[Weekly Compilation of Presidential Documents Volume 31, Number 3 (Monday, January 23, 1995)]
[Pages 75-77]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
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, 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 Mex- 

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ico. 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, 
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,

[[Page 77]]

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 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.