[Congressional Record Volume 141, Number 108 (Thursday, June 29, 1995)]
[Senate]
[Pages S9349-S9351]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  MEXICO CRISIS REPORT AND CHRONOLOGY

  Mr. D'AMATO. Mr. President, since February, I have repeatedly voiced 
my concern over the Clinton administration's bailout of Mexico. Today, 
I am releasing a comprehensive report and chronology of the Mexican 
economic crisis.
  Since January, the Senate Banking Committee has held three hearings 
to examine this crisis. This report and chronology is based on 
testimony from these hearings and from information contained in 
numerous internal administration documents. It brings together for the 
first time a full description of the United States Government's 
internal and external communications regarding Mexico.
  My office will have available the complete report and chronology. We 
cleared the releases and declassification of many internal documents 
for use in this report. It does not include or refer to any classified 
documents.

[[Page S 9350]]

  It does include the background of the Mexican economic crisis; the 
administration's monitoring of the crisis; the contradictions between 
the administration's rosy public statements about Mexico during 1994 
and the private, far more negative, views the administration and 
officials had; the failure of the administration taxpayer-funded 
bailout; and we conclude that the administration should not--the 
administration should not--send another $10 billion of taxpayers' money 
to Mexico.
  The report and chronology culminates weeks of work and a review of 
hundreds of documents and testimony. I appreciate the cooperation of 
Secretary Rubin and Chairman Greenspan in producing the documents used 
to prepare this report and chronology.
  Mr. President, on February 7, 1995, I spoke in this Chamber about the 
economic crisis in Mexico. I asked the question: What did the 
administration know about the situation in Mexico and when did they 
know it? After reviewing the information, the answer is clear.
  The administration's own records indicate that key officials, 
including Under Secretary Summers, knew about the deteriorated economic 
condition of Mexico as early as February 1994. Administration 
officials, however, repeatedly painted a rosy public picture of the 
Mexican economy.
  Again, sadly, this will appear as a pattern of this administration. 
It has a history of not leveling with the American public. This report 
and the chronology and the administration's own internal documents 
sadly demonstrate that this has taken place over and over and over 
again.
  The administration's repeat of public praise of the Mexican economy 
during 1994 stands in stark contrast to the looming signs of economic 
disaster reflected in internal administration documents. The underlying 
documents demonstrate that the administration was aware that Mexico was 
on the road to economic disaster, but the administration did not tell 
the truth to the American people.
  That was wrong. The administration did not tell the truth to the 
American economists. And that was wrong. The administration has placed 
$20 billion of American taxpayer dollars at risk to bail out the 
Mexican Government. The Mexican Government is using these dollars to 
reward local speculators who bought high-interest-rate short-term 
Mexican Government notes or tesobonos. The administration has already 
sent $10 billion to Mexico and beginning on July 1--July 1 we will be 
out of session--the administration will begin to send another $10 
billion to Mexico.
  Now, Mr. President, the administration and the Mexican Government 
officials repeatedly assured Congress and the American people that the 
second $10 billion would not be needed this year. But again, they have 
a pattern of saying one thing and doing another, painting one picture 
and then discovering another.
  The Mexican Government financial plan expressly states, ``The second 
$10 billion of the U.S. Government funds is not''--is not --``intended 
to be used in 1995, but will be available for unforeseen 
contingencies.''
  This Senator said a long time ago that you are kidding the people. 
That $10 billion is gone. The next $10 billion is gone. You will have 
the same disastrous result. The administration should not sink the 
United States and the American taxpayer any deeper into this Mexican 
quagmire. The first $10 billion has not solved the economic crisis. The 
only people who benefited are speculators. Global speculators, not the 
Mexican people, not the Mexican economy. In July and August Mexico 
faces a payment bubble of more than $6 billion to pay off tesobonos 
that are coming due. Now, where is that money going to come from? 
Guess. The United States taxpayer. That is where. The U.S. taxpayers' 
money to Mexico to pay off, who? Private speculators, private investors 
who bought high-risk, high-return investments. And now we are going to 
pay that off. The United States does not do that for our own citizens. 
Why should we do this for private speculators who support Mexican 
tesobonos? Mexico's basic economic problems have not been solved. It is 
clear that the administration's bailout has not benefited the Mexican 
people. The Mexican people are worse off because of the austerity 
measures demanded by the administration.
  Middle-class Mexicans and small business owners have been devastated. 
And in the past few months inflation in Mexico has skyrocketed to 
almost 80 percent. Mortgage interest rates have risen to 75 percent. 
Consumer credit card interest rates increased from 90 percent to 100 
percent. The peso 6 months after the administration bailout stands at 
6.28 to the dollar, still near record highs. Last month Mexican 
citizens and business leaders told the Banking Committee that the 
Mexican bailout is a failure and that the Mexican economy is in 
shambles. When the Clinton administration first tried to sell the 
Mexican bailout to Congress they told us they would commit $40 billion 
in loan guarantees to help Mexico through its short-term liquidity 
crisis. They reassured Congress that taxpayer funds would not be at 
risk. After Congress refused to support a bailout, the administration 
then unilaterally decided to give Mexico $20 billion through the United 
States exchange stabilization fund, an unprecedented and legally 
doubtful use of this fund.
  The problems with the Mexican economy are not new. They are well-
known to administration officials. Throughout 1994, as the documents 
and the chronology demonstrate, over and over again, the administration 
officials were alerted to unmistakable signs of economic distress in 
Mexico. Yet throughout the year the same administration officials 
continue to issue glowing public statements about the Mexican economic 
condition and strong support for the Mexican economic policies. The 
record is clear. Let me give you a few brief highlights.
  On March 24, 1994, Under Secretary of Treasury Summers informed that 
the Mexican Government ``is looking for some comforting Treasury words 
to soothe the press.'' Secretary Bentsen then issued a statement 
saying: ``We have every confidence that Mexico is on the right economic 
path.'' Mr. President, clearly again, a pattern of the administration 
not leveling with the American people, not leveling with the Congress.
  In a news conference that same day President Clinton said, ``Mexico's 
institutions are fundamentally strong * * * they have a great future 
and we do not expect any long-term damage.'' Mr. President, clearly the 
statement is at variance with the facts in the record. Again, a pattern 
of not leveling with the American people.
  Again on April 26, 1994, Under Secretary Summers said publicly, 
``Mexico is fundamentally sound and has a fundamentally sound 
currency.'' Earlier that same day however in an internal memo, the same 
day that he talks about a sound economy, a sound currency, Summers 
informs Secretary Bensten that the Bank of Mexico had been intervening 
to support the peso and that ``Mexico's dependency on the financing of 
its large account deficit from largely volatile investment remains a 
serious problem.'' Again, a pattern of deception of saying one thing 
when the facts are clearly different.
  Now, how can you come and say that the economy is fundamentally 
sound, publicly, when at the same time you are informing the Secretary 
of the Treasury that there are severe problems? In the fall of 1994 the 
Mexican Government policies were the cause of concern among 
administration officials. In an internal memo on September 27, Under 
Secretary Summers questioned the Mexican Government's decision to 
maintain a highly overvalued peso. And November 18, 1994, another 
Treasury Department memorandum discusses the weakening of the peso and 
that Mexicans commitment of their dwindling resources to prop up the 
peso. Nevertheless, on the same day, the United States Ambassador to 
Mexico, Jim Jones, told a group of American investors that those 
journalists who were predicting financial problems in Mexico were 
alarmists. Again, a pattern of deception. Just wrong. Just wrong.
  Despite the administration's obvious internal concerns and knowledge, 
on November 21, 1994, Under Secretary Summers said ``Mexicans would 
very much like for Bentsen to make a statement today.'' Summers told 
the Secretary that he ``has worked out'' a proposed press statement for 
him for the 

