G7 delegates may have tickly Mexico questions

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The Independent Online
Lingering questions over the international bail-out of Mexico are expected to dominate talks between finance ministers and central bank governors of the Group of Seven countries that open in Toronto this evening.

The meeting follows President Bill Clinton's decision this week to abandon efforts to offer Mexico $40bn in US loan guarantees and to forge instead a package backed by global institutions including the International Monetary Fund and the Bank for International Settlements.

European ministers may raise the temperature by querying the failure of the IMF and the US to detect the danger signals in Mexico before catastrophe struck with the devaluation of the peso before Christmas. They may also demand that the IMF improve procedures for monitoring such economies.

Over dinner tonight and during a formal session tomorrow morning, European officials are also expected to express irritation that their governments were not more closely informed of developments in Washington before Tuesday's announcement of the international package.

Among sensitive questions likely to be asked are whether sufficiently stringent conditions have been imposed on Mexico to minimise the risk of a repeat of the recent blow-out, and whether the new draw on the IMF's resources will mean a reduction of available funds for countries in Eastern Europe.

The US will contribute $20bn in loans and loan guarantees from the Treasury's own Exchange Stabilisation Fund. Added to it is $17.76bn from the IMF and $10bn from the BIS.

Michel Camdessus, the managing director of the IMF, issued a warning yesterday that the Mexico debacle may not be the last of its kind. "This is the first crisis of the next century". Mr Camdessus denied that the Mexican package had put an immediate strain on IMF finances but hinted that some new infusion of funds may have to be sought from member countries.

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