Mexico Hints That It May Suspend Debt Payments

Treasury Secretary Jesus Silva Herzog has expressed frustration at the lack of international sympathy for Mexico’s economic plight and did not rule out the possibility that the government might suspend foreign debt payments.

“We require a different treatment that is not ‘business as usual’ because things are not ‘as usual,’ ” he said in an interview late Wednesday.

He said the Mexican economy had suffered a severe shock from the collapse of world oil prices. “Never, never has there been a case of a country that received an external shock . . . (of that magnitude) in such a short period of time,” he said in his offices at the National Palace.

Slashed in Half

Mexico depends on crude sales for about 70% of its foreign earnings to help stay current on a foreign debt of nearly $100 billion. Government officials have estimated that oil earnings in 1986 will be slashed at least in half from the $13.3 billion of last year.

As a result, Mexico is seeking billions of dollars in financial aid from international financial organizations, such as the International Monetary Fund, and commercial bankers. Talks so far have been slow.

Silva Herzog said the government has enough reserves in its coffers to meet its financial obligations for the entire year.

“But,” he said, “because it would not be reasonable, we are not going to permit our scarce resources to be used only to cover the payments of the foreign debt. We have other priorities, and the principal creditor of Mexico is the Mexican people.”

Asked if he expected Mexico to suspend debt payments this year, he replied: “It depends; it depends a lot on the outcome of these conversations and these negotiations” with the IMF and international bankers.

Mexico paid $2.3 billion in interest and principal payments in the first three months of the year and owes $7.5 billion in all of 1986.

The nation’s international reserves tumbled to $5.5 billion at the end of last year, sharply under the $8.1 billion of a year earlier. Other government officials have said the level of reserves rose in the first four months of the year to more than $6 billion.

Silva Herzog said that Mexico was still holding talks with the IMF but that the two sides remained apart on the size of Mexico’s deficit spending and inflation rate this year.

The finance official said that because of the fall in oil prices, the government projects a budget deficit of about 13% of the gross national product, higher than the 9.9% posted last year.