WASHINGTON -- President Clinton won approval from top congressional leaders yesterday for what is expected to become an enormous package of loan guarantees to rescue the Mexican economy.
The agreement, described by the White House as a significant test of bipartisanship in a foreign financial crisis, is aimed at lTC trying to keep Mexico's growing financial crisis from erupting into a clash with the Republican majority and dissident Democrats.
The speaker of the House, Newt Gingrich, and the Senate majority leader, Bob Dole, agreed to a rescue plan put together by the Clinton administration that will require Mexico to pay a fee, similar to an insurance premium, to the United States for taking the risk of guaranteeing Mexico's debts. The plan avoids a potentially raucous congressional argument over foreign aid by allowing Congress to approve the guarantees without allocating funds from the federal budget.
But the administration refused to say how much the loan guarantees would total. Officials clearly hoped that the announcement alone would restore the confidence of private investors and commercial banks, making use of the guarantees unnecessary.
"We agreed to do what is necessary to restore financial confidence in Mexico without affecting the current budget at home," Mr. Clinton said in a joint statement with the Republican leaders and the minority leaders of the Senate and House, Sen. Tom Daschle of South Dakota and Rep. Richard A. Gephardt of Missouri.
Vice President Al Gore; the new Treasury secretary, Robert E. Rubin; and the chairman of the Federal Reserve, Alan Greenspan, also attended the White House meeting.
The announcement came yesterday after it became clear that an $18 billion credit line for Mexico, created last week by the United States, Canada and several other nations, would prove insufficient to stem the crisis created by a 35 percent devaluation of the peso.
In Mexico City, reports yesterday that Washington was working on the huge aid package, which was rumored to total as much as $40 billion, helped push the Mexican stock market up 4.5 percent from Wednesday's close.
Investors in Mexico were encouraged that the action might bring the economy back from the brink of collapse and took the chance to buy stocks at what might turn out to be bargain-basement prices after a 12.5 percent drop earlier this week.
The Mexican peso also strengthened yesterday, closing at 5.495 to the dollar, up more than 3 percent from Wednesday.
But analysts say Mexico is far from overcoming its crisis.
"When you have the market moving as much as it has on rumors, it shows that there still is a lot of uncertainty," said Walter T. Molano, an economist at CS First Boston in New York.