[Congressional Record Volume 141, Number 15 (Wednesday, January 25, 1995)]
[House]
[Pages H674-H675]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


      PROPOSED $40 BILLION UNITED STATES LOAN GUARANTEE TO MEXICO

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from New Jersey [Mr. Menendez] is recognized for 5 minutes.
  Mr. MENENDEZ. Mr. Speaker, on November 18, 1993, I cast my vote 
against the NAFTA, not because I oppose free trade; not because I 
oppose the economic integration of the Western Hemisphere; and not 
because of the incomplete, albeit substantial, movement toward 
political and economic reform in recent years in Mexico. No--I cast my 
vote against the NAFTA because I believed that Mexico as an economy was 
not prepared to enter an argument of this magnitude with the United 
States.
  I believed then as I believe now, that a more gradual approach toward 
economic integration, such as that adopted by the then-European 
Community toward nations seeking membership, is wiser. These nations 
were required to meet high economic and political standards before 
enjoying European Community benefits.
  The hard-working families of the 13th District of New Jersey, which I 
represent, do not join exclusive clubs which they cannot afford. They 
do not buy expensive homes if they can't afford the down payment. They 
do their sweating at work--not in fancy health spas. These middle class 
families know their limits.
  We should have anticipated the possibility of a peso devaluation. We 
should have regarded Mexico like the developing economy that it was--
not as the developed economy we portrayed.
  Many supporters of NAFTA told me that if I were to vote for NAFTA, I 
would be doing the right and responsible thing. Now they claim that 
the 
[[Page H675]] right and responsible thing is to bail out Mexico.
  The value of the Mexican currency, the peso, fell a dangerous 40 
percent in just three weeks. In one week alone, American investors 
withdrew $12 billion dollars from Mexico. But--that's the free market 
at work.
  Our middle class stands to be a big loser in this deal. Of the 
billions of dollars pumped into Mexico in the wake of NAFTA, many were 
invested by U.S. speculators who sent to Mexico the hard-earned dollars 
of middle class families in the form of mutual or pension fund 
investments.
  With the passage of NAFTA, we created a speculative environment in 
which middle class investors, the mom and pop investors so vital to 
Wall Street brokers, were led to believe that investing some of their 
hard-earned life savings on emerging Mexico was a safe bet. But 
billions of dollars later, we know it's not.
  Now the United States proposes to act as a lender of last resort to 
salvage the Mexican economy. But will this bailout really help? Even 
the most ardent NAFTA supporters have their doubts. Listen to avid 
NAFTA backer, Wesley Smith of the Heritage Foundation: ``This takes 
real pressure off the Mexican Government to make substantive changes.'' 
James K. Glassman of the Washington Post agrees that the loan 
guarantees may provide a disincentive for reforms in Mexico. Like 
parents who are too lenient with a rebellious adolescent, we may be 
encouraging misbehavior in the future. We may be helping the 
speculators who poured money into Mexico, but harming the prospects 
there for economic and political reform. I have serious doubts as to 
whether the Administration's proposals will win my support.
  If the United States is going to be generous as a lender of last 
resort, then it is appropriate that we ask Mexico to be a first-rate 
client. The administration must insist on assurances that would make 
the loan guarantee effective:
  The money that the United States guarantees must only be used for 
what it is intended: to pay the debts on short-term Mexican bonds.
  If we are going to bail out speculators, then we should protect 
middle class Americans by reporting to the American people through this 
legislation the losses they incurred through mutual or pension funds 
invested in Mexico.
  The billions in oil revenues that Mexico earns annually must be used 
as collateral should the Mexican Government default.
  The Mexican Government should accelerate and broaden its 
privatization program.
  The Mexican Government should continue the political, economic, and 
social reforms that it requires if it is to achieve long-term 
stability.
  And by the way, none of this money should be used to prop up the 36 
year Cuban dictatorship of Fidel Castro, who has recently benefited 
from generous Mexican investments, debt forgiveness, and debt-for-
equity swaps. No Mexican foreign assistance, nor any investments 
sustained by United States credit lines, should go to Cuba's 
oppressors--neither from the Mexican Government nor any of its banks or 
state-related companies. Not one red cent.
  This crisis is about speculation. It is about the speculative 
environment created by those who supported NAFTA without the 
appropriate safeguards. That speculative environment has led to the 
loss of billions of United States dollars invested by hard-working 
American families who put their savings in mutual funds and pension 
funds investing in Mexico. It is time to bring a reality check to the 
risks of the emerging markets and to the joys of the good old U.S. 
Treasury and blue chip stocks.


                          ____________________