ECONOMY-MEXICO: Doubts about U.S. Bail Out Grow
MEXICO CITY, Jan 19 (IPS) - Doubts about and criticism of the U.S. bail out of Mexico with guarantees for 40 billion dollars grew on Thursday, while the peso and stockmarkets continued their decline.
The U.S. Treasury guarantee, still pending approval by Congress, will back the payment of loans this year, when 29 billion dollars of government securities with dollar clauses mature.
But opposition in the U.S. Congress to the aid package and strict political and economic conditions included in President Bill Clinton's bill make its approval uncertain.
Clinton said his intention is not to "administer Mexico's macroeconomy nor violate its sovereignty," and called on Congress to quickly approve the aid package after influential leaders from both parties questioned it.
According to Clinton, the package "is neither foreign aid nor a gift, loan or bail-out, but the equivalent of an I.O.U., in exchange for which the Mexican government commits itself to comply with both old and new debts."
To speed up the process, Clinton asked for the debate to remain strictly financial, and criticised those who want to "load the law with too many conditions."
Clinton was making clear reference to the intention of lawmakers to stipulate political conditions, such as controls on illegal immigration and drug trafficking, a new extradition law favourable to the United States and Mexico's breaking off of relations with Cuba.
The Mexican peso has fallen from 3.45 to 5.50 per dollar since Dec. 19 when the crisis broke out after the government set the local currency to float freely. The drop followed an 11 percent decline that had occurred in the 12 previous months.
From January 1994 to Dec. 19, Mexico's foreign currency reserves had fallen from 28 to 6.5 million dollars.
Mexico will pay 3.2 billion dollars - or eight percent of the total sum - in advance for the U.S. guarantee. "There will be no guarantee until we are convinced Mexico will be able to pay," said Clinton.
But several U.S. legislators do not want to help the Mexican government, and conservative analyst Patrick Buchanan said "loans for millions of dollars are not part of a free market economy, but gifts from Wall Street investors."
Gustavo Emmerich with the Metropolitan University told IPS that "the majority of Mexico's debtors in dollars are U.S. firms and investors, so Washington is seeking to guarantee the payment of debts it needs to collect on."
Meanwhile, pressure has been stepped up on Mexico to privatise its state oil monopoly PEMEX, which generates 2.8 million barrels of crude oil a day, half of which is exported, with the United States being Mexico's top customer.
Mexico's hydrocarbon reserves will last 50 years at the current rhythm of production, and at today's prices are worth a total of 850 billion dollars.
U.S. lawmakers have demanded that Mexican oil income be directly deposited in an account in the U.S. Federal Reserve Bank as a safeguard against any guarantee.
The San Angel Group, made up of figures from Mexico's main political parties and ideological currents, urged the rejection of U.S. conditions.
In a document released on Thursday, the San Angel Group called on the government to provide complete information on negotiations with the United States, adding that there are signs that "national sovereignty is being surrendered."
One of the group's leaders, political analyst Lorenzo Meyer, told IPS that "there are well-founded suspicions that the defence of sovereignty is incompatible with what is occurring in terms of economic and political negotiations abroad."
Legislators of the governing party and the opposition called the demands of the White House and the U.S. Congress "unacceptable."
Carlos Sales, with the Institutional Revolutionary Party which has held power since 1929, said "U.S. credit is not the only option, but we will wait to see what they come up with and will decide whether we accept their conditions."
Meanwhile, lawmakers of the right-wing National Action Party, the country's largest opposition force, held a protest on Thursday in front of the U.S. Embassy.
For their part, legislators of the centre-left Democratic Revolution Party (PRD), Mexico's second opposition force, released a condemnation of U.S. conditions.
According to the PRD, the rescue package seeks to "institutionalise Mexico's dependency on the world's strongest power ever."
Authorities attribute the financial crisis to an excessive deficit in the foreign current account, fed by a 20 billion dollar trade deficit over the last three years.
© Inter Press Service (2014) — All Rights Reserved. Original source: Inter Press Service