NATION/WORLD
Wednesday, February 22, 1995
5B
UNIVERSITY DAILY KANSAN
U.S. to provide relief to Mexico
The Associated Press
WASHINGTON — After intensive negotiations, the United States and Mexico reached agreement yesterday on a $20 billion rescue package that officials said should put the chaotic Mexican economy back on the road to recover.
The deal was signed by Treasury Secretary Robert Rubin and Mexican Finance Minister Guillermo Ortiz during a brief ceremony in the Treasury's Cash Room.
"We begin today the important work of helping Mexico restore its economy. It will not happen overnight, nor will it be easy," Rubin said. "Mexico has chosen the right
course and so have we."
Rubin said that $3 billion in U.S. loans and loan guarantees would be made available immediately, and $7 billion more would be provided during the next four months. He said that beginning in July, the second $10 billion would be provided to Mexico in stages.
Rubin praised Mexican President Ernesto Zedillo's government for demonstrating the courage needed to take tough steps to control its economy and halt a plunge in the value of the peso.
Ortiz said that the support package would allow Mexico to resume borrowing in capital markets on a reasonable basis, and he predicted that
the country would not need all of the funds available.
The agreement met U.S. demands that Mexico pledge to make fundamental economic reforms, which will likely cause rising interest rates and possibly a recession.
However, U.S. officials said that without the reforms, investor confidence could not be restored, and the peso would continue to plummet.
The slower growth will have an impact in the United States as well, since Mexico is the United States' third largest export market.
David Wyss, chief financial economist at DRI-MacGraw Hill, a private consulting firm in Lexington, Mass., said DRI was forecasting that
U. S. exports to Mexico would drop by $10 billion this year, translating into a loss of 350,000 U.S. jobs.
Administration officials said the agreement met all U.S. demands for economic reforms and assured repayment from oil revenues if Mexico defaulted on the loans.
Mexico's central bank announced Monday that it was tightening credit, which pushed short-term interest rates up to almost 50 percent.
That decision helped bolster the peso, which closed Monday at 5.53 to the dollar, up from 5.725 on Friday. Higher interest rates generally strengthen currency by giving foreigners a greater return on investments.
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