From: NY Transfer News Collective <[EMAIL PROTECTED]> Subject: Weekly Update on the Americas #261 1/29/95 Via NY Transfer News Collective * All the News that Doesn't Fit WEEKLY NEWS UPDATE ON THE AMERICAS ISSUE #261, JANUARY 29, 1995 MEXICANS MARCH AGAINST US BAILOUT Thousands rallied in Mexico City's central plaza on Jan. 24 to protest a $40 billion loan guarantee package proposed earlier this month by US president Bill Clinton and Mexican president Ernesto Zedillo Ponce de Leon. The demonstration was called by prominent members of the center-left opposition Party of the Democratic Revolution (PRD) along with a few important figures from the conservative opposition National Action Party (PAN) and dissidents from the ruling Institutional Revolutionary Party (PRI). At the rally, former PRD presidential candidate Cuauhtemoc Cardenas Solorzano called for a national plebiscite on Feb. 12, the date of gubernatorial elections in the western state of Jalisco, in which the PAN candidate is favored to win. Cardenas read the demonstrators a proposed text for the referendum, asking Mexicans if they wished to owe the US another $40 billion. "No!" the protesters shouted, waving "wanted" posters with a caricature of president Carlos Salinas de Gortari, Mexican president from 1988 until last month and architect of the country's economic "modernization" policy, which collapsed with the devaluation of the peso last month. [Equipo Pueblo, Mexico Update, Vol. 2, #15, 1/24/95; Telemundo TV (US) 1/25/95; Independent (UK) 1/28/95; Washington Post 1/28/95] There are now strong doubts about the bailout plan all across the political spectrum. PAN senator Mauricio Fernandez Garza from Nuevo Leon is furious over proposals in the US Congress to condition the loan guarantees on an end to Mexico's trade with Cuba. "No one can tell me what the hell I should do with my money," Fernandez Garza said on Jan. 21; the conservative senator has been involved in joint ventures with Cuba for two years and is planning a new $250 million venture for generating electrical energy. [La Jornada (Mexico) 1/22/95] Deputies from the PRI joined with the opposition parties on Jan. 26 to vote 381-58 for an unprecedented measure requiring President Zedillo to submit the loan guarantee plan to the Mexican Congress for ratification; the president was forced to agree to the requirement. [WP 1/28/95] Even Zedillo's secretary of foreign affairs, Jose Angel Gurria, expressed impatience with the US. "I would say that the typical US politician is not necessarily someone who is very conscious of international subjects," Gurria told Mexican legislators during discussions on the bailout. "Even supposing that they know exactly where Mexico is on the map...they lack information about what happens in Mexico." [FT 1/27/95] Meanwhile, Berta Lujan of the Mexican Action Network on Free Trade (RMALC) and representatives of the Citizens Movement for Democracy and of the Democratic National Convention (CND), a grassroots coalition originally sponsored by the campesino rebels of the Zapatista National Liberation Army (EZLN), have been touring Europe to explain the situation to European non- governmental organizations (NGOs). The groups want an abrogation or renegotiation of the North American Free Trade Agreement (NAFTA), in effect for one year. "The events [the economic crisis] show that the shock treatment of NAFTA and liberalized trade was an error," CND co-president Sergio Zermeno told reporters during a visit to Paris on Jan. 24. [Inter Press Service 1/24/95] IMF AND WALL STREET PUSH MEXICO LOANS US legislators share their Mexican counterparts' reluctance to back the bailout. Senate majority leader Bob Dole (R-KS) suggested for the first time on Jan. 27 that the US Congress might not approve the plan, despite support from the Democratic White House and the Republican leadership of Congress. [New York Times 1/28/95] International investors showed their lack of confidence in the situation on Jan. 24 during the Mexican government's weekly auction of tesobonos (short-term Treasury bonds). Only $275.3 million sold out of a $400 million offering, despite a staggering interest rate of 26.99%, up 7.25% from the high rate of the week before. [FT 1/25/95] However, the International Monetary Fund (IMF) demonstrated its support for the plan on Jan. 26 by signing a preliminary agreement for a standby loan of $7.58 billion to Mexico, the largest loan in the fund's 50-year history. The move brought the peso up 2.3% against the dollar. White