WHEN the Mexican peso crisis rocked international financial markets earlier this month, an overnight coalition of the White House, the Federal Reserve, and congressional leaders quickly agreed on a United States plan to help save Mexico from financial ruin. Two weeks later, their rescue package is mired in congressional politics.
Lawmakers hear the warnings that a stinging devaluation of the currency held by millions of Mexicans living along the US's 2,000-mile border with Mexico could be destabilizing. They say a failure to shore up Mexico's economy could result in multibillion-dollar losses in US exports with job losses to follow.
But despite the obvious stakes, lawmakers are holding President Clinton's $40 billion loan guarantee bill ransom to an ever-growing list of demands.
Democrats who say the bill is a bailout for wealthy international investors are only willing to trade their endorsement for concessions from Mexico's government that they were unable to win during the debate over the North American Free Trade Agreement. Mexican employers must establish a minimum wage high enough that US firms don't flock south in search of cheap labor, they say, and abide by workplace and environmental standards.
Republicans who balk at the loan guarantees as government interference in the marketplace say their ultimate support for the bill is contingent upon Mexico's commitments to economic reforms and a Mexican currency board designed to limit the money supply to the amount of official foreign exchange and gold reserves.
In a steady stream of Clinton advisers testifying for the bill before the House Bank and Senate Foreign Relations Committees this week, Secretary of State Warren Christopher said tagging extraneous demands to the bill is imprudent. But he tried to assuage opponents with news that the Mexican government will sign a separate document about taking tougher action on narcotics-trafficking and migration to the US.
Administration officials have been working on their own set of conditions, an effort spearheaded by new Treasury Secretary Robert Rubin. Their requests are more practical than their congressional detractors', they say, because they relate specifically to securing the loan- guarantee deal and have been accepted by the Mexicans.
FIRST, Mexico will be required to ante up, in advance, financing fees for the guarantee. And as collateral, the US government can expect to receive a percentage of Mexican oil revenue as an insurance policy in case of Mexican default on the loan guarantee.
To avoid another financial catastrophe, the Clinton administration is also leaning heavily on the Mexican government reformers to fund the country's economic development through direct foreign investment in physical assets - such as plants and factories, electrical grids, and waterworks - instead of banking on the paper investments from easily withdrawn global portfolio funds.
The crisis - whether it is regarded as a foreign or a US domestic policy emergency, presents the first urgent issue before the White House and Congress.
Meanwhile, major international operations have their development plans on hold - from opening new department stores to breaking ground for new factories. But global investors who are anxious for a resolution of the crisis caution against propping up the peso at an unrealistically high level. The costs would become unsustainable, they say, and the ultimate fallout from a failed US effort to bolster the peso would undermine international confidence in the Mexican and other so-called emerging markets.