[Congressional Record Volume 141, Number 8 (Friday, January 13, 1995)]
[Senate]
[Pages S941-S943]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                CRISIS OF CURRENCY AND FOREIGN EXCHANGE

  Mr. MOYNIHAN. Mr. President, I rise at the end of our day to speak to 
the subject with which the House and Senate began the day, which is the 
crisis of currency and foreign exchange in Mexico and the prospect 
that, unless there is a quite extraordinary and urgent action in the 
United States, the Government of Mexico might default on its foreign 
obligations, a matter which would have repercussions not just 
throughout the Western Hemisphere, not just in our own economy and that 
of Canada and the rest of Latin America as already has been the case in 
Argentina and Brazil, but, indeed, repercussions throughout the world. 
A world of previously rigidly controlled, usually government-controlled 
economies that have been moving toward free markets in the general 
shift of attitudes that have come with the end of the cold war, and 
with the appearance of wholly new and quite revolutionary currency 
market systems.
  Mr. President, we have to act. We have to act now, immediately. And 
every day that goes by is a day in which the difficulty of acting 
effectively becomes more problematic.


                           Order of Procedure

  Mr. KEMPTHORNE. Mr. President, it would be our intent that next 
Tuesday, at 9:30 a.m. we would again take up S. 1. At that time I would 
be asking for a unanimous-consent agreement that we would lay aside the 
next two committee amendments and that we would then have before the 
Senate the pending business of the amendment found on page 25.
  I would not make that unanimous consent request until Tuesday 
morning. And on behalf of the leader I announce that it is possible 
that there could be votes prior to the 12:30 recess on Tuesday.
  Mr. MOYNIHAN. I was saying that we are in the midst of a regional 
crisis which could become a global crisis in very short order. Such are 
the speeds with which currency markets move at this time, such is the 
enormous amount of capital not controlled by governments. Such is the 
capacity already in evidence in our region to reconsider the whole 
degree of risk involved in these new economies. This week's ``The 
Economist'' speaks of this matter in no fewer than three separate 
pieces.
  I speak, sir, in support of the general outlines as they are 
understood presently of the agreements reached on a bipartisan basis 
between the Members of the Senate, the leadership in the House, the 
administration, and, of course, the Federal Reserve Board in the person 
of our distinguished chairman, Alan Greenspan.
   [[Page S942]] This morning, we met with Mr. Rubin, our Secretary of 
the Treasury, Mr. Greenspan, and Dr. Summers, who is the Treasury 
Undersecretary and is deeply involved in these matters.
  A number of persons mentioned the degree to which there was already a 
reaction in this country--on radio call-in shows and such like--
speaking in various degrees of censure and animosity about those in 
this Chamber and the other body who had supported the North American 
Free-Trade Agreement and now find themselves having to associate with 
this emergency action in a crisis atmosphere.
  I would like to speak as one who did not support that agreement, who 
was opposed from the first, and yet who very much supports the measures 
we are working on even as I speak, and to make the point that this was 
always a close question in the Senate.
  On May 24, 1991, on the issue of giving the administration--then the 
administration of President Bush--fast-track authority to negotiate a 
North American Free-Trade Agreement, 36 of us in this body--a large 
number--voted not to do so. A position which I believe, in retrospect, 
might have given a little more sense of treading carefully to our 
negotiators. But there you are.
  The agreement was negotiated beginning after that vote, and 
eventually it came to the Committee on Finance, as such trade 
agreements do. By then I was chairman of the committee and was one of 
four members of the committee who voted not to report the bill 
favorably, although fully intent that the bill be reported, as clearly 
16 members of the committee wished to be done, and as the President, 
President Clinton, had assumed the same position of his predecessor in 
this regard, as was also the case of the Uruguay round.
  The bill came to the floor in November 1993 and, again, the approval 
was not overwhelming. It was 61 to 38. Of course, there was a great 
deal of opposition from a very wide range, wide spectrum of opponents, 
and they might at this point be tempted to assert they had been right 
all along.
  I would like to take a different view. I would like to make the case 
that the arguments, such as they were, against this agreement had to do 
with the nature of the Mexican polity. I was one who absolutely 
supported a free-trade agreement with Canada, a country that has a 
regime of law similar to our own, a tradition of an impartial and 
independent judiciary, of free elections, of basically a market system 
in their economy in which differences, when they arise, are settled 
according to procedures that are well understood and agreed to by both 
parties.
  It is simply the case, Mr. President, that these conditions still do 
not exist in Mexico. They are not wholly absent and in no sense can we 
suggest--can we or ought we suggest--that they will not evolve. But 
they have not yet done so. The Mexican Government remains fundamentally 
a one-party state. Other parties are tolerated, and there have been 
occasions recently in which the PRI, the Party of the Institutionalized 
Revolution, has, in fact, accepted defeat in a local election.
  But, in the main, since the 1920's, there has been one party, and it 
has dominated all aspects of the national life.
  At the time, and particularly under President Cardenas in the 1930's, 
it was a great achievement. We tend, because of our own tradition, I 
suppose, to pay a great deal of attention to the onset of revolution 
and instability, if you will. That, in fact, Mr. President, is a very 
ordinary event. It happens with the frequency of hurricanes in the 
Caribbean. A much more rare event in world history is the onset of 
stability.
  Mexico had been a hugely unstable society, largely because--if I can 
offer a thought, and I see my friend from New Mexico is on the floor 
and he would have a better, closer sense than I--but the Mexican polity 
had never developed a device for yielding office.
  It has frequently been remarked by American Presidents that the 
American democracy really began--oh, Philadelphia was fine, the 
