiscal deficit no
                 greater than 0.65 percent," Fox told Reuters in an interview.

                 Fox added that he saw no need for any additional spending cuts before the end of
                 2001, beyond the $1 billion in expenditure cuts made earlier in the year.

                 The president also said he was very confident agreement could be reached with the
                 main opposition party, the Institutional Revol utionary Party (PRI), on a package of
                 tax reforms before the end of the year.

                 "I think we have 85 percent progress toward reaching an agreement mainly with
                 the PRI and that this agreement will give us a tax reform in the fundamental terms
                 in which we proposed it," he added.

                 The opposition-controlled Congress must approve the tax reform bill for it to
                 become law.

                 The most controversial part of the reform is a plan to extend Value Added Tax
                 (VAT) to food and medicines that has been attacked by the PRI and by the
                 left-wing Party of the Democratic Revolution (PRD).

                 The opposition says it believes extending VAT would harm the poor, who make up
                 almost half the nation's 100 million inhabitants.

                 Fox said the tax reform would be redistributive, it would boost government
                 revenues by the equivalent of 1.5 percent of GDP while simplifying tax procedures
                 for business.

                 He said these aims would be achieved "even though changes are being made to the
                 original proposal."

                 "First of all this must be a reform that does not affect the poor and that has a
                 redistributive effect."

                 The budget for 2002, which has to be approved by Congress the end of the year,
                 would take into account the tax reform.

                 Analysts have expressed concern that if tax reform is not passed soon, next year's
                 budget will have to be especially restrictive because of an anticipated shortfall in tax
                 revenues as a result of a sharp economic slowdown.

                 "Without doubt there will be an agreement which will be presented in the 2002
                 budget, which will give us a very solid situation in economic terms," he added.

                 He also said his government wanted to achieve convergence with the United States
                 in economic fundamentals by 2003.

                 "Our aim is total convergence with the United States in fundamental variables and
                 we want to achieve this aim by 2003 at the latest," he added.

                 He said convergence would be "for example, in interest rates, inflation levels and
                 fiscal deficits, in the fundamentals of the economy," he said.

                 He added: "they add up to a partnership for prosperity."

                 Mexico ships more than 85 percent of its exports to the United States and relies on
                 its powerful northern neighbor for the bulk of the foreign direct investment that
                 flows into the country.

                    Copyright 2001 Reuters