Main Point:

Bill Bradley’s op-ed piece discusses the form of interest and debt relief needed to bail out Mexico from its rising debt burden to U.S. and Western creditors, and it stresses the timing and sense of urgency needed to implement his proposal before the Mexican economy collapses.

Summary:

Once Bush entered office, the former Baker idea of debt rollover was abandoned in favor or providing other forms of interest and debt relief to Mexico. Since debt service diverts funds away from investment, Bradley largely favors this relief strategy and believes that it could provide a positive impetus for growth. Also, measures taken by the Salinas administration have made tremendous strides in opening up resources to service its outstanding debt. From 1984-1989, the Mexican government has complied with IMF mandates; it cut its budget deficit by 9% of GNP, removed trade barriers primarily by reducing tariffs, privatized former government enterprises, encouraged foreign investment, and has begun to stabilize wages and prices. Yet debt relief, Bradley asserts, is necessary to prevent inflation from rising and the peso from depreciating, once the social compact to stabilize wages and prices expires in June 1989.

Bradley’s resolution to providing between $5-$7 million in savings for the next five years (the amount necessary to spur long-term growth) is the following:

(1) U.S. banks need the support of U.S. government leadership and the backing of their European and Japanese counterparts to “bear a fair share of any reduction.”

(2) The World Bank should aid creditors in developing options for affording debt relief and possibly serve as a guarantor for certain debt instruments.

(3) Bush should appoint someone whose chief responsibility is overseeing this plan and ensuring that debt reduction for the debtor nations, including Mexico, comes to its fruition.