Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-07-27
MEXICAN BOND ROW
HAPPILY ADJUSTED
Closer Commercial Relations
With u. S. Are Now Made
Much Easier.
BY PRESTON S. KRECKER.
Special Dispatch to The Star.

SPECIAL Dispatch 10 me star.
NEW YORK. July 26-Announce.
ment today that settlement has beer
reached between the Mexican govern
ment and bankers representing holder:
of that courtrys external bonds brings
TO happy conclusion negotiations
which were begun several weeks age
with but vague hopes of ultimate sue
cess and is the prelude, it is hoped, t.
closer commercial relations between the
United States and the southern repub.
lie
Mexico is one of the few foreign coun.
tries which have been unable to keer
. their covenants with American debtors
and in this instance the difficulty has
not been any desire or attempt to re.
pudiate a debt. but merely inability tc
meet obligations owing to unforeseen
political and economic developments
Mexico owes about $700, 100000 to for
eign lenders, who include French, Brit
ish and other European bondholders as
well as Americans. OF that amount APP
proximately $500,0o0.000 is principal
: while the balance represents unpaid in
terest
Bond Troubles Started in 1911.
The troubles of Mexico with respect
10 its foreign debt began in 1911, when
the Diaz regime was overthrown and a
new and more democratic form of gov
eminent was established While the
new era has been signalized by freer
expression of the will of the people, 1t
has been marked by many political dis
turbances. coupled with economic diff
cultieS created by the war. AS an out
come, Mexico, which formerly had a
splendid reputation as a borrower, be-
came seriously embarrassed
Three distinct adjustments of the
Mexican external debt have been made
within the last decade. The first was
reached in 1922, when a plan for pay
ment Of interest was adopted after
Mexico had defaulted payment for sew
eral years. That plan worked for about
two years, after which Mexico again
:, defaulted and continued in default I'M
I'll 1925. when a second arrangement
was made. AS before, Mexico met the
terms Of the plan for two years, but
thereafter defaulted payments for the
third time
Each successive adjustment has re-
suited in a. scaling down of Mexico's
obligations. The latest plan is based
on her supposed ability to pay rather
: than on the actual amount of the debt.
Bondholders are asked to make i'm
portant concessions, largely by way of
waving interest claims, together with
some scaling down of the principal 1t
is proposed to refund the old debt,
g comprising number of different bond
issues, into new bonds.
Major Economic Moves.
Mexico'S embarrassment has been
aggravated by two major economic de-
velopments over which the government
has had little control. One has been
the decline In production of oil, for
years the principal source of Mexico's
government revenues. The other has
been the decline in the purchasing
power of silver. Mexico is the largest
silver-producing country in the world
and her currency is on silver basis
Serious disturbance to her trade has
occurred. therefore. as a result of the
depreciation in the value of her prin-
cipal precious mineral product.
Like Canada, Mexico is a natural
customer of the United States. More
over, Americans have invested several
billion dollars in Mexican projects. It
Is to the best interests of all that Mex
Eco be assisted to adjust her foreign
debts in order that credit status can be
re-established and foreign capital re-
gain confidence in Mexican good faith.
(Copyright, 1930)