```

[Journal of the House of Representatives, 1995]
[Thursday, March 9, 1995 (41), Para 41.28 Message from the President--Economic Emergency in Mexico]
[Pages 363-364]
[From the U.S. Government Publishing Office, www.gpo.gov]

para.41.28  message from the president--economic emergency in mexico

  The SPEAKER pro tempore, Mr. LONGLEY, laid before the House a message 
from the President, which was read as follows:

To the Congress of the United States:
  On January 31, 1995, I determined pursuant to 31 U.S.C. 5302(b) that 
the economic crisis in Mexico posed ``unique and emergency 
circumstances'' that justified the use of the Exchange Stabilization 
Fund (ESF) to provide loans and credits with maturities of greater than 
6 months to the Government of Mexico and the Bank of Mexico. Consistent 
with the requirements of 31 U.S.C. 5302(b), I am hereby notifying the 
Congress of that determination. The congressional leadership issued a 
joint statement with me on January 31, 1995, in which we all agreed that 
such use of the ESF was a necessary and appropriate response to the 
Mexican financial crisis and in the United States' vital national 
interest.
  On February 21, 1995, the Secretary of the Treasury and the Mexican 
Secretary of Finance and Public Credit signed four agreements that 
provide the framework and specific legal arrangements under which up to 
$20 billion in support will be made available from the ESF to the 
Government of Mexico and the Bank of Mexico. Under these agreements, the 
United States will provide three forms of support to Mexico: short-term 
swaps through which Mexico borrows dollars for 90 days and that can be 
rolled over for up to 1 year; medium-term swaps through which Mexico can 
borrow dollars for up to 5 years; and securities guarantees having 
maturities of up to 10 years.
  Repayment of these loans and guarantees is backed by revenues from the 
export of crude oil and petroleum products formalized in an agreement 
signed by the United States, the Government of Mexico, and the Mexican 
govern

[[Page 364]]

ment's oil company. In addition, as added protection in the unlikely 
event of default, the United States is requiring Mexico to maintain the 
value of the pesos it deposits with the United States in connection with 
the medium-term swaps. Therefore, should the rate of exchange of the 
peso against the U.S. dollar drop during the time the United States 
holds pesos, Mexico would be required to provide the United States with 
enough additional pesos to reflect the rate of exchange prevailing at 
the conclusion of the swap.

  I am enclosing a Fact Sheet prepared by the Department of the 
Treasury that provides greater details concerning the terms of the four 
agreements. I am also enclosing a summary of the economic policy 
actions that the Government of Mexico and the Central Bank have agreed 
to take as a condition of receiving assistance.
  The agreements we have signed with Mexico are part of a multilateral 
effort involving contributions from other countries and multilateral 
institutions. The Board of the International Monetary Fund has approved 
up to $17.8 billion in medium-term assistance for Mexico, subject to 
the Mexico's meeting appropriate economic conditions. Of this amount, 
$7.8 billion has already been disbursed, and additional conditional 
assistance will become available beginning in July of this year. In 
addition, the Bank for International Settlements is expected to provide 
$10 billion in short-term assistance.
  The current Mexican financial crisis is a liquidity crisis that has 
had a significant destabilizing effect on the exchange rate of the 
peso, with consequences for the overall exchange rate system. The 
spill-over effects of inaction in response to this crisis would be 
significant for other emerging market economies, particularly those in 
Latin America, as well as for the United States. Using the ESF to 
respond to this crisis is therefore plainly consistent with the purpose 
of 31 U.S.C. 5302(b): to give the United States the ability to take 
action consistent with its obligations in the International Monetary 
Fund to assure orderly exchange arrangements and a stable system of 
exchange rates.
  The Mexican peso crisis erupted with such suddenness and in such 
magnitude as to render the usual short-term approaches to liquidity 
crisis inadequate to address the problem. To resolve problems arising 
from Mexico's short-term debt burden, longer term solutions are 
necessary in order to avoid further pressure on the exchange rate of 
the peso. These facts present unique and emergency circumstances, and 
it is therefore both appropriate and necessary to make the ESF 
available to extend credits and loans to Mexico in excess of 6 months.
                                                  William J. Clinton.  
  The White House, March 9, 1995.

  By unanimous consent, the message, together with the accompanying 
papers, was referred to the Committee on Banking and Financial Services 
and ordered to be printed (H. Doc. 104-55).
```