inauguration of George Washington was fine--but democracy really began 
when John Adams learned he had lost the election to Thomas Jefferson, 
turned over a mostly empty Treasury, the Great Seal, what there was of 
the Army, and left for Massachusetts, thinking that he had been a 
failure when, in fact, he had proven in a democracy that free election 
can bring a transfer of party and power.
  That has never happened in Mexico. What has happened is that the 
invention was that a President would leave office but he would choose 
his successor and would find himself frequently in an advantaged and 
attractive position in the aftermath of a single term.
  But it also meant that there were no free elections; and in addition, 
that there were frequent, dramatic violations of human rights. Freedom 
House and Americas Watch have recorded this with great care and 
concern--not hostility, but concern. Americas Watch reported not 2 
years ago that torture was endemic in Mexico. Not that it happened here 
and there, but it was endemic; it was a device of social control, 
torture--not long prison sentences or the like, but torture as a wholly 
illegal, extralegal, but normal practice.
  The judiciary had no independence. And the outcome of the election 
was a given, excepting on occasion, very rarely, very infrequently, 
when another party was allowed to prevail.
  In that circumstance, Mr. President, I believed that we would be 
associating ourselves--we would, as we have done--in intricate 
economic-social relations with a polity very different from our own and 
very problematic as regards those aspects of our civilization, our 
polity, if you like, and of Canada's, surely, which we find of central 
importance.
  And the agreement we reached itself was problematic in certain 
respects. For example, the Mexican investors had instant access to 
American markets--open, free, unfettered with that always indispensable 
feature that you could buy anything you could pay for.
  For example, a Mexican firm recently purchased a seat on the New York 
Stock Exchange. Fine. But the reciprocity you would expect has not 
taken place. For example, American financial institutions and many 
other American investors have had very restricted access to the Mexican 
market. The agreement provided for only limited access, over a very 
long transition period. Now, at this moment of a financial crisis, the 
Mexican Government could very much wish it had done otherwise and 
provided as much access as anybody wished. And, indeed, they now have 
begun to do just that, even as the agreement provides otherwise. They 
would be in a stronger position today if they had done so earlier.
  They would be in a stronger position today if they had done so in the 
agreement. But the fact they did not was very characteristic of a 
regime not to want any other influences that would challenge its own 
power. This was not an accident. It was a normal response of such a 
regime, not to let any other influences take hold that they could not 
control.
  Well, sir, they have not been able to do so, and once again we see a 
crisis of large consequence with international implications. The peso 
has dropped 40 percent in three weeks or thereabouts. Inflation may 
reach 40 to 50 percent this year. There is a renewed concern, as a 
result, along that border that reaches from the Caribbean to the 
Pacific, with all the consequences for illegal immigration, a matter of 
very deep concern to States on the border, especially to California.
  What are we to do? It seems to me we have no alternative and that we 
do have a real opportunity. If we act, if we provide $40 billion in 
loan guarantees, the plan would be for the Mexican Government to pay a 
fee to compensate us for assuming that risk. That promises technically 
the guarantor will make money out of such an event in normal 
circumstances. I do not say this will happen. It could. We issued a 
very large loan guarantee to the Israelis a few years ago in a matter 
of providing housing for the sudden, huge immigration that was coming 
from the Soviet Union, and they were to pay a fee for any bonds backed 
by our dollar guarantee. They have not used that. They have not 
exercised that option at all. But were they to do so, we would be in a 
position of a lender receiving compensation for a guarantee.
  But if we do not do this, we face the prospect of not only 
instability in the currencies of the Western Hemisphere or the 
developing nations around the 
[[Page S943]] world, we face the prospect of mass instability in Mexico 
itself. We have seen this in the Chiapas insurgency which is not yet 
resolved by any means. We have seen it in instances of political 
killings. I do not want to get in any way abrasive, but I commented on 
this floor at one point that Mexico is a country where you can murder 
archbishops and say they inadvertently wandered into the line of fire 
in a police action involving drug dealers, which was the equivalent of 
being shot while in church.
  Mr. President, Mr. Paul Gigot, in this morning's Wall Street Journal, 
writes that if we fail to stem the crisis, we ``can expect more Mexican 
sons and daughters to arrive in San Diego soon''. Unwilling to stay in 
Mexico, seeking a promise of better opportunities, overwhelming the 
opportunities of our own people in our own country.
  We cannot do that. We cannot risk undermining a reviving Argentina 
economy, a promising Brazilian economy. We cannot put at risk the 
efforts around the world of countries that moved away from centrally 
controlled, to use a French term, ``dirigiste'' regimes in which 
American investment is kept out, American goods kept out, autarky I 
think as the economists would call it, and with the result of economic 
stagnation.
  The courage--and it takes courage--to open up, to be part of the 
world economy is more and more in evidence everywhere. That courage 
could turn into fear and retreat in a very short order if we do not 
act.
  I would like to congratulate the majority leader of the Senate, 
Robert Dole, and the minority leader, Tom Daschle, for their 
willingness to meet with the President, in the company of their 
counterparts from the House, to bring forth a bipartisan American 
initiative which is very much directed to the protection of American 
interests, and I hope it succeeds. I hope it finds support on the 
Senate floor with Senators generally as it has done with the 
leadership.
  I thank my friends for their patience. Mr. President, I thank the 
Chair, and I yield the floor.
  Mr. COHEN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Maine.

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