Guillermo Ortiz, Mexico's finance minister, said negotiations with the Fund would begin today. In New York to reassure American investors, he added that none of the emergency $18bn international rescue package had yet been used to support the peso.
Mr Ortiz also insisted that the country would have no difficulty in meeting its payments on tesobonos, the dollar-linked government bonds mainly held by overseas investors. ``We do not have a solvency problem. We can meet our obligations,'' he said.
About $28bn of tesobonos are trading, with $17bn held by foreign investors, according to the Mexican authorities. Some $16bn-worth mature between now and the end of June.
Mr Ortiz said there had been practically no renewals of the instruments since Mexico's crisis began with a shock devaluation of the peso just before Christmas, a sign of the dramatic loss of confidence in the country.
Mr Ortiz went on to meet US credit rating agencies in his mission to restore the country's financial credibility. The markets reacted favourably to the government's announcement that it would seek an IMF standby agreement for funds to prevent further declines in the peso's exchange rate.
The IMF has already expressed its approval of the measures announced by President Ernesto Zedillo earlier this week. The negotiations beginning today are not expected to be long. After the remarks by Mr Ortiz, the peso rose 35 centavos to 5.22 to the do
Analysts also greeted a new set of detailed economic forecasts published by the finance ministry. It issued a statement saying the country's current account deficit in 1995, forecast at $14bn, could be covered without using the $18bn emergency package put together.
The ministry predicted inflation would reach nearly 16 per cent this year, while the peso would average 4.5 to the dollar. It described the currency as now ``very undervalued''.
Nigel Rendell, an economist at James Capel in New York, said: ``Mexico's problem is now entirely one of confidence. It is difficult to think of anything else the government could do.''
However, Gene Frieda, a Washington-based analyst for NatWest Markets, said: ``The government has not said enough to satisfy investors. The economic recovery plan looks good on paper but the question is whether it will deliver results. The figures are notplausible.''
President Zedillo is likely to face political hurdles over both wage restraint and the privatisation of state enterprises. The prospect that the 10 per cent limit on wage rises set in the pact will hold was dimmed by the first union challenge. Union lea
d ers at Mexico's state-owned news agency said they would push for a 25 per cent pay increase.
British investors who have invested in Latin American markets have suffered losses of 15-20 per cent in the past month.
Perpetual, one of the UK's biggest fund managers, has about £22m in Latin America, of which about 31 per cent is invested in Mexico.
Mark Turner, Latin America fund manager, said that it would take at least to the end of the year for the fund to recoup the 17 per cent fall it has suffered in just one month.
James Fairweather, deputy chief investment officer at Martin Currie, said: ``Mexico is certainly not an attractive market, but the currency is now undervalued and there will be some returns when it moves back to a more realistic level.''
Kenneth King, head of emerging markets at Kleinwort Benson, said: ``Mexico would be one of my most favoured stock markets for 1995. It has overreacted ludicrously to the devaluation - which was a good technical decision with lousy presentation.''Reuse content