    [Public Papers of the Presidents of the United States: William J. Clinton (1995, Book I)]
    [March 9, 1995]
    [Pages 328-329]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Message to the Congress on the Financial Crisis in Mexico
    March 9, 1995

    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

    [[Page 329]]

    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.