Mexico Debt Talks Reported Close to Agreement
Negotiators for Mexico and a consortium of commercial banks said Saturday that they are “close to agreement in principle” on a new financing package for that cash-strapped country that is likely to exceed $3 billion.
Banking industry officials said the outlines of the accord probably would be completed late this coming week. Full details of the package are not likely to be worked out for several weeks after that.
The statement, issued jointly by senior negotiators for both sides, was intended to signal the likelihood that they will reach an accord before the start of the annual seven-nation economic summit in Paris on July 15-16.
The two sides have been under intense pressure from the U.S. Treasury Department to end the three-month stalemate and hammer out an accord that President Bush can use to show that his new Third World debt strategy is working.
French President Francois Mitterrand has invited leaders of 22 poor countries to an eve-of-summit dinner to discuss the debt issue, and U.S. officials fear that Bush could be embarrassed if an accord is not in hand.
The U.S. proposal, unveiled March 10 by Treasury Secretary Nicholas F. Brady, already is under growing criticism by debtors and creditors alike, mainly on grounds that it cannot provide enough relief to do the job.
The plan calls on commercial banks to forgive a portion of their loans to Third World countries in return for receiving guarantees from the International Monetary Fund and the World Bank for the remainder of their loans.
Saturday’s statement said the pending new accord was likely to include “a range of options,” from paring the amount of the debt owed by Mexico to providing new bank loans to that country.
The total of new loans and debt reduction for Mexico would amount to slightly more than $3 billion. The Mexicans had asked for something approaching $6 billion to $7 billion.
The negotiations had been stalemated for months, and the Mexicans had begun to consider taking new measures--such as placing their current debt payments in escrow--that would escalate their skirmish with the banks.
However, in the past two weeks, the Bush Administration has stepped up its pressure on both sides to complete agreement on at least the outlines of an accord. Brady himself jumped into the fray.
The talks are being conducted in New York by a 15-bank advisory committee headed by William R. Rhodes, a vice president of Citibank, the largest bank in the group, and Jose Angel Gurria, the Mexican undersecretary of the Treasury.
Mexico has a $107-billion foreign debt, of which about $75 billion is owed to commercial banks, both U.S. and foreign.