Mexico's president ends silence on peso crisis


MEXICO CITY -- President Ernesto Zedillo Ponce de Leon moved to take control of Mexico's economic crisis yesterday by outlining an emergency plan to stabilize the economy and announcing the resignation of the finance minister who oversaw the devaluation of the peso that led to the collapse of the government's economic strategy.

Breaking a public silence that had lasted for five days and confounded investors, Mr. Zedillo told a national television audience of a plan "in which everyone will have to do their part and no one will be exempt from sacrifice."

His finance minister, Jaime Serra Puche, had offered to resign several times in the face of criticism from both Mexicans and foreign investors who had lost billions of dollars in the peso's fall. Yesterday, the resignation was accepted.

Mr. Zedillo, who was inaugurated as president only four weeks ago, announced that Mr. Serra would be replaced by Guillermo Ortiz Martinez, 46, a government economist favored by New York investors.

It is widely known that as under secretary of finance in the previous administration, Mr. Ortiz tried last fall to persuade then-President Carlos Salinas de Gortari to devalue the peso in an orderly fashion. His proposal was rejected.

Details of Mr. Zedillo's plan will be released before he gives another speech to the nation on Monday night. But several of his key advisers made clear in interviews yesterday that the new strategy would require severe concessions from labor, deep cuts in government spending and a temporary slowdown of economic growth -- all of this in an attempt to cut by more than half the $30 TC billion trade imbalance that lies at the core of Mexico's crisis.

The ambitious plan to rebuild investor confidence includes an international aid package totaling $10 billion to $15 billion in loans from the United States, Canada, the European central banks and several private American banks, including Citibank.

The money, which includes a credit line of $6 billion already authorized by the United States, will be used to defend the peso and to help Mexico cover its obligations on $5 billion in short-term bonds that fall due next month.

In Washington, Congressional experts who also insisted on anonymity said that rather than ask a Republican Congress for money to lend to Mexico, the Treasury Department was likely to use its Exchange Stabilization Fund.

The little-known fund, which is intended to be used at the Treasury's discretion in foreign-exchange crises, held $20.4 billion as of Sept. 30, according to a recent Federal Reserve publication.

During an interview yesterday with news-agency reporters, President Clinton implied that the United States would help Mexico.

When asked about the Mexican currency crisis, he replied: "It is something that I take seriously, and we are looking at it very seriously. We're talking to the Mexican government about what we can do."

The president continued, "I would have to say that if you look where Mexico is today, compared to where they were several years ago, they have made a serious commitment to economic reform, to social reform, to cultural reform and to political reform."

Mr. Clinton then added, "I would like to see that commitment rewarded, obviously, in so far as it can be in having those folks build a stable and growing economy."

Most details of the international economic package, parts of which became known Wednesday, have been settled with the help of U.S. Treasury officials, Mexican officials said. But the domestic section dealing with wages and inflation controls will not be settled until Monday, when Mexican business and labor leaders will presumably reach a consensus with the government on its plan to stabilize the economy.

Since the peso was devalued, and a day later, allowed to float freely against the dollar it has lost about 30 percent of its value. Yesterday, the peso closed at 4.875 to the dollar, up modestly from 4.975 to the dollar on Wednesday.

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