International banks said Wednesday they have agreed to a $500 million standby loan to Mexico, but a Latin American economic expert said here that higher world oil prices may be the only long-range solution to Mexico`s critical financial problems.
”A real bailout for Mexico cannot come from the International Monetary Fund or the banks, but from the international oil market,” said Juan Lara, director of the Latin American Economic Service of Wharton Econometric Forecasting Associates Inc., Philadelphia.
Lara said that a tentative plan reached last month with the IMF and other financial institutions for new loans of up to $12 billion over the next 18 months contains many unanswered questions about Mexico`s economic outlook.
The agreement, which Lara called ”muddling through, IMF style,” will tide Mexico over for the rest of 1986, he told a meeting of the Chicago Association of Business Economists.
But he said that Mexico`s government ”has not clearly defined” its economic goals for 1987, and that there is a ”real question whether banks will be willing to put more money into Mexico before the targets are defined.”
”That opens the possibility of another difficult period of negotiations,” he said. ”Mexico isn`t out of the woods yet.”
Lara warned that Mexico may face a triple-digit inflation rate for at least another few years, a continuing export-import imbalance and a further decline in its foreign exchange reserves and the value of the peso even if the entire IMF package is adopted.
”If oil prices do recover, the program makes sense for Mexico,” he said. ”It will then have the capacity to make the payments due on its $97 billion of external debt. But if oil remains at $15 to $20 a barrel, it may have been a waste of time to put another $12 billion into its economy.”
He also said that Argentina`s economic comeback effort seems to be faltering, but added that Brazil seems to be on course toward improving its economy.
William R. Rhodes, a Citibank executive, said in New York that U.S. and other banks have ”fully subscribed” to a $500 million standby loan to Mexico, which would be the bank portion of a total $1.6 billion loan to which 15 governments are contributing.
More than 50 of Mexico`s largest lenders, including the 13 banks serving as the advisory committee, have agreed to the loan, said Rhodes, who co-chairs the committee.
The $500 million will be disbursed after more than 90 percent of all 500 of Mexico`s bank creditors have agreed to a refinancing package for Mexico`s debt maturing in 1986-1987, he said. Talks on the package are continuing in New York.
The $1.6 billion rescue package was initiated by the United States. Fifteen central banks from Europe and Asia as well as Brazil, Colombia, Argentina and Uruguay agreed to a $1.1 billion bridge (short-term) loan to tide Mexico over until the IMF executive board approves its 18-month economic program.
A statement by the Treasury Department and Federal Reserve Board said the two agencies would provide a total of $545 million to help beef up Mexico`s international reserves, which have been severely depleted by the collapse in world oil prices.
Oil is Mexico`s chief export, and the price dive since February is expected to cost the country an estimated $6 billion in revenues this year.
Many smaller U.S. commercial banks have said they are unwilling to lend Mexico any new money at all.
Lara said the tentative IMF agreement reached last month with Mexico represented a departure from previous bailout programs developed by the agency with Mexico and other debtor nations.
The new program ”does not emphasize immediate belt-tightening as the earlier programs did,” he said. The plan also assumes that Mexico`s economy will return to the growth path in 1987 after a slowdown this year, and calls for Mexico to increase government spending if it doesn`t pick up by next year`s first quarter. The proposed $12 billion of additional loans also is greater than what had been contained in earlier plans, he said.
”What it amounts to is the closest thing yet to a real live version of the Baker Plan,” Lara said. He was referring to a call by Treasury Secretary James Baker III for banks and other world agencies to increase loans to debtor countries so they can stimulate their economies to meet their debt obligations.
