    [Public Papers of the Presidents of the United States: William J. Clinton (1995, Book I)]
    [January 18, 1995]
    [Pages 59-62]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks on Loan Guarantees for Mexico
    January 18, 1995

        Thank you very much, Secretary Rubin and Ambassador Kantor.
        Ladies and gentlemen, we wanted to be here today to make the
    clearest public case we can for the proposal which has been developed by
    the administration and the bipartisan leadership in Congress for dealing
    with the present situation. We have worked hard with an extraordinary
    group of people who have joined forces because all of us realize how
    important this proposal is, not only to the people of Mexico but also to
    the United States and to our workers. We are acting to support the
    Mexican economy and to protect and promote the interests of the American
    people.
        As Ambassador Kantor said, and as all of you know very well, we live
    in an increasingly global economy in which people, products, ideas, and
    money travel across national borders with lightning speed. We've worked
    hard to help our workers take advantage of that economy by getting our
    own economic house in order, by expanding opportunities for education
    and training, and by expanding the frontiers of trade,

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    by doing what we could to make sure there was more free and fair trade
    for Americans. And we know, and all of you know, that those efforts are
    creating high wage jobs for our people that would otherwise not be
    there.
        Our goal, our vision must be to create a global economy of
    democracies with free market, not government-run, economies; democracies
    that practice free and fair trade, that give themselves a chance to
    develop and become more prosperous, while giving our own people the
    opportunity they deserve to reap the benefits of high-quality, high-
    productivity American labor, in terms of more jobs and higher incomes.
        We have pursued this goal with vision and with discipline, through
    NAFTA, through the Summit of the Americas, through a number of other
    international endeavors like GATT and the Asian-Pacific Economic
    Cooperation group. But we have pursued it especially here in our own
    hemisphere, where we are blessed to see every nation but one governed in
    a democratic fashion and a genuine commitment to free market economics
    and to more open trade.
        We have to know that the future on this path is plainly the right
    one, but as with any path, it cannot be free of difficulties. We have to
    make decisions based on a determined devotion to the idea of what we are
    pursuing over the long run. We know that, given the volatility of the
    economic situation in the globe now, there can be developments that for
    the movement are beyond the control of any of our trading partners,
    themselves developing nations, which could threaten this vision and
    threaten the interests of the American people.
        Mexico's present financial difficulty is a very good case in point.
    Of course, it's a danger to Mexico, but as has already been said, it is
    plainly also a danger to the economic future of the United States.
        NAFTA helped us to dramatically increase our exports of goods and
    services. It helped us to create more than 100,000 jobs here at home
    through increased exports to Mexico. But over the long run, it means
    even more. It means even more opportunities with Mexico. It means the
    integration of the rest of Latin America and the Caribbean into an
    enormous basket of opportunities for us in the future. And we cannot--we
    cannot let this momentary difficulty cause us to go backward now.
        That's why, together with the congressional leadership, I am working
    so hard to urge Congress to pass an important and necessary package to
    back private sector loans to Mexico with a United States Government
    guarantee. Let me say, I am very gratified by the leadership shown in
    the Congress on both sides of the aisle.
        By helping to put Mexico back on track, this package will support
    American exports, secure our jobs, help us to better protect our borders
    and to safeguard democracy and economic stability in our hemisphere,
    because America and American workers are more secure when we support a
    strong and growing market for our exports, because America and American
    workers are more secure when we help the Mexican people to see the
    prospect of decent jobs and a secure future at home through a commitment
    to free-market economics, political democracy, and growing over the long
    term, and because we're more secure when more and more other countries
    also enjoy the benefits of democracy and economic opportunity, and
    perhaps most important over the long run, because we are more secure if
    we help Mexico to remain a strong and stable model for economic
    development around our hemisphere and throughout the world.
        If we fail to act, the crisis of confidence in Mexico's economy
    could spread to other emerging countries in Latin America and in Asia,
    the kinds of markets that buy our goods and services today and that will
    buy far more of them in the future. Developing these markets is plainly
    in the interests of the American people. We must act to make sure that
    we maintain the kind of opportunities now being seized by the Secretary
    of Commerce and the delegation of American business leaders who have had
    such a successful trip to India.
        If you take Mexico, just consider the extraordinary progress made in
    recent years. Mexico erased a budget deficit that once equalled 15
    percent of its gross domestic product. It slashed inflation from 145
    percent a year to single digits. It sold off inefficient state
    enterprises, dramatically reduced its foreign debt, opened virtually
    every market to global competition. This is proof that the Mexican
    Government and the Mexican people are willing to make decisions that are
    good for the long run; even if it entails some short-term sacrifice for
    them, they know where their future prosperity and opportunity lie.
        Now Mexico, of course, will have to demonstrate even greater
    discipline to work itself out of the current crisis. Let me say, though,

