Mexico to Get $1.5-Billion Loan Package

The World Bank announced Tuesday that it had approved a $1.5-billion package of loans to Mexico, with as much as $375 million of the money set aside to support the Bush Administration’s Third World debt-reduction plan.

With the approval, Mexico became the first country to gain money for debt relief from the 151-nation lending institution as part of the debt initiative launched by Treasury Secretary Nicholas F. Brady on March 10.

World Bank officials said they hoped that the loans would be enough to break a stalemate in debt reduction talks between Mexico and its creditor banks, which are currently under way in New York.

“This is the first time ever that the bank has made provisions to finance debt relief for one of its members countries, and the approval of these loans constitutes a milestone in the 43-year history of the institution,” World Bank president Barber Conable told a news conference.

“Today’s action signals the bank’s determination to become more involved in solving the problem of Third World debt, within the framework of the Brady initiative,” Conable said.

Lukewarm Support for Plan

Brady, in one of the Bush Administration’s first international initiatives, announced in early March a program to encourage commercial banks to voluntarily forgive a portion of the $1.3-trillion debt burden being carried by developing countries.

The Brady plan envisioned that the World Bank and its sister organization, the International Monetary Fund, would provide the bulk of enticements that the commercial banks would require for the debt relief effort to succeed.

But so far the Brady plan has met with lukewarm support from commercial banks, which contend that the resources being discussed by the two international lending organizations are not sufficient to accomplish the scale of debt relief being demanded by debtor countries.

The banks and Mexico are currently far apart in their talks on the matter. Mexico is insisting that its outstanding debt be reduced by 50%, while the banks have only offered to reduce the principal of existing loans by 22%.

The stalemate is a blow to the Administration, which is hoping to have a successful Mexican debt package completed in time for Bush’s trip to the economic summit of major industrial nations in Paris on June 14. The hope is that an agreement with Mexico would serve as a model for debt relief programs for other heavily indebted countries.