It took a push from President Reagan and other United States government leaders. But after months of negotiations it finally happened: Mexico's 500 or so commercial bank creditors agreed ``in principle'' to lend that financially beleaguered nation nearly $6 billion in new money. Next on the debt package list: Nigeria. Not far down the road: the Philippines.
The Mexican deal brings to life the ``debt initiative'' of US Treasury Secretary James A. Baker, aimed at containing the third-world debt crisis. It gives Mexico some financial means to revive its depressed economy.
Both Mexico and Nigeria are hard hit by losses in oil income and both are strapped for cash. The Philippine economy piled up debts under President Ferdinand Marcos, ousted earlier this year.
William R. Rhodes, the Citibank executive who heads the 13-bank negotiating team, and Mexican officials were under pressure to reach an agreement.
President Reagan, in his address to the joint annual meeting of the International Monetary Fund (IMF) and the World Bank here Tuesday, said he wanted the ``growth-oriented programs'' drawn up for the debtor nations with the help of the fund and bank to be ``fully supported by commercial banks.''
Federal Reserve chairman Paul A. Volcker had called in chairmen of some of the key banks to discuss the negotiations Monday with the IMF managing director, Jacques de Larosi`ere; the World Bank's new president, Barber Conable; and Mexican Finance Ministry officials.
IMF officials talked of a deadline last Monday. At that point a $12 billion loan package worked out by the IMF with Mexico was to expire. But as expected, the IMF relented on the deadline.
The two sides agreed on an interest rate of 13/16 percentage points above the London Interbank Offered Rate (LIBOR), the wholesale cost of money for commercial banks. This was only 1/16 percentage points below what the banks sought. Mexico had bargained for the LIBOR rate itself.
Since this rate will also apply to $43.8 billion of outstanding Mexican loans that were paying 11/8 percentage points over LIBOR, the Mexicans will save more than $1 billion in interest charges over the next 12 years.
The bank negotiating team also agreed to lend $500 million to Mexico if the nation doesn't achieve growth of 3 to 4 percent for 1987. And the banks stand ready to provide $1.2 billion more in ``investment contingency funds'' should the IMF deem this necessary.
Some $1 billion of the $6 billion in loans will be linked to the World Bank, which will guarantee about $500 million. The new loans are scheduled to be paid over 12 years, with only interest due in the first five years.
To the third world, the Mexican loan shows something is being done to help countries with their debt problem. And it should tell the financial community that the debt crisis will not explode -- at least not yet.
The Baker initiative, announced at last year's IMF-World Bank meeting in Seoul, was intended to revive the economies of the debtor countries and ease the danger of political turmoil. It called for $20 billion in new commercial bank money and $9 billion in fresh funds from the World Bank and other regional development banks for 15 debtor nations over three years.
In return for the money, the developing countries were expected to continue with reforms that would make their economies stronger. The new money, however, would enable these nations to ease the austerity that has tormented some of them since the crisis that began in 1982 could be eased.
Mexico, for instance, agreed to drastically reduce some popular subsidies for gasoline, electricity, telephone rates, bread, milk, and tortillas. It said it would close or sell some 300 inefficient state-owned enterprises, at the cost of some extra unemployment. It promised to broaden the tax base, to keep interest rates high enough to discourage capital flight, to reduce barriers to imports, and to trim the size of its budget deficit. Some progress on these goals has already been achieved.
Little if any new commercial bank money has shown up so far this year, however. Some banks fear they will be pouring good money after bad. The 13 banks must now attempt to twist the arms of the other 500 to get their approval of the deal.
The Nigeria debt package is unusual, since it involves no IMF money. The World Bank is expected to provide $452 million if commercial banks lend an additional $320 million. Further, some $1.5 billion to $2 billion of old loans are to be rescheduled.
Nigeria is making the point that the IMF is providing no money. In the popular view in Nigeria, IMF involvement infringes on the nation's sovereignty. Nonetheless, the IMF will review the loan package. It involves the creation of a second-tier foreign-exchange market. In reality, the plan amounts to a 400 percent devaluation of the Nigerian naira. But again, for political reasons, the devaluation is being somewhat disguised.