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    it's important that we understand what's happened. And the Secretary of
    Treasury and I and a lot of others spent a lot of time trying to make
    sure we understood exactly what had happened before we recommended a
    course of action.
        It is clear that this crisis came about because Mexico relied too
    heavily upon short-term foreign loans to pay for the huge upsurge in its
    imports from the United States and from other countries. A large amount
    of those debts came due at a time when, because of the nature of the
    debts, it caused a serious cash flow problem for Mexico, much like a
    family that expects to pay for a new home with the proceeds from the
    sale of its old house only to have the sale fall through.
        Now, together with the leadership of both Houses, our administration
    has forged a plan that makes available United States Government
    guarantees to secure private sector loans to Mexico. The leadership in
    Congress from both sides of the aisle and the Chairman of the Federal
    Reserve Board developed this plan with us. It is something we did
    together because we knew it was important, important enough to the
    strategic interest of the United States to do it in lockstep and to urge
    everyone without regard to party or region of the country or short-term
    interests to take the long view what is good for America and our working
    people. We all agree that something had to be done.
        Now, these guarantees, it's important to note, are not foreign aid.
    They are not a gift. They are not a bailout. They are not United States
    Government loans. They will not affect our current budget situation.
    Rather they are the equivalent of cosigning a note, a note that Mexico
    can use to borrow money on its own account. And because the guarantees
    are clearly not entirely risk-free to the United States, Mexico will
    make an advanced payment to us, like an insurance premium. No guarantees
    will be issued until we are satisfied that Mexico can provide the
    assured means of repayment. As soon as the situation in Mexico is fully
    stabilized, we expect Mexico to start borrowing once again from the
    private markets without United States Government guarantees.
        The U.S. has extended loans and loan guarantees many, many times
    before to many different countries. In fact, we've had a loan mechanism
    in place with Mexico since 1941. And Mexico has always made good on its
    obligations.
        Now, there will be tough conditions here to make sure that any
    private money loaned to Mexico on the basis of our guarantees is well
    and wisely used. Our aim in imposing the conditions, I want to make
    clear, is not to micromanage Mexico's economy or to infringe in any way
    on Mexico's sovereignty but simply to act responsibly and effectively so
    that we can help to get Mexico's economic house back in order.
        I know some say we should not get involved. They say America has
    enough trouble at home to worry about what's going on somewhere else.
    There are others who may want to get involved in too much detail to go
    beyond what the present situation demands or what is appropriate. But we
    must see this for what it is. This is not simply a financial problem for
    Mexico; this is an American challenge.
        Mexico is our third largest trading partner already. The livelihoods
    of thousands and thousands of our workers depend upon continued strong
    export growth to Mexico. That's why we must reach out and not retreat.
        With the bipartisan leadership of Congress, I am asking the new
    Congress to cast a vote, therefore, for the loan guarantee program as a
    vote for America's workers and America's future. It is vital to our
    interests. It is vital to our ability to shape the kind of world that I
    think we all know we have to have.
        No path to the future--let me say again--in a time when many
    decisions are beyond the immediate control of any national government,
    much less that of a developing nation, no path to the future can be free
    of difficulty. Not every stone in a long road can be seen from the first
    step. But if we are on the right path, then we must do this. Our
    interests demand it. Our values support it, and it is good for our
    future.
        Let me say again that the coalition of forces supporting this
    measure is significant; it may be historic. The new Republican leaders
    in Congress, the leadership of the Democratic Party in Congress, the
    Chairman of the Federal Reserve Board, why are they doing this? And I
    might say, I was immediately impressed by how quickly every person I
    called about this said, ``Clearly, we have to act.'' They instinctively
    knew the stakes.
        Now in the public debate questions should be properly asked and
    properly answered. But let us not forget what the issue is. Let us not
    read too little into this moment or try to load it up with too many
    conditions unrelated to the

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    moment. The time is now to act. It is in our interest. It is imperative
    to our future. I hope all of you will do what you can to take that
    message to the Congress and to the American people.
        Thank you very much.

    Note: The President spoke at 3:49 p.m. in the Cash Room at the Treasury
    Department.