New Debt Plan Faces First Test in Mexico
This Article comes from the march 13 New York Times edition. It talks about Mexico’s debt plan negotiations with Americans officials. The process of lending money to Mexico has been slowed by the differences between the Federal Reserve and the Treasury Department. At the same time American private bankers are irritated because Mexico has not approached none of the bank authorities that are expected to provide $42 billion over the next six years. According a financial analyst Mexico need’s a quick promise to maintain confidence and a deal by the end of July 1989, if not everything is going to fall apart.
In 1989 the savings and loan association crisis in the U.S. did not let the Treasury Department officials to pay attention to the debt issue. In the discussions that have occurred the U.S. and Mexico did not agree on “major elements of the debt menu”, Mexico is saying that it needs $7 billion in 1989, and American officials made an estimate of less than $2 billion. Americans officials responded to Mexican trade worries by urging Mr. Salinas to devaluate the peso.
That step would automatically lead to an increase of inflation. It also seem that the problem was the Bush administration that has been arguing from the old model. Mr. Aspe a Mexican official was scheduled to return to Washington to meet his American colleagues of the IMF, the World Bank, and Inter-American Bank. These institutions have been called to play a guarantor’s role.
Private Banks are annoyed
Mexico’s strategy has avoided direct negotiations with private banks, and that approach irritated many bankers who knew they were expected to provide $42 billion in debt relief to Mexico over the next six years. One banker said: “Not only there are no negotiations; there has been no discussion”. Mr. Aspe declined to meet with the presidents of some large banks who visited Mexico. A European diplomat said: “he has been trying to follow the suggestions the Americans made to him, but it has made some key people rather unhappy.
Bankers and diplomats said that Mexico’s foreign reserves dropped by $10 billion in less than a year and continue under pressure. The pressure made people not to feel reassured about the relief. An American financial analyst said that a promise by the end of March would be enough to maintain Mexico’s confidence but if there was no deal by the end of July everything was going to fall apart.