The departure of Jesus Silva Herzog from his post as Mexico's finance minister does not signal a change in the country's policy toward its foreign debt, Federal Reserve chairman Paul Volcker said Wednesday. Testifying before the House of Representatives Foreign Affairs Committee, Mr. Volcker said he did not think the Mexican government would make unilateral moves to limit its interest payments on its $98 billion foreign debt.
After Mr. Herzog's resignation Tuesday (though some Mexican government officials claim he was actually fired), speculation grew that he had decided to leave the post after losing the confidence of President Miguel de la Madrid Hurtado. There was concern that this could signal increased Mexican resistance to meeting its overseas debt obligations.
Volcker said the consequences would be severe if Mexico decided to stop making interest payments on its overseas debt. He said such a move would greatly impair Mexico's access to world capital markets in the future.
Such a development would have an important impact on sensitive talks between Mexico and the International Monetary Fund which are attempting to solve Mexico's debt problems. But Treasury Secretary James Baker IIIexpressed confidence last night that Mexico and other debtor nations could work out their problems in cooperation with international lending agencies and commercial banks.
Mr. Baker said he believed Herzog's successor, Gustavo Petriccioli Iturbide, would continue a responsible approach to handling Mexico's foreign debt.
``He is said to be a moderate on the debt issue, not having favored its politicization,'' Baker said of Mr. Petriccioli, who was the head of the State National Development Bank before his appointment.