Hoping to initiate congressional action by the end of the week, U.S. and Mexican officials met throughout the day Monday, hammering out details of the multibillion-dollar loan program the Clinton Administration is assembling to help bail out the Mexican economy.
The Administration faces an undercurrent of pressure from members of Congress to attach conditions to the aid package, including strict provisions attacking illegal immigration.
Administration officials made it clear that they are trying to avoid a confrontation with Congress over the issue, while also trying to keep legislation approving the loan guarantees as free of extraneous conditions as possible.
At its heart, the assistance would provide the U.S. government's guarantee that private banks lending money to Mexico could count on the U.S. Treasury to repay up to $40 billion in loans if the debts are not paid back by Mexican borrowers.
After the third day of private meetings involving a revolving cast that has included Mexican Finance Minister Guillermo Ortiz, U.S. Treasury Secretary Robert E. Rubin and a dozen Republican and Democratic members of the House and Senate, a senior Treasury official said optimistically Monday afternoon that "there is a strong sense this is something we've got to do."
But he said the details of how the program would work--and what it would cost Mexico--remained unsettled. Stumbling blocks were said to include Mexican concerns over the amount of loan fees they would be charged and how the aid would be structured.
While the U.S. aid package was being assembled, Mexicans nervously awaited the results of today's government bond auction in Mexico City to find out whether the economic crisis that has shaken the country for the past month is beginning to subside.
The crisis was triggered by massive capital flight as foreigners sought safer investments after the government's unexpected devaluation of the peso Dec. 20. The auction results will signal whether investors are still deserting Mexico.
By Monday afternoon, the Bank of Mexico still had not announced an alternative for the dollar-backed government securities, called tesobonos , that foreigners resoundingly rejected last week. The government is expected to use part of the American rescue package to create bonds backed by U.S. government securities that are expected to be more palatable to investors.
Less than a fifth of the bonds offered were purchased in last week's auction, which meant that when earlier issues of tesobonos matured three days later, hundreds of millions of dollars left Mexico.
Despite apprehensions about today's auction, markets remained stable. The Mexican stock exchange index rose 26.46 points, or 1.19%, to 2,243.01. The peso, however, lost ground, climbing to 5.48 to the dollar from 5.25 on Friday, after three straight days of strengthening.
The talks in Washington, which began Friday and which the Administration hopes will be completed today or Wednesday, are dealing with specific details of the loan guarantees.
Negotiators have proceeded with an understanding on at least one sensitive issue: that Mexico will have to pay a loan fee. Mexico will be required to put up sufficient fees to cover the yearly amount of U.S. government money that would be reserved to pay for a default--an amount that must be charged to the federal budget, under complex budget laws, while the loans are outstanding, even if the U.S. Treasury is never called upon to release the funds.
Using past international loan guarantees as a guide, officials indicated that Mexico could be expected to pay fees ranging from slightly less than 5 cents on the borrowed dollar to slightly more than 10 cents. Supplemental risk premiums would also be attached to the loans, and U.S. and Mexican officials continued to negotiate over the use of up to $7 billion in Mexican oil revenues as collateral.
The Administration has indicated that it does not relish the potential political problems that could follow if legislators attempt to attach strict conditions intended to pressure Mexico to step up efforts to limit illegal immigration into the United States. But the Administration does not consider the issue totally out of bounds in the financial measure, and the issue has been raised in the talks with Mexican officials and the congressional group.
Gerstenzang reported from Washington and Darling from Mexico City.
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