MEXICO CITY -- In a bold move to restore confidence of international investors, Mexico is repaying -- three years ahead of schedule -- the remaining $3.5 billion it owes the United States from an emergency loan.
The Mexican government said yesterday that it is using bond sales to make the repayment and will pay $1.5 billion in advance to the International Monetary Fund.
"This is another step to consolidate our economic recovery," Mexican President Ernesto Zedillo said. "It proves that we Mexicans are leaving behind the crisis."
Mexican stocks surged on the news.
The early repayment highlights the 180-degree turn that Mexico's economy has undergone in two years, and to some extent the benefits both countries have gained under the North American Free Trade Agreement. U.S. companies such as AT&T Corp. and MCI Communications Inc., for example, are betting on Mexico's rising economy by teaming up with Mexican partners and investing $450 million and $900 million, respectively.
"The Mexican economy is back on track, and we did the right thing," said President Bill Clinton, who had come under fire in the Republican-led U.S. Congress for the financial package. The United States "earned more than half a billion dollars on the loan," he said at the White House yesterday.
That's because Mexico paid about $1.4 billion in interest, more than what the United States would have made had the U.S. Treasury parked the money in its own securities. The average return on the loan for the United States has been up to 4 percentage points more than the three-month Treasury bill.
Mexico's Bolsa index rose 78.10 points yesterday, more than 2 percent, to 3,709.84. The Mexican stock market surged 12 percent in the last two weeks and climbed 35 percent in less than 10 months.
The Treasury said it expects to receive Mexico's final payment tomorrow. It will be placed back in the Exchange Stabilization Fund, controlled by the Treasury secretary.
The $3.5 billion is the last installment of $13.5 billion in U.S. money that Mexico borrowed as part of a $20 billion bailout agreement reached in February 1995, after the Mexican government devalued the peso.
Pub Date: 1/16/97
