Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, February 4, 1995 TAG: 9502080014
SECTION: EDITORIAL PAGE: A-7 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
The Republican congressional leadership knows this, and both Senate Majority Leader Robert Dole and House Speaker Newt Gingrich responsibly supported the administration's efforts. But too many others in Congress did not, and Clinton had to abandon his proposed $40 billion loan-guarantee package.
Instead, the president bypassed Congress by putting together a $49 billion international package of loans and loan guarantees, including $20 billion from the U.S. Exchange Stabilization Fund.
Neo-isolationists like newspaper columnist and occasional Republican presidential candidate Patrick Buchanan hailed the congressional sandbagging as "an incredible victory for economic nationalism and a healthy new populism." That's demogoguery, but in accord with the polls: Some 70 to 80 percent of Americans opposed any rescue of the peso.
Much of the opposition - including Buchanan - also decries the wave of immigrants, documented and not, who cross into the United States from Mexico. Instead of viewing peso protection as a bailout for foreigners and Wall Street investors, they would do well to see it as, in part, timely support for Mexico's continued economic growth, which in the end is the best and perhaps only way to stem the immigration tide.
The immediate goal of the loans was to avert an economic disaster that might have required Mexico to default on short-term government bonds whose cost to that country shot up with the sudden fall of the peso's value against other currencies. The underlying goal is to keep Mexico on the path of free-market growth.
Investors - a group that includes millions of not-so-rich Americans with small mutual-fund holdings, retirement savings and pension interests - may benefit. But so may the U.S. economy in general.
America needs markets, and the fear created by the plummeting peso started a sell-off of stocks and bonds not only in Mexico but also in other developing countries. Left unchecked, this could have worldwide repercussions. Developing nations have become growing consumer markets for industrialized nations; if investment capital dries up and pushes developing nations into recession, the economies of industrialized nations will be slowed as well.
The neo-isolationists might prefer it otherwise, but they'd better learn to live with it: The push of technology is making national economies more interdependent than ever. This is especially true in the case of Mexico, the United States' second biggest trading partner after Canada.
Mexico is using future oil revenues as collateral on the loans, and has agreed to cut government spending, the peso supply and its trade deficit. Mexico already had been pursuing a policy of modernizing its economy with free-market reforms. Reassurances are welcome, given the psychological element in any effort to stabilize currency, curb inflation, lower unemployment and restore investor confidence.
Whether Mexico can get its economy back on track is not certain. What's certain is that Mexico's success is in the interests of the United States, and that international intervention has given Mexico crucial time to try.
by CNB