UPDATE 3-Mexico delays fuel hike in tax reform package

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By Catherine Bremer and Noel Randewich

MEXICO CITY, Sept 26 (Reuters) - President Felipe Calderon on Wednesday delayed a hike in gasoline and diesel prices, watering down a tax reform that Moody's debt rating agency says already falls short of what Mexico needs.

Calderon put off from October until next year the gradual implementation of a 5.5 percent rise in gasoline prices as well as increases in other energy rates, saying he did not want to burden the poor and worsen inflation.

"The federal government will cancel any increase in gasoline, diesel, liquid gas and ordinary domestic electric prices for the rest of this year," he told reporters.

Legislators agreed this month to a tax reform meant to slowly increase government revenues by 2.1 percent of gross domestic product by 2012, helping reduce Mexico's dependence on oil revenues and offset growing social spending obligations. But the reform left little new money for badly needed investment.

Moody's said it does not plan to raise its "stable" outlook for Mexico or upgrade its sovereign debt rating from "Baa1," as investors hoped might happen once the reform was passed.

Rather, the "modest" tax reform should be just enough to keep Mexico's finances from worsening, said Mauro Leos, Moody's senior analyst for Latin America.

"Something had to be done to keep the outlook stable," Leos told bankers in speech to a forum in Mexico City.