Government promises to meet all its obligations

MEXICO PROPS UP CONFIDENCE

January 06, 1995|By New York Times News Service

NEW YORK -- International investors seemed to increase confidence in Mexico's future yesterday as the country's new finance minister, Guillermo Ortiz, told banking officials that his country could pay its debts.

In a whirlwind day in New York, Mr. Ortiz also sought to reassure investors by saying that Mexico would ask the International Monetary Fund for its stamp of approval on the economic-recovery plan it announced Tuesday, after having devalued the peso in December.

Addressing a standing-room-only crowd in the ballroom of the Pierre Hotel yesterday morning, the American-educated Mr. Ortiz said Mexico now had $24 billion in new international credits and monetary reserves. They will be used, he said, to stabilize the peso and allow owners of $17-billion worth of foreign-held dollar-indexed treasury notes, known as tesobonos, to get their money out safely if they wished.

"We have a fundamentally sound economy," Mr. Ortiz said. "We do not have a solvency problem. We can pay our debts."

Objecting to comparisons to Mexico's bond default more than a decade ago, a development that ushered in a larger-scale Latin American foreign debt crisis, Mr. Ortiz declared: "The situation is completely different from what it was in 1982."

Describing the peso as "grossly undervalued," the finance minister said he expected to see it stabilize at about 4.50 to the dollar. But he emphasized that this was not a rate the Mexican central bank intended to defend by interventions in the currency markets.

Mr. Ortiz told the bankers that Mexico was working with leading New York investment banks and brokerage houses, including J. P. Morgan, Goldman Sachs, and Lehman Bros., to create a series of longer-term, high-interest, dollar-indexed bonds that it would offer to foreign holders of the expiring short-term treasury notes.

Mr. Ortiz appeared to reassure most of the bankers present, who warmly applauded his two-hour presentation and the question-and-answer session.

John F. H. Purcell, director of emerging-markets research at Salomon Bros., said an informal poll he took afterward showed that about two-thirds of those present were impressed by the finance minister's remarks.

"I see this as a turnaround point," Mr. Purcell said. "But it may take the market a while to believe it. Mr. Ortiz demonstrated that someone is in charge and that major political forces in the country are behind him."

To further strengthen confidence in the government's economic program, Mr. Ortiz said he would visit the International Monetary Fund's managing director, Michel Camdessus, in Washington today to win official support from the fund.

Mexico hopes to receive $14 billion in direct foreign investment, new bank loans and supplier credits this year. That should be sufficient, Mr. Ortiz insisted, to finance a current-account deficit the government is committed to cutting by at least half -- to less than $14 billion.

Finally, the finance minister announced details of a plan to sell state-owned assets. The privatizations, expected to yield $12 billion to $14 billion, are to include part of the nation's electricity-generating monopoly as well as container ports, airports and satellite broadcasting and telecommunications rights. The oil industry remains off-limits.

On currency markets yesterday, the peso strengthened, rising in New York to close at 5.35 to the dollar, compared with 5.575 Wednesday. The Mexico City stock market was up, with the Bolsa index closing at 2,273.10, a gain of 0.14 percent.

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