MEXICO WARNS OF WORSENING THIRD WORLD DEBT WOES
High interest rates, sluggish global
economic growth and creeping protectionism are deepening the
third world debt crisis, senior Mexican officials said.
    Finance minister Gustavo Petricioli said today's signing of
a 76 billion dlr new-loan and rescheduling package for Mexico
was the most comprehensive and far-reaching effort in debt
management yet achieved for a sovereign borrower.
    But, in remarks prepared for the signing ceremony, he
warned against complacency. "The debt problem is not solved. If
anything, it has been exacerbated by recent events."
    "The inequities of the international economic environment
conspire against the welfare and stability of developing
countries," Petricioli added. The debt problem will not be
solved unless developing countries are allowed to grow, he
argued. "There will be no solution without the further
development of trade throughout the world.".
    Director of public credit Angel Gurria told reporters that
Mexico's economy should resume growth this year, but he said
external conditions are not favorable. Latin America is
grappling with adverse terms of trade, for instance, as
underlined by the recent slide in coffee prices.
    Interest rates remain unacceptably high in real terms,
Gurria added. "Inflation has literally disappeared from the
face of the earth in the industrialized world, but interest
rates are still near seven pct."
    Industrial powers must also improve the coordination of
their economic policies to boost unacceptably low growth rates
and to keep export markets open, said Gurria, who is Mexico's
chief debt negotiator.
    The officials also had a blunt warning for those banks that
refuse to participate in the loan package: Do not expect to get
much business with Mexico in the future.
    About 60 of Mexico's 430 or so creditor banks worldwide
have still to join the loan, but four more acceptances were
received today, according to senior Citibank executive William
Rhodes, who is co-chairman of Mexico's advisory committee.
    "Those who supported us today can be sure that Mexico will
continue to be open and willing to share with them the business
opportunities which its future growth will create.
    "Those few who have denied their responsibility have turned
their backs on this remarkable effort of international
cooperation, on the financial system and on their enlightened
colleagues," Petricioli said.
    One way that Mexico could punish recalcitrant banks would
be to deny, or at least slow down, applications to convert
Mexican debt into equity investments within the country.
    "We will be a lot more expeditious in processing the
requests of banks that have supported us," Gurria said, adding,
"We have long memories."
    Debt-equity conversions are an attractive way for banks to
provide clients with subsidized pesos for investment in Mexico
and to collect handsome brokerage fees or reduce their own
Mexican exposure in the process.    
    The growing popularity of the scheme was underlined this
week when American Express Bank, which has joined the new
Mexican package, said it plans to convert 100 mln dlrs of its
own loans into an equity stake in hotel projects in Mexico.
    Mexico halted the debt-equity program on Feb. 25 to force
banks to concentrate on wrapping up the financing pakcage, and
Gurria said it would resume once the first part of the six
billion dlr loan that forms the core of the deal is disbursed.
    The loan is now 99 pct subscribed. Gurria said Mexico hopes
to close the books by the middle of April in time for a
drawdown by the end of April.
    Although the agreements were signed in the sumptuous
surroundings of a midtown Manhattan hotel, the atmosphere of
the signing ceremony was rather subdued, with bankers and
officials showing little of the elation and relief that
normally follows the conclusion of a mammoth deal.
    After five months of arduous work syndicating the loan,
debt fatigue was apparent and the talk was of ways to make the
financing process less cumbersome.
    "This (package) has been harder than all the others... I
hope we find a way that's not so debilitating for the people
who have to put them together," Gurria said.
 Reuter
