[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 
    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 
    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.