Mexico, IMF Set New Deadline for Completing Talks on Foreign Debt

Mexico and the International Monetary Fund have set a new 30-day deadline for completing long-stalled negotiations over Mexico’s foreign debt, according to a communique from the Finance Ministry.

It was not clear by late Tuesday whether Mexico had also made a $600-million interest payment on the debt that was due during the day. The communique said only that the $600 million was the kind of payment that is “canceled naturally month by month.”

There has been recent speculation that Mexico would delay debt repayments because of adverse economic conditions. In any case, no moratorium on payments was announced.

Falling prices for oil, Mexico’s main export, have crippled the country’s ability to pay its $98-billion debt. Comments from Mexican officials that the country might cancel or limit debt payments have set off bouts of frantic currency trading here in recent weeks.

Over the weekend, Mexican negotiators met with the heads of the IMF, the World Bank, the U.S. Federal Reserve Board and the U.S. Treasury to try to come up with a new payments formula, but the talks were inconclusive.

Mexico has been negotiating a debt agreement with the IMF for months. Although the delay in signing a new accord was not explained, the press communique from the Finance Ministry alluded to a particular Mexican negotiating stance that has been unacceptable to bankers: Mexico wants to link debt payments to the price of oil so that payments would be adjusted downward when oil prices fall.

In the past, bankers have flatly refused to make payments dependent on the price of export commodities, fearing that other debtor countries would demand the same treatment.

Despite the apparent stalemate in the talks, one stumbling block has been overcome, according to Mexican press reports: The IMF will permit Mexico to exceed spending targets that it had earlier tried to impose.

An IMF blessing on Mexico’s economic plans is thought to be necessary before foreign banks will extend new loans. Bankers are said to be considering new loans of $6 billion.

In announcing the 30-day extension, the government of President Miguel de la Madrid said that Mexico’s gross national product will decline by 3% to 4% in 1986. For 1987, the De la Madrid government is looking for a formula to reverse the down slide.

“The government of Mexico considers it necessary to adopt measures tending to obtain moderate rates of growth of from 3% to 4% in 1987 and 1988, which it considers indispensable to create employment and maintain social stability,” the communique said.

There was some confusion over whether the scheduled $600-million payment would have covered the full amount due July 1. The Finance Ministry said that under an agreement made in 1985 and renewed this year, payment of another $950 million in principal would be delayed until Oct. 1.

The principal payment was originally due Oct. 1, 1985, but creditors granted a delay because of Mexico’s financial problems after last September’s devastating earthquake. Six months later, the payment was deferred again.

Last week, however, Finance Minister Gustavo Petrocioli claimed that a full $1.5 billion was due July 1.

His estimate fueled speculation that Mexico would cancel payments since the country’s foreign reserves stood only at about $2.5 billion.