Mexico May Get $2-Billion Loan From the U.S. : Temporary Step to Tide Nation Over Until Banks OK New Debt Financing

The United States said Thursday that it is prepared to provide Mexico with a temporary “bridge” loan of $1 billion to $2 billion as soon as that country has completed its negotiations with commercial banks on a new debt-financing package.

The loan, similar to others that are often granted in such situations, would be designed to tide Mexico over between the time that it reaches an accord with the banks and the day that the banks actually begin disbursing money under any new loan agreements. Mexico would repay the United States from the bank loans.

The Bush Administration’s willingness to provide such temporary financing was signaled by a senior Treasury Department official after a meeting in Paris on Thursday between Treasury Secretary Nicholas F. Brady and Mexican President Carlos Salinas de Gortari. President Bush plans to meet with Salinas today.

Bush and Brady are in Paris for the annual seven-nation economic summit, which begins Saturday, and Salinas is attending a separate meeting hosted by French President Francois Mitterrand.

An accord between Mexico and the commercial banks would be the first “test case” of Brady’s Third World debt-reduction plan, which he unveiled in March. U.S. officials had hoped to have an agreement in hand before this week’s economic summit, to blunt criticism of the new strategy. Brady has pressed both sides to finish the new accord.

Talks in New York

The banks and top Mexican officials have been negotiating intensely for the past 2 1/2 weeks on a new financing package for Mexico that includes some reduction of its existing $56-billion debt to commercial banks and a cut in the interest rates that banks are charging.

Both sides say they are close to reaching an agreement in principle, which could come as early as today, and Brady told reporters Thursday that he is “more hopeful than ever” that the two sides will reach an accord soon. The negotiations are being held in New York.

The senior Treasury official who disclosed the Administration’s position said Thursday that if the banks and the Mexicans can reach an agreement on a new financing package, “Treasury is very willing to contemplate a bridge.” He said he expected that the accord could come “at any moment.”

The United States offered Mexico a $3.5-billion bridge loan last autumn but never completed the processing because of a dispute between the Treasury and the Mexican Finance Ministry over whether Mexico had met certain conditions needed to qualify for the package. It was expected that any new loan would not contain such conditions.

Loan for Bolivia

The Treasury official who spoke Thursday said the agreement between the Mexicans and the commercial banks probably would leave Mexico’s total foreign debt burden somewhat lower than it was before, even though the package includes additional loans as well as debt reduction. Mexico owes foreign creditors about $107 billion, some $75 billion of which is from commercial banks.

In another development, the Treasury Department announced Wednesday in Washington that it is providing Bolivia with a $100-million, short-term bridge loan to help it as it continues to reform its economy.

“These funds will complement ongoing, longer-term financial assistance from the International Monetary Fund, the World Bank, the Inter-American Development Bank and bilateral donors,” the Treasury’s announcement said.