Mexico Pays $600 Million on Foreign Debt, Gets Extension on IMF Talks

Mexico made a $600-million interest payment on its foreign debt Tuesday, according to a spokesman in the office of President Miguel de la Madrid, thus scotching for the moment speculation that the government would cancel or limit its payments due to depressed economic conditions.

In addition, Mexico and the International Monetary Fund agreed to extend for 30 days negotiations on new terms of debt payments and fresh loans designed to revive the country’s sagging economy, according to a communique from Mexico’s Finance Ministry.

Falling prices for oil, Mexico’s main export, have crippled the country’s ability to make payments on a foreign debt that is now approaching $100 billion. Comments from Mexican officials that the country might, on its own, cancel or limit debt payments have set off bouts of frantic currency trading here in recent weeks.

Last week and over the weekend, Mexican negotiators met with heads of the International Monetary Fund, 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.

Negotiations between Mexico and the IMF have been dragging on for months. Although the delay in signing a new accord was not explained Tuesday, the press communique from the Finance Ministry alluded to a particular Mexican negotiating stance that has traditionally 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 talks, one stumbling block has been overcome, according to Mexican press reports: The IMF has pulled back from its demands that Mexico reduce government spending much further this year.

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

In announcing the 30-day extension, the government of President De la Madrid said Mexico’s gross national product will decline by 3% to 4% in 1986, it added.

For 1987, the De la Madrid government is looking for a formula to reverse the downslide.

“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 $600-million payment covered the full amount due July 1. The Finance Ministry said that under an agreement made in 1985 and renewed this year, payment of $950 million in principal would be delayed until Oct. 1.

The principal payment was originally due Oct. 1, 1985, but creditors granted a six-month delay because of Mexico’s financial problems after last September’s wing the destruction from last September’s earthquakes.

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.