[clari.biz.finance.services] Mexico to sign landmark debt reduction agreement

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
	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.