[Congressional Record Volume 141, Number 44 (Thursday, March 9, 1995)]
[Senate]
[Page S3743]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     REPORT ON UNITED STATES SUPPORT FOR MEXICO--MESSAGE FROM THE 
                            PRESIDENT--PM 32

  The PRESIDING OFFICER laid before the Senate the following message 
from the President of the United States, together with an accompanying 
report; which was referred to the Committee on Banking, Housing, and 
Urban Affairs.

To the Congress of the United States:
  On January 31, 1995, I determined pursuant to 31 U.S.C. 5302(b) that 
the economic crisis in Mexico posed ``unique and emergency 
circumstances'' that justified the use of the Exchange Stabilization 
Fund [ESF] to provide loans and credits with maturities of greater than 
6 months to the Government of Mexico and the Bank of Mexico. Consistent 
with the requirements of 31 U.S.C. 5302(b), I am hereby notifying the 
Congress of that determination. The congressional leadership issued a 
joint statement with me on January 31, 1995, in which we all agreed 
that such use of the ESF was a necessary and appropriate response to 
the Mexican financial crisis and in the United States' vital national 
interest.
  On February 21, 1995, the Secretary of the Treasury and the Mexican 
Secretary of Finance and Public Credit signed four agreements that 
provide the framework and specific legal arrangements under which up to 
$20 billion in support will be made available from the ESF to the 
Government of Mexico and the Bank of Mexico. Under these agreements, 
the United States will provide three forms of support to Mexico: short-
term swaps through which Mexico borrows dollars for 90 days and that 
can be rolled over for up to 1 year; medium-term swaps through which 
Mexico can borrow dollars for up to 5 years; and securities guarantees 
having maturities of up to 10 years.
  Repayment of these loans and guarantees is backed by revenues from 
the export of crude oil and petroleum products formalized in an 
agreement signed by the United States, the Government of Mexico, and 
the Mexican government's oil company. In addition, as added protection 
in the unlikely event of default, the United States is requiring Mexico 
to maintain the value of the pesos it deposits with the United States 
in connection with the medium-term swaps. Therefore, should the rate of 
exchange of the peso against the U.S. dollar drop during
 the time the United States holds pesos, Mexico would be required to 
provide the United States with enough additional pesos to reflect the 
rate of exchange prevailing at the conclusion of the swap.

  I am enclosing a Fact Sheet prepared by the Department of the 
Treasury that provides greater details concerning the terms of the four 
agreements. I am also enclosing a summary of the economic policy 
actions that the Government of Mexico and the Central Bank have agreed 
to take as a condition of receiving assistance.
  The agreements we have signed with Mexico are part of a multilateral 
effort involving contributions from other countries and multilateral 
institutions. The Board of the International Monetary Fund has approved 
up to $17.8 billion in medium-term assistance for Mexico, subject to 
Mexico's meeting appropriate economic conditions. Of this amount, $7.8 
billion has already been disbursed, and additional conditional 
assistance will become available beginning in July of this year. In 
addition, the Bank for International Settlements is expected to provide 
$10 billion in short-term assistance.
  The current Mexican financial crisis is a liquidity crisis that has 
had a significant destabilizing effect on the exchange rate of the 
peso, with consequences for the overall exchange rate system. The 
spill-over effects of inaction in response to this crisis would be 
significant for other emerging market economies, particularly those in 
Latin America, as well as for the United States. Using the ESF to 
respond to this crisis is therefore plainly consistent with the purpose 
of 31 U.S.C. 5302(b): to give the United States the ability to take 
action consistent with its obligations in the International Monetary 
Fund to assure orderly exchange arrangements and a stable system of 
exchange rates.
  The Mexican peso crisis erupted with such suddenness and in such 
magnitude as to render the usual short-term approaches to a liquidity 
crisis inadequate to address the problem. To resolve problems arising 
from Mexico's short-term debt burden, longer term solutions are 
necessary in order to avoid further pressure on the exchange rate of 
the peso. These facts present unique and emergency circumstances, and 
it is therefore both appropriate and necessary to make the ESF 
available to extend credits and loans to Mexico in excess of 6 months.
                                                  William J. Clinton.  
  The White House, March 9, 1995.
  

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