House officials expressed hope that the IMF's support for Mexico would help win Congressional backing for the bailout. [Wall Street Journal 1/27/95] Another friend of the bailout plan is US treasury secretary Robert Rubin, who assured Congress on Jan. 25 that the loan guarantees were not a giveaway to US holders of tesobonos. "I don't think any of us would have the slightest interest if this were a question of bailing out wealthy investment firms," said Rubin, co-chair of the Goldman, Sachs & Co. investment firm until he joined the administration in 1993. [Los Angeles Times 1/26/95] While at Goldman, Sachs, Rubin had "significant contact," in his words, with companies such as Enron, the natural gas giant, that have substantial business interests in Mexico. Goldman, Sachs had pretax earnings of $1.4 billion in 1992, Rubin's last year as co- chair, and it was the largest single contributor to Clinton's presidential campaign. Rubin was a big NAFTA promoter while working for the Clinton administration in 1993. Rubin became Treasury Secretary after Lloyd Bentsen retired last month. His personal net worth is $155 million. [Counterpunch 12/15/94] Goldman, Sachs' sphere of influence includes major US media, which regularly cite the firm's Latin American equity research head, Jorge Mariscal [see Update #244]. Salomon Brothers, which handles $15 billion worth of transactions in Mexico each year, similarly influences the US media through its often-quoted "emerging markets" research head, John Purcell. In 1993 Purcell scolded Moody's Investors for its "fundamental error of pessimism" about Mexico. Purcell's ex-wife, Susan Kaufman Purcell, is another regular media source on Mexico. She is an official at the Americas Society and a director of an investment fund with big interests in Mexico. Political consultant Christopher Whalen, who advised Cuauhtemoc Cardenas' presidential campaign last year, predicted before the peso's fall: "There are a lot of people who are going to want to sue the ass off of Salomon after their investments go down the drain." [Counterpunch 12/1/94] On the Republican side, George Bush has been friends with both former president Salinas and his father, Raul Salinas Lozano, since the 1960s. [Counterpunch 12/1/94] Bush strongly supports the bailout [see Update #260], as do Sen. Dole and Rep. Jim Leach (R-IA). The Nation reports that Leach is "secretly drafting the bailout legislation"; recent financial-disclosure documents may show that he and Dole have "heavy Latin American holdings in mutual funds and stock and bond funds." [Nation 2/6/95] MEXICAN ECONOMIC CRISIS DEEPENS Under the proposed bailout, the US would promise to pay as much as $40 billion (plus $9 billion from an earlier credit line) if the Mexican government was unable to meet bond payments. About $29 billion in bonds come due this year alone, the majority owned by US investors. As collateral, Mexico is to put export revenues from its mammoth state petroleum company, Pemex, directly into the US Federal Reserve; the exports come to about 470.4 million barrels (with 75.87% sold to the US), generating $7 billion in hard currency. Some Mexican economists ask how this plan could help lift Mexico out of the economic crisis precipitated by a 45.16% fall of the peso against the US dollar since Dec. 20. They note that Mexico would have to use six years' worth of oil revenues just to meet the new debt to the US. [LJ 1/22/95] Meanwhile, Zedillo's administration is proceeding with the sort of austerity measures always demanded by the US and the IMF during economic crises. For example, the government is slashing its investment budget by 11% and halting new investment projects scheduled for 1995. [FT 1/23/95] The government now projects a 1995 growth rate of just 2%--although most analysts expect a zero or negative growth rate. Soaring local interest rates (72% the week of Jan. 23) have brought half the country's huge construction industry to a standstill, with 10% of the firms shutting down in the last weeks. [Mexico Update 1/24/95] Some 18,000 auto workers have been laid off since the crisis began. Automobile production is the country's largest industry, employing 230,000 workers and producing 420,000 vehicles a year. The industry expects 30-50% declines in domestic sales. [IPS 1/24/95; FT 1/25/95] Even the production of billionaires has halted: Forbes Magazine reports that the total of 24 Mexican billionaires it counted last year has been reduced overnight to 14. [LAT 1/17/95] Sid Shniad