[Congressional Record Volume 141, Number 33 (Wednesday, February 22, 1995)]
[Senate]
[Page S2953]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                       MEXICAN ECONOMIC AGREEMENT

  Mr. PELL. Mr. President, after weeks of intense negotiation, the 
United States and Mexico yesterday agreed on a package of guarantees 
and swap transactions to help restore investor confidence in the 
Mexican economy while addressing United States concerns about the 
fundamental soundness of the Mexican economy and the level of risk to 
American taxpayers. I commend the President for his efforts to respond 
to this crisis while ensuring that adequate safeguards and conditions 
are in place to protect U.S. national interests.
  I must say that, when the administration first proposed, in the 
immediate aftermath of the peso devaluation, a major U.S. response, I 
was quite skeptical. In many discussions with the administration I 
raised my concerns and urged that tough questions be asked about the 
wisdom of United States involvement and tough conditions be applied on 
Mexico as a precondition to any aid package.
  Mr. President, I believe the administration has negotiated tough-
minded terms for the package. I commend them for this and now believe 
it is both appropriate and in our national interest for this program to 
be put into operation.
  In all candor, I continue to have some concerns about the possible 
long-term negative consequences of this whole crisis to our national 
economy and national economic interest. But I do believe as a nation we 
had to act and that the administration has acted skillfully. And if we 
did not act, real economic disaster could result.
  The economic stabilization package signed Tuesday by Treasury 
Secretary Robert Rubin and Mexican Finance Minister Guillermo Ortiz 
actually consists of four separate agreements. The framework agreement 
sets the overall terms and conditions for U.S. support. These include 
commitments on the part of Mexico to reduce inflation, strengthen the 
peso, and encourage new investment by cutting Government spending, 
pursuing tight monetary policy, and raising short-term interest rates. 
Mexico is also committed to accelerate structural reforms in the 
transportation, telecommunications, and banking sectors, speed 
privatization, and improve financial transparency.
  The Medium-Term Exchange Stabilization Agreement provides the basis 
for currency swap transactions, under which Mexico can exchange pesos 
for dollars for a period of up to 5 years. The interest rate charged 
for these swaps is to cover the U.S. risk for such transactions.
  Under the guarantee agreement, the United States will provide 
guarantees for the issuance of Mexican debt securities with maturities 
of up to 10 years. This portion of the package is intended to convince 
investors to lend money to Mexico for longer terms at lower interest 
rates, thus alleviating the short-term debt burden that precipitated 
this crisis.
  Finally, the oil proceeds facility agreement establishes the 
mechanism by which the United States is assured substantial repayment 
should Mexico default on its obligations. The agreement would set up a 
bank account in the United States into which foreign purchasers of 
Mexican oil would be required to make their payments. If Mexico fails 
to repay the United States under any of the financing agreements, the 
Treasury Department would be able, in effect, to take over that bank 
account.
  All told, these agreements total $20 billion in United States support 
for Mexico--a bold and comprehensive package designed to prevent an 
immediate shortfall from leading to long-term economic and political 
instability. This support is designed to entail no direct costs to our 
taxpayers. Mexico will be charged fees for the guarantees and interest 
for the medium-term swaps, and all of Mexico's obligations to the 
United States will be backed by proceeds from the export of Mexican 
crude oil and oil products.
  Moreover, the U.S. action is more than matched by the international 
response. The IMF has offered an unprecedented $17.8 billion in medium-
term assistance, while the other G-10 countries plan to provide another 
$10 billion in short-term credit through the Bank of International 
Settlements.
  Mr. President, I believe it is essential that we continue to monitor 
this situation closely, and the agreements that were signed yesterday 
provide the means and expand our ability to do just that. Even with 
this assistance, Mexico will face difficult economic choices, many of 
which could have an impact upon us.
  I look forward to working with my colleagues and with the 
administration to ensure that Mexico lives up to its commitments under 
this package and that broad United States interests continue to be 
served through its implementation.


                          ____________________