Creditor Banks Delay Mexico’s Debt Payments : Nation Gets Six Months to Repay $950 Million

A committee representing international banks owed money by Mexico agreed Tuesday to postpone for six months loan repayments totaling $950 million.

William Rhodes, co-chairman of a 13-bank committee representing more than 600 banks that have outstanding loans to Mexico, said payments that were due Tuesday and Nov. 4 were deferred until it becomes clear how much financing earthquake-ravaged Mexico needs, as well as how much will be supplied by international financial institutions, government-to-government aid and private contributions.

The statement issued by Rhodes, the chairman of Citibank’s restructuring committee, made no specific reference to the financial impact of the two earthquakes that rocked Mexico last month, but it said the banks agreed to a postponement “in light of recent developments.”

Talks on Fresh Credit

The statement also said Mexico was confident that it could return to the international credit markets for loans from commercial banks in 1986. It said Mexico was already negotiating for fresh credit.

The bankers agreed to count the $950 million toward a total of $2.5 billion in new loans that Mexico has requested to see it through 1986.

In return for the new loans, Mexican officials committed the country to seeking a new, 15-month standby loan agreement with the International Monetary Fund, bankers said.

Mexico currently has a three-year borrowing arrangement with the IMF for $3.5 billion, but it recently failed to meet targets set by the IMF in return for the loans and was declared ineligible for the $900 million remaining in the loan package.

Not only has Mexico incurred huge new expenses because of earthquake damage, but, because capital has been taken out of the country and oil revenue has fallen, the country’s currency reserves have dwindled to about $5 billion from $8 billion at the end of 1984.

Mexico’s 700 creditor banks worldwide were advised by Citibank, co-chairman of the 13-bank advisory committee, not to expect their share of Tuesday’s scheduled payment. But details of how it is to be rescheduled have yet to be worked out.

Banking industry representatives said it was already apparent that the first half of Mexico’s pact with the banks for rescheduling payments on $48.7 billion of debts over several years would have to be amended.

As part of the first half of the rescheduling covering $28.6 billion, Mexico agreed to prepay $1.2 billion of a $5-billion loan extended in 1983. It made the first $250-million installment in early January.

In total, Mexico owes a staggering $96 billion to foreign creditors, second only to Brazil among indebted developing countries.

Agreement to amend the rescheduling pact would require 100% approval of Mexico’s creditor banks, a process that could take months. Mexico has asked that its new loans be raised by only its main 100 or so creditors in an attempt to speed up approval.

Currently, the commercial banks plan to provide their loans through co-financing with the World Bank and the Inter-American Development Bank. Mexico hopes that these institutions will lend it about $1.6 billion in 1986.

Mexico also hopes to receive about $1 billion from the IMF next year, and the United States has agreed to lend $1 billion through the Commodity Credit Corp. to finance Mexican agriculture.