Financial Assistance Package
A week of intense currency crisis stabilized some time after the US president, Clinton, in concert with international organizations, granted a loan to the Mexican government.
Loans and guarantees to Mexico totaled almost $50 billion, with the following contributions:
- The United States arranged currency swaps and loan guarantees with a $20 billion total value.
- The International Monetary Fund promised an 18 month Stand-by Credit Agreement of around US$17.7 billion.
- The Bank for International Settlements offered a $10 billion line of credit.
- The Bank of Canada offered short term swaps of around US$1 billion.
The Mexican "bailout" attracted criticism in the US Congress and the press for the central role of the former Co-Chairman of Goldman Sachs, U.S. Treasury Secretary Robert Rubin. Rubin used a Treasury Department account under his personal control to distribute $20 billion to bail out Mexican bonds, of which Goldman was a key distributor. In late 1995, Patrick Buchanan wrote "ewly installed President Ernesto Zedillo said he needed the cash to pay off bonds held by Citibank and Goldman Sachs, lest the New World Order come crashing down around the ears of its panicked acolytes."
According to Hannibal Travis, the "former manager of $5 billion in Mexican investments at Goldman Sachs became U.S. Secretary of the Treasury and lobbied for legislation that forced U.S. taxpayers to contribute in excess of $20 billion to bail out investors in Mexican securities, in a form of 'corporate socialism'".
The United States' assistance was provided via the treasury's Exchange Stabilization Fund. This was slightly controversial, as President Bill Clinton tried and failed to pass the Mexican Stabilization Act through Congress. However, use of the ESF allowed the provision of funds without the approval of the legislative branch. By the end of the crisis, the U.S. actually had made a $500 million profit on the loans.
Read more about this topic: 1994 Economic Crisis In Mexico
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