[[Page S 9351]]

Government of Mexico. Why were officials of the United States 
Government working on public relations for the Mexican Government, and 
I might add, putting out false information, aligning themselves to 
false information being circulated?
  The letter to the Washington Post, my colleagues, Senators Specter 
and Kerrey, advised, ``We believe--based on a reading of United States 
analysis since last spring, that policymakers were adequately 
forewarned of Mexico's declining financial position and of domestic 
political pressures that made it difficult for the Mexican Government 
to take timely action in the economic sphere.''
  Mr. President, internal administration documents make clear that 
Under Secretary Summers and other treasury officials were not 
forthcoming to the Congress and the American people. I agree with A.M. 
Rosenthal of the New York Times who wrote on April 4, 1995, in a column 
entitled ``Cover-Up Chronology,'' ``Real concern for Mexico would have 
meant public warnings from Washington as soon as trouble was 
discovered. Legitimate confidentiality does not include deceiving the 
world.''
  I think that bears repeating: ``Legitimate confidentiality does not 
include deceiving the world.'' That is what we have a pattern of, 
deception.
  There are vital lessons to be learned from the handling of the 
Mexican crisis. The American people and their elected representatives 
were entitled to the truth about Mexico's precarious and deteriorating 
condition during 1994. Mr. President, the official reports by the 
Mexican Government and the positive public statements made by the 
United States administration were completely contradictory to the true 
condition of Mexico's economy. The American taxpayers should not be 
forced to bear further financial risk. U.S. dollars should not be used 
to bail out private investors who gambled on high-risk, high-return 
instruments. We should not be sending another $10 billion in American 
taxpayer dollars based upon a web of half-truths, distortions, and 
concealments. That is wrong. The American people have a right to be 
outraged that their tax dollars are going to bail out local speculators 
and not improve the plight of the Mexican people.
 Congress should be outraged as well.

  Mr. President, I thank my colleagues for giving me this opportunity 
to make this report to the American people.
  I yield the floor.
  Mr. HATCH addressed the Chair.
  The PRESIDING OFFICER (Mr. Campbell). The Senator from Utah, Mr. 
Hatch, is recognized.

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