clarinews@clarinet.com (UPENDRA NATH MISHRA) (02/03/90)
MEXICO CITY (UPI) -- Mexico will sign Sunday a crucial agreement with its foreign commercial lenders to significantly reduce the developing country's $93 billion external debt, a senior official said Friday. Jose Angel Gurria, deputy finance minister for international affairs, said the agreement will cover the reduction of the debt's principal, the lowering of interest rates, and options to get new loans. ``The economic impact of the accord would mean that Mexico has only an $80 billion foreign debt,'' Gurria said, commenting on the long-term financial impact of the international agreement. Gurria, Mexico's chief negotiator with the country's foreign lenders, said the Central American nation's total foreign debt currently stood at $93 billion, down from $100 billion in 1988. The agreement will be signed Sunday between the Mexican government and a 15-member Bank Advisory Committee representing about 450 foreign commercial lenders. A Mexican Finance Ministry spokesman said a U.S. government delegation, headed by Treasury Secretary Nicholas Brady, will attend the signing ceremony. The debt reduction negotiations fall under a plan drawn by Brady to help rescue the Mexican economy. Gurria estimated that the agreement will allow Mexico to reduce its annual repayments by $3 billion in 1990. Mexico last year disbursed $12 billion in much needed hard currencies to service its debt. The amount will be reduced to $9 billion after the signing. Under the agreement, Mexico hopes to lower the amount required to service its foreign debt to 2.9 percent of its gross domestic product in 1990 and 2.3 percent in 1991, down from 6 percent in 1989, Mexican officials said. Mexico's gross domestic product in 1989 was $200 billion. Although it falls short of Mexico's initial expectations, the agreement will reduce Mexico's $48.5 billion medium-term commercial debt by $7 billion. The debt reduction agreement includes three options that the lending banks can decide to exercize under the restructuring plan for the $48.5 billion commercial debt. The principal could be reduced by up to 35 percent; interest rates could revised downward at 6.25 percent; or new loans amounting to up to 25 percent of the outstanding debt could be extended by stages. Gurria said that $20 billion in commercial debt could be restructured under the first option, $22.5 billion under the second, and $6 billion under the third option.