THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, February 2, 1995 TAG: 9502020707
SECTION: FRONT PAGE: A12 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 55 lines
President Clinton may be little better than a lame duck, but he's still the president. His decisive action to create a package of timely loan guarantees for Mexico is a reminder that Congress may be riding high, but there are things only an executive can do.
With the peso heading south, Mexico faced a classic ``run on the bank'' situation. And panicky investors were also withdrawing funds from other emerging economies, threatening to turn them into submerging markets.
Clinton had asked Congress to act and the leadership of both parties had endorsed loan guarantees backed by Mexican oil revenues. But in the face of polls showing 70 percent of the public opposed, Democrats abandoned their president and Republicans ignored the lukewarm calls of their leaders for support.
Finally, with Mexico close to default, Clinton did what 535 members of Congress refused to do. He moved with dispatch to avert a crisis. The initial response has been encouraging. The peso and Mexican stocks have stabilized. The panic has abated.
But all the deal gives Mexico is breathing space. It must get its economic house in order. It faces recession and must control debt and inflation through a more responsible monetary policy. If investors aren't convinced that opportunities in Mexico outweigh the risks of government bungling, all the loan guarantees in the world won't prevent them from moving dollars elsewhere.
At home, Clinton must persuade skeptical taxpayers that the loan guarantees are secured by the collateral of Mexican oil and no raid on the U.S. Treasury is in the cards. He's also got to make the case that the United States has a vital stake in keeping Mexico growing. He shouldn't have to make the case alone.
Clinton was forced to act unilaterally because members of Congress who knew loan guarantees were the right course nevertheless refused to cooperate on a solution. But no guts, no glory. Clinton did what had to be done and, for once, looks like a statesman. Congress faced a moment of truth and flinched.
Members can partially redeem themselves by helping explain that a disaster in Mexico would have grave repercussions - including increased illegal immigration and the loss of tens of thousands of jobs tied to exports. Too many Americans continue to believe we can retreat into isolationism. We can't. In a global economy, where money crosses borders at the speed of light, our prosperity is tied to events abroad whether we like it or not. And that makes it essential that we respond prudently to crises that affect our national interests. by CNB