Dec. 19 (Bloomberg) -- Mexico's government said its plan to reduce inflation and foster economic growth by cutting electricity rates and import duties will cost 4 billion pesos ($353 million) in revenue next year.

The government said it would cut spending should the measures fail to boost activity and generate enough tax revenue to compensate for the reduction in duties and for the electricity subsidies, according to a statement e-mailed by President Vicente Fox's office Sunday.

Fox is seeking to reduce the effect of government-regulated prices for electricity and natural gas on inflation in Latin America's largest economy. Mexican consumer prices rose 5.4 percent in the 12 months to November, above the central bank's 3 percent target, as state-controlled costs rose 10 percent.

Under the measures, the Federal Electricity Commission, which generates 98 percent of the country's power, will pay 4 percent less for the fuel oil it buys from the state oil company and cut power rates for consumers and companies.

The government said it will cut duties on $11 billion of imports from countries with which Mexico doesn't have a free- trade agreement. The duty on consumer goods will be cut by 5 to 10 percentage points, and by 3 percentage points on machinery and raw materials.

To contact the reporter on this story: Adriana Arai in Mexico City at aarai1@bloomberg.net

Last Updated: December 19, 2004 20:04 EST