Clinton's Mexico rescue deal wins global backing

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The Independent Online
The international community closed ranks yesterday to back the new multi-billion-dollar financial rescue package for Mexico. The swift agreement to American proposals put forward on Tuesday was intended to help restore confidence in Mexico in thefinancial markets. President Bill Clinton said he was encouraged by the international response to the plan, which should provide Mexico with nearly $52bn (£33bn) in credit. It was put together hurriedly by the Clinton administration overnigt on Monday after it became clearthat the original plan for a $40bn US guarantee for Mexico's debts would not pass Congress.

Robert Rubin, the US Treasury Secretary, said the Group of Seven leading industrial countries would discuss Mexico's economic crisis and the international response in Toronto at their meeting on Friday and Saturday. "Mexico will be a fair part of the agenda," Mr Rubin said.

Guillermo Ortiz, the Mexican Finance Minister, said he expected his country's economic growth in 1995 to be 1 per cent "or maybe less". Growth will be flat in the first half and then rise in the second, he said.

After a euphoric response to the package on Tuesday, the Mexican stock market fell 3.5 per cent yesterday morning, largely due to profit-taking.

The new plan is more acceptable to the Mexicans than the old. They will still have to meet stringent economic targets but will not have the political strings that the US Congress had looked like attaching to its $40bn guarantee.

Hasty administration discussions with the governments of the other industrialised countries took place throughout Monday night into the early hours of Tuesday morning Washington time. The board of the International Monetary Fund, with the backing of its members, was expected yesterday to vote in favour of increasing its contribution from $7.8bn to $17.8bn.

Some European central banks were miffed by the speed of the US action, which did not allow time for full consultation. As one British official put it: "It has been difficult for us to keep up." One European central banker called the IMF announcement a "brave step".

Others were annoyed to learn from the press that the Bank for International Settlements would call on them to chip in $10bn rather than the $5bn agreed two weeks ago. The BIS contribution is now under discussion by member banks, and should be finalised within the next few days.

Andres Rozental, Mexico's ambassador to London, told the Independent yesterday that what mattered was that everyone had accepted the package. ``No central bank has witheld its support,'' he said.

Mr Rozental said conditions on the new package were less onerous than they would have been under the previous $40bn proposal put to the US Congress. "It looked as though that would have had political conditions attached that would have been unacceptable to our Congress," he said.