January 9, 2018 / 12:26 AM / a year ago

Mexico governor says federal funding withheld in graft probe dispute

MEXICO CITY, Jan 8 (Reuters) - A Mexican state governor on Monday accused the finance ministry of withholding federal funds to punish his administration for launching an investigation into alleged corruption that has embarrassed the ruling Institutional Revolutionary Party (PRI).

Chihuahua Governor Javier Corral, of the center-right opposition National Action Party (PAN), said the ministry was pressuring the northern border state because of its probe into the administration of his PRI predecessor Cesar Duarte.

Corral said that after he announced last month the arrest by state and federal authorities of Alejandro Gutierrez, a former top PRI finance official, the ministry failed to transfer to the state more than 700 million pesos ($36.5 million) it was due.

“This is an attempt to strangle the government of Chihuahua economically,” Corral told a news conference in Mexico City.

Just before Corral made his complaint, the finance ministry issued a statement saying it was meeting all the required payments, and that Chihuahua had received more funds in 2017 than originally budgeted due to higher federal revenue.

The ministry did not immediately reply to requests for comment on Corral’s accusations.

The dispute risks keeping attention focused on alleged PRI graft in the run-up to a presidential election in July. Tackling corruption promises to be a key campaign issue, and the PRI faces an uphill struggle to hold on to power.

After noticing the holdup in federal transfers, Corral said, he and aides held a meeting with top ministry officials in Mexico City on the evening of Jan. 4 to discuss the impasse.

There, Corral added, the Chihuahua delegation was told that his state’s investigation into alleged corruption had called “into question the mechanism of how funds are transferred,” for which reason the ministry decided to withhold the money.

Prosecutors in Chihuahua accuse Gutierrez of participating in a scheme to divert public funds worth 250 million pesos into PRI coffers during the 2016 election season, in which Cesar Duarte’s successor was chosen. Gutierrez has denied the charge.

A Mexican judge issued an arrest warrant for Duarte last March. Corral says his predecessor is in the United States.

Now Chihuahua was being subjected to “political reprisals” for taking on corruption in Mexico, Corral said. ($1 = 19.1880 Mexican pesos) (Reporting by Dave Graham and Ana Isabel Martinez; Editing by Matthew Lewis)

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