Clinton Presses for Mexico Loan Plan as Support Wanes

With support seeming to hemorrhage as the Clinton Administration tries to contain its first potential international economic crisis, the White House and its congressional allies rushed Monday to prepare legislation granting loan guarantees to Mexico.

Battling on two fronts--with recalcitrant members of both parties in Congress and with a public showing even more reluctance than its elected representatives to support the plan--President Clinton said that the assistance is in the interest of American workers and businesses “and the United States as a whole.”

“I realize it’s not politically popular back home,” he said in a speech to the National Governors Assn. But, he added later in the day, “This is something for ordinary Americans.”

Clinton found his efforts to help Mexico out of its financial morass being sharply criticized as half hearted or, even worse, misleading. Aides said that he may try a go-for-broke address to the nation from the Oval Office to rally the support that could bring reluctant members of Congress to his side.

In Mexico, meanwhile, the deepening uncertainty in Washington redounded with devastating impact on the battered financial markets there. The peso fell to 6.35 against the dollar. The peso has lost about half of its value in a month. The key index on the Bolsa de Valores stock market fell 3% to its lowest closing mark since Oct. 8, 1993.

And just as Clinton’s path was fraught with political potholes, so too was that of Mexican President Ernesto Zedillo, who was being urged to seek alternatives to U.S. assistance and not cave in to U.S. demands in a desperate rush to get out from under Mexico’s worst financial crisis in more than a decade.

Zedillo promised in three speeches last week that he would not sacrifice Mexican sovereignty in exchange for U.S. support. But opposition leaders and grass-roots critics quoted in the influential Mexican news weekly Proceso expressed fear that the U.S. Congress is using the package to force Zedillo’s capitulation on a series of issues, including intensified campaigns against illegal immigration and narcotics trafficking.

Mexico City newspapers reported speculation that Zedillo would visit Clinton in Washington on Friday. The White House refused to confirm or deny that such a meeting is planned.

The centerpiece of the U.S. plan, intended to stabilize the Mexican economy and enable it to carry out necessary short-term borrowing, is a guarantee that the U.S. Treasury would repay private lenders if Mexico defaults on as much as $40 billion in private loans. In effect, the United States would be co-signing the loan note.

Senior Administration officials and members of a congressional task force spent much of Monday afternoon working privately on legislation authorizing the loan-guarantee program and hoped to submit the proposed measure to Congress today. Lawmakers reluctant to support the program have pressured the Administration to attach provisions intended to strictly regulate Mexican wages, impose immigration programs and delve into such sensitive foreign policy issues as Mexico’s limited support for Cuba.

A senior White House official said that any language related to Cuba has been ruled out as irrelevant but that the proposed legislation is being written to include expressions of concern about labor matters in Mexico, although Mexico would not be forced to adhere to specific standards to be eligible for the backing.

The Administration put the loan-guarantee plan together nearly three weeks ago, boosted by the seemingly solid support of the top Democrats and Republicans in Congress. But popular support did not follow, and House Speaker Newt Gingrich (R-Ga.) conceded Monday, “I think I was in error . . . in thinking it would be easy.”

He said it is still possible to gain congressional approval for the plan. But he added, “I don’t know that it’s probable.” And Senate Majority Leader Bob Dole (R-Kan.), who worked out the original plan with Gingrich, Democratic leaders and the White House, said that “support has eroded.”

To help counter the seemingly daily slippage and gain political support, the Administration put together a list of prominent Americans in favor of the plan, among them former Presidents George Bush, Jimmy Carter and Gerald R. Ford.

The Administration also said that it had the backing of more than two dozen other former senior government officials dating back to the Lyndon B. Johnson Administration.

Administration officials said that they hope the list will provide some political cover for members of Congress, particularly first-term lawmakers, who are reluctant to vote for a program that has the aura of a $40-billion gift of foreign aid, even if the United States ends up doing no more than guaranteeing loans that are repaid at no cost to taxpayers.

Some Republicans, including supporters of the loan guarantees, complained quietly that Clinton had failed to take the lead aggressively before the crisis threatened to get out of hand.

Now he is faced with the prospect that the economy of Mexico, the second-largest customer for U.S. goods, will continue to tumble, pushed down further by a lack of confidence in the United States. And the turmoil, by Clinton’s own account, would threaten not just jobs in the United States but also efforts to contain illegal immigration and the flow of drugs northward.

The Administration came under withering criticism from several Republican senators, offset by little visible support from Democrats, for what has been widely seen as a poor job of selling the program to the nation.

Some GOP senators questioned the validity of the Administration’s assertion that the loans would be secured by Mexico’s oil revenue and that the United States would be first in line with any claims should Mexico default.

“The oil collateral is a joke,” said Sen. Lauch Faircloth (R-N.C.).

Gerstenzang reported from Washington and Fineman from Mexico City. Times staff writers Doyle McManus and Edwin Chen also contributed to this story in Washington.

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