THE WHITE HOUSE
Office of the Press Secretary
EMERGENCY SUPPORT PROGRAM FOR MEXICO CONCLUDES SUCCESSFULLY AND AHEAD OF SCHEDULE
Mexican President Zedillo phoned President Clinton this morning to inform him that Mexico would complete repayment on the U.S. emergency support program more than three years ahead of schedule. Mexico's decision marks the early conclusion of a financial stabilization program that has been successful by any measure.
Two Years Ago, President Clinton Took Decisive Action to Avert Financial Crisis.
Two years ago, Mexico faced a severe financial crisis. Mexico was on the brink of default, and other emerging markets were threatened. Mexico's foreign reserves had fallen to a low of $3 billion, compared with $45 billion in short-term debt falling due in 1995.
Faced with this impending crisis, President Clinton took decisive action. With the bipartisan support of the Congressional leadership, the President led an international initiative to provide up to $50 billion in emergency financial support, including up to $20 billion in U.S. loans through the Exchange Stabilization Fund. The resulting emergency support agreement that was signed by Secretary Rubin on February 21, 1995 was backed by Mexican oil export proceeds and was dependent on Mexican adherence to a rigorous economic adjustment program.
President Clinton's decision to offer U.S. support was based on his judgment that vital U.S. interests were at stake: U.S. exports and jobs, stability along our common border, and financial stability in other emerging markets. His decision also reflected an assessment that there would be no cost to American taxpayers, since the Mexican economy was fundamentally strong and creditworthy.
Mexican Recovery Is Now Well Under Way.
Mexican President Zedillo instituted a set of disciplined economic policies that included expenditure cuts and a small fiscal surplus for 1995; strict limits on the growth of domestic credit; acceleration of structural reforms; and regular publication of monetary and fiscal data to ensure greater transparency. Following an initial sharp contraction in the Mexican economy and a deep depreciation of the Mexican peso, adjustment began to take hold. Mexican GDP growth resumed in the second half of 1995, and is projected to surpass 4 percent in 1996. The exchange rate has stabilized and inflation has fallen by nearly half from 1995 to 1996. And close to 1 million jobs have been restored in Mexico since the economy bottomed out.
Today's Repayment Marks an Early Conclusion of the Emergency Support Program, which Has Been a Success by Any Measure.
With Mexico's announcement today of its final repayment -- three years ahead of schedule -- the emergency support program has proven to be a resounding success on all fronts: Mexico's economy is recovering strongly, stability was preserved in emerging markets around the world, U.S. exports were protected, and U.S. taxpayers have been repaid. In sharp contrast to the seven-year hiatus that followed Mexico's financial crisis in 1982, this time, Mexico returned to international capital markets after only seven months -- raising over $16 billion on international markets in 1996. Following the crisis in 1982, Mexico slapped on prohibitive tariffs and U.S. exports fell by half, taking seven years to recover. This time, Mexico continued to fulfill its NAFTA commitments, and U.S. exports are already up 11 percent over pre-crisis levels after only two years.
American taxpayers have been repaid in full and well ahead of schedule, earning a good return on their investment. Indeed, Mexico had already repaid $3 billion in short-term loans by January 1996. In August 1996, Mexico had prepaid $7 billion out of the $10.5 billion still outstanding, almost four years ahead of schedule. And the $3.5 billion transfer announced today closes out the books -- more than three years ahead of schedule. Moreover, Mexican interest payments have resulted in a net gain of nearly $580 million for the American taxpayer.
Events in Mexico confirm the importance of the global effort that we have led, together with our partners around the world, to institute fundamental reforms to prevent financial crises from disrupting the international system in the future and to strengthen the capacity of the international financial institutions to respond rapidly and effectively when crises cannot be avoided.
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