Zedillo Outlines Shape of a Recovery Plan : Mexico: President pledges maximum import tariffs, inflation-linked loan payments.

President Ernesto Zedillo, responding to outcries from Mexico’s business owners, on Tuesday outlined an economic recovery plan that will include lifting some import barriers and setting up a special fund for companies with credit problems.

It also proposes indexing loan payments to the inflation rate, official efforts to help Mexican banks raise capital and creation of a futures market for the peso, officials of the central bank said.

In a speech to manufacturing executives, Zedillo sought to assure them that the government is working on solutions to the credit crunch that has sent interest rates on government bonds to the highest levels in seven years, and on ways to maintain the solvency of Mexican banks.

Miguel Mancera, the governor of Mexico’s central bank, also announced details of a plan to lift a 10-year-old rule against investors trading futures and options on the Mexican peso. That would clear the way for the Chicago Mercantile Exchange to begin trading Mexican peso futures in early April.

The government’s failure to announce a new economic plan amid the continuing crisis has been widely criticized by business leaders. It has been considered an important factor in the continuing declines of the peso and the stock market here.

The Mexican currency on Tuesday fell three centavos to 6 to the dollar, near its lowest point since the Dec. 20 devaluation triggered the crisis. The Mexican Stock Exchange index rallied by 7.01%, but its 1,549.84 finish was still far below the December level.

“My government will not put off solving problems, no matter how difficult they are, because the consequences will be much worse,” Zedillo said in a thinly veiled allusion to his predecessor, Carlos Salinas. “I will dedicate myself to solving problems . . . not to taking care of my personal image.”

To protect Mexican companies from unfair foreign competition, the president promised that products from countries outside of free trade agreements with Mexico will be assessed the highest tariffs and stiffest quotas permitted under international commercial agreements.

The changes will not affect U.S. exporters, who are protected by the North American Free Trade Agreement.

Zedillo also said that the Treasury Ministry and Bank of Mexico are developing a fund to help heavily indebted companies, which include most industries that were forced to modernize rapidly to compete with imports. It will be similar to the fund that he, as a central bank executive, designed after the devaluation of a dozen years ago, he said.

That trust fund, better known as Ficorca, enabled hundreds of Mexican companies that had acquired large debts in dollars to meet their financial obligations on time.

The debt indexing plan will link the value of loan principals to the consumer price index, central banker Mancera explained. Indexation, he said, will mitigate the credit shortages and high interest rates caused by inflation, which was triggered by Mexico’s economic crisis.

At the same time, the government will require banks to increase both their reserves against bad loans and their capital. The Bank of Mexico will buy convertible obligations the banks can use as capital for up to five years, until they find a way to raise funds.