Mexico has told the International Monetary Fund that it aims to slash payments on its huge foreign debt to get its stagnant economy growing again, two leading newspapers said Wednesday.
The privately owned El Financiero and the government newspaper El Nacional said President Carlos Salinas de Gortari’s Administration informed the IMF in a draft-letter of intent that it plans to reduce payments to 2% from 5% of the annual gross national product over the next three years.
El Financiero said the letter was drafted after an IMF team visited Mexico City last week to evaluate an application for $500 million in “special drawing rights” to bolster the country’s foreign currency reserves. Special drawing rights, or SDRs, are a type of international money created by the IMF for use in settling international payment imbalances.
Treasury Secretary Pedro Aspe toured Mexico’s principal creditor nations in February, unsuccessfully seeking $100 million in fresh loans from private banks, together with a reduction in the paper value of the country’s debt.
Quoting unnamed government sources, the two newspapers said the debt situation was analyzed by Aspe and other members of the Cabinet’s economic team at a meeting with Salinas on Tuesday night.
Wants to Spur Growth
Government spokesmen refused to talk about the debt situation. “In due time, we shall make the appropriate information public,” Treasury Department spokesman Rafael Diaz de Leon replied in a telephone interview Wednesday.
Salinas wants to use money saved on debt payments to spur economic growth to about 4.5% annually, El Nacional said.
After two decades of 6% growth, the economy completely stagnated under Salinas’ predecessor, President Miguel de la Madrid, in part due to an austerity program put into effect to keep up with debt payments.
Despite efforts to encourage non-petroleum exports, reduce government deficit spending and cut inflation, the economy has remained in the doldrums.
Salinas--de la Madrid’s budget secretary--has been warning since he took office in December that Mexico may be forced to suspend debt payments if it fails to wrest timely concessions from foreign creditors.
Officials have been saying Mexico wants to cut its annual service costs by about $7 billion from the $14 billion in principal and interest paid last year and the $16 billion scheduled for 1989.
The World Bank estimates Mexico’s debt was $106 billion in December. Deputy Treasury Secretary Jose Angel Gurria on Tuesday denied the debt had gone up to $108 billion and said it was actually on $100 billion.
Gurria said in a television interview that the public sector foreign debt currently stands at $81 billion, the short-term inter-bank debt at $7 billion, the private sector debt at $7 billion and the International Monetary Fund is owed another $5 billion.
El Financiero quoted the eight-page letter to the IMF as saying the “present (debt) situation is not acceptable or sustainable” and “it is urgent the Mexican economy start growing again” in order to check growing unemployment.
From 1982 to 1988 the economy failed to grow, per-capita income dropped some 15% to 20%, the purchasing power of wages was halved, the newspaper quoted the letter as saying.
The letter said Mexico needs to create 1 million jobs annually just to take care of new entries in the job market, but created only 1 million jobs over the six-year period.