Peso strengthens after $20bn bailout


The United States and Mexico yesterday signed a $20bn (£13bn) rescue package for the Mexican economy, the first stage of a $50bn international bailout. The peso strengthened in anticipation of the signing, trading at around 5.40 pesos to the dollar compared with Monday's close of 5.55.

But the political cost of reported tough US conditions could counterbalance the deal's financial importance for the beleaguered Mexican President, Ernesto Zedillo.

After several days of intensive talks in Washington, Robert Rubin, the US Treasury Secretary and Guillermo Ortiz, the Mexican inance Minister, signed four agreements which, said Mr Rubin, were aimed at "restoring to health Mexico's economy in the long term".

Mr Ortiz insisted that Washington had imposed no political conditions. But there was widespread criticism in Mexico of the fact that the country will have to put up as security against default on debt repayments its vital oil revenue, about $7bn a year and formally specified as national patrimony under the constitution.

In a speech before the signing at the US Treasury, Mr Rubin said there were four separate accords: a framework agreement, a medium-term stability agreement, a security guarantees agreement and an oil proceeds facility accord.

"Mexico had a problem and we responded to that problem," Mr Rubin said. "The ultimate success of this programme depends on Mexico." He said an initial $3bn would be made available immediately and a total of $10bn by the end of June. The remaining $10bn would be released after 1 July provided Mexico has adhered to the terms of the accords.

However Mexico's current climate, with Mr Zedillo battered by criticism of his handling of the Indian peasant uprising in the state of Chiapas, means anything affecting the economy - particularly a predicted recession, business closures, job losses and a further fall in the standard of living - will have political implications. The Banco de Mexico raised key interest rates on Monday from 40 per cent to just under 50 per cent, widely seen as demonstrating to the US that Mexico was serious about imposing a tighter monetary policy .

Anticipating the signing, the leading Mexican daily El inanciero yesterday carried the splash headline "Tough Conditions for US Loan. Radical Stance by Robert Rubin."

On Monday, anti-government protesters threw tomatoes at the US embassy in Mexico City and the chairman of the left-wing opposition Party of the Democratic Revolution, Senator Porfirio Munoz Ledo, spoke of the danger of a military coup because of Mr Zedillo's perceived weakness.

Demonstrators calling for "peace in Chiapas" sang and danced around Mexico City's Angel of Independence monument on Monday night, expressing support for the Indian peasant guerrillas and their white leader, Subcomandante Marcos. They criticised the reported advance of Mexican troops towards an area where hundreds of guerrillas are said to be hiding in the jungle along with several thousand starving civilian sympathisers afraid of returning to their homes .

Oil revenues are one of the few issues which can still unite Mexicans of all political persuasions against foreign interference. In one of the most popular moves in Mexico's post-revolutionary history, President Lazaro Cardenas kicked out foreign oil companies and nationalised the industry in 1938.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living