Mexico aid is pushed by Clinton

January 31, 1995|By Mark Matthews and Carl M. Cannon | Mark Matthews and Carl M. Cannon,Washington Bureau of The Sun Sun staff writers Karen Hosler and Paul West contributed to this article.

WASHINGTON -- President Clinton cranked up a major lobbying effort yesterday to rescue Mexico's currency as financial and stock markets reeled over predictions that his $40 billion loan-guarantee package was doomed on Capitol Hill.

"We have hundreds of thousands of jobs that are tied to the success of the Mexican economy," the president told a group of governors at the White House yesterday. "It is now our third-largest trading partner, several billions of dollars a year."

By day's end, however, the administration and congressional leadership had failed to work out details of a measure to put before members of Congress for a vote, and Senate Majority Leader Bob Dole sounded more pessimistic than ever about its prospects.

Supporters of the rescue warned that if it failed, U.S. exports to Mexico would drop sharply, The United States' trade relationship with the rest of the Western Hemisphere would stall and other emerging markets elsewhere could falter, slowing the U.S. economy.

They also said that if Mexico's economy slumped, the United States would face a big new influx of illegal immigrants.

But more was at stake than trade, investor confidence and U.S. relations with Mexico. A key question was whether Mr. Clinton and Congress' new Republican leadership could unite to push through any unpopular foreign-policy initiatives and thereby maintain U.S. leadership in the world.

A failure of the package "would seriously damage the image of the United States as a leader in world affairs because it would signal that it couldn't even garner support for a neighbor and economic partner," said Nora Lustig, a senior fellow at the Brookings Institution. "It would be incredibly harder for the United States to garner support of other leading countries in implementing a foreign policy together."

When the outlines of the package of loan guarantees were agreed upon by President Clinton and congressional leaders of both parties three weeks ago, it seemed likely to pass quickly enough to reassure nervous financial markets and restore stability to a Mexican economy in turmoil over the government's devaluation of the peso.

The package would have the United States guarantee repayment of loans to Mexico needed to shore up the peso.

Unless Mexico defaulted, the deal would not be a drain on the U.S. Treasury and could even produce a profit in the form of fees that Mexico must pay for the guarantees.

In the past two weeks, however, the package has run into opposition from members of Congress who see it as a bailout for greedy investors and failed Mexican policies.

Freshmen members and talk-show hosts have joined past opponents of the North American Free Trade Agreement, including Ross Perot, who claim that they were right in warning of the perils of becoming so closely tied to Mexico's economy.

With members of their own party hoping to slash foreign aid, Republican leaders are refusing to pressure their party colleagues to back the package unless Mr. Clinton delivers more members of his own party.

Widely reported predictions over the weekend that the rescue was all but doomed sent the Mexican peso to an all-time low against the dollar yesterday before it recovered slightly. The uncertainty also contributed to declines yesterday on Wall Street.

Trying to win more votes, the administration and Congress have argued over conditions to attach to the package to make it less risky for the American taxpayer.

At the same time, they have tried to persuade Mexico's government to accept tough American-set conditions and put aside sensitivities over sovereignty. Mr. Clinton, who spent several hours Sunday lobbying for the rescue package, canceled a trip to Florida scheduled for Friday and planned to promote the plan all week.

"This is something we have to do," he told reporters in the Oval Office, stressing that the stabilization plan "is not a bailout for Wall Street" but a boon for "Main Street."

The key reason for supporting the stabilization plan, Mr. Clinton said, is American jobs.

"Helping the economy stay strong down there is more important than anything else for our working people and our businesses on Main Street that are doing such [voluminous] business in Mexico," Mr. Clinton said.

Market collapse feared

"If they want to continue to grow and have that as a market, we can't let the financial markets, in effect, collapse the Mexican political and economic structure."

The president stressed that the pension plans of American workers would be severely hurt by a failure of the Mexican peso, because so many institutions have invested in Mexico.

He also said that the United States needs a strong Mexican government to help control immigration and drug trafficking from Mexico.

Addressing the nation's governors later, he said, "I realize that it's not politically popular back home."

The president acknowledged that time is not on his side, and actually sounded frustrated that his staff had not yet produced a package to send to Capitol Hill.

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