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Show The Post-Nafta Mexican Peso Crisis: Bailout or Aid? Isolationism or Globalization? Brett M. Humphrey success President Clinton was forced to directly appeal for help. In a meeting with business leaders at the Treasury Department, Clinton stressed, '"the rescue package is important for the strategic interests of the U.S.," and "these guarantees are not foreign aid; they're not a gift; they are not a bailout. Rather they are the equivalent of cosigning a note"1 (quoted in Carrington and Calmes 1995 ). Resort to an Alternative Outcome In the wake of what appeared to be failure on the part of President Clinton and the White House, in late January 1995 Clinton withdrew the proposal and announced a new package. This package bypassed the need for congressional support and drew on the fairly obscure and hardly ever used Exchange Stabilization Fund (ESF). The Fund, found in the Treasury Department, was created during the time the gold standard was applicable, in order to bolster emerging market economies that were struggling to support the exchange of their currency. Predictably, far-right Republicans and far-left Democrats opposed this action, viewing it as a run around Congress. Nevertheless, Clinton still had the authority and ability to use the Fund if the proposed purpose met the rules governing its use. The "moderates" felt differently from the rest of Congress, and once again Gingrich and Dole joined the President in support of his actions. Moderates from both parties saw the new plan as a way to support Mexico without having to be held responsible by their constituencies. In a joint statement, President Clinton, House Speaker Gingrich, House Minority Leader Richard Gephardt (D-MO), Senate Majority Leader Dole, and Senate Minority Leader Thomas Daschle (D-SD) said: "We must act now in order to protect American jobs, prevent an increased flow of illegal immigrants across our borders, ensure stability in this hemisphere, and encourage reform in emerging markets around the world....This is an important undertaking, and we believe that the risks of inaction vastly exceed any risks associated with this action. We fully support this effort, and we will work to ensure that its purposes are met....We have agreed to act today" (quoted in Roett 1996, 39). The President's actions included a final February package containing the following highlights: $20 billion from the ESF; International Monetary Fund (IMF) support of $17.8 billion, the largest loan amount ever given by the organization up to that time; $10 billion in loans from the Bank of International Settlements (BIS); $3 billion from U.S. commercial banks; and $2 billion from Canada and Latin-American countries (Woods 1998, 153). Although Clinton had regained the support of congressional leadership and moderate congressional support, he still was at odds with the anti-NAFTA right and left members of Congress. Even though he did not need their approval to advance with the intervention plan, the day following the announcement of President Clinton's package, speaking before the House International Relations subcommittee, John P. Sweeney of the Heritage Foundation foreshadowed the soon-to-follow congressional opposition: The original bailout plan was a bad idea. This new plan is much worse. Since 1976, every six years, like clockwork, Mexico has come to DC, sombrero in hand, pleading for a bailout, and in the last twelve years Mexico has restructured ...[its] economy as many as six times. It is clear Salinas and Zedillo were doing nothing but worrying about re-election and if the economy got out of hand they knew the U.S. would bail them out as they had in the past. Begging the question are we going to bail them out again? (Sweeney 1995) As the debate heated in the following weeks Rep. Bernard Sanders, an independent from Vermont, was quoted as saying, "Why are we bailing Mexico out at a time when Members of Congress are proposing cutbacks in School Lunch Programs, in Breakfast Programs, in programs which hurt the most vulnerable people in our society, because the claim is we do not have enough money to provide those programs? We have more than enough problems here at home. Let us pay attention to those problems" (quoted in Congressional Record 1995a). Thus it appeared that despite moderates' backing of the new package, congressional and public opposition remained constant. Senator Alfonse M. D'Amato (R-NY) as Chairman of the Senate Banking Committee, emerged as the new leader in the opposition. He was able to join forces with the new congressional members and now tried to attack the February package as nothing more than aid, suggesting that $15 billion dollars that can be used for up to 7 to 10 years, was a foreign-aid program, not exchange stabilization (Congressional Record 1995b). D'Amato therefore tried to attach an amendment onto the yearly budget bill, contending that the $20 billion in aid was against the rules of the ESF. Although his attempted amendment failed, the debate lasted over four hours and the commonly held notions and arguments against U.S intervention were agreed to by many opposing Senators. Congress soon began to realize it could not stop the President from using the ESF. It made one last effort by trying to pass some bills aimed at limiting the use of the funds, by dictating to Mexico how it was to use the money and to restructure its economy. These last-ditch efforts saw the passage of House Resolution 80 sponsored by Rep. Marcy Kaptur (D-OH), which requested the President to submit information to the House concerning actions taken through the ESF regarding the peso crisis (Congressional Record 1995b). The resolution passed overwhelmingly 407 to 21. In the Senate although Rep. Kaptur's resolution was never presented, similar anti-ESF usage legislation was presