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
