Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, February 22, 1995 TAG: 9502220097
SECTION: NATL/INTL PAGE: A-1 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Officials in the Clinton administration and the government of Mexican President Ernesto Zedillo acknowledged the accord could cause severe economic and political stress in Mexico. They said the situation would have been much worse without the support package.
``With the signing of this agreement, we are bringing this crisis to a close,'' said Secretary of State Warren Christopher.
Treasury Secretary Robert Rubin said the Mexicans showed political courage in agreeing to the ``kind of stringent economic medicine this program requires.
``Under these agreements, Mexico should be able to take the steps necessary to end its liquidity crisis, and in time the Mexican economy, which is fundamentally sound, should stabilize.''
At the White House, President Clinton praised Mexico for taking ``some very courageous steps'' to address its economic problems and defended the agreement against charges that it's a bailout by U.S. taxpayers.
``We have very good collateral on this deal, so we have done the right thing by the American taxpayers and the American people as well,'' he told reporters.
To receive the U.S. support, Mexico pledged to continue a tight-money policy that has seen interest rates soar to nearly 50 percent, to run a budget surplus of 0.5 percent this year and to move more quickly toward privatizing state-run enterprises.
The $20 billion in U.S. loans and loan guarantees is part of a $52 billion international package that includes $17.8 billion in commitments from the International Monetary Fund and $10 billion in funds from several European countries.
The $20 billion in U.S. assistance is coming from a fund that was established to support the U.S. dollar. Clinton tapped these resources after his effort to get congressional approval of $40 billion in loan guarantees ran into heavy opposition.
Private economists called the plan bitter but necesssary medicine.
``This makes a recession in Mexico likely, at least a mild one,'' said David Wyss, chief financial economist at DRI-McGraw Hill, a private consulting firm in Lexington, Mass.
The slower growth will have an impact in the United States as well, as Mexico is America's third largest export market. Wyss said DRI was forecasting U.S. exports to Mexico would drop by $10 billion this year, translating into a loss of 350,000 U.S. jobs.
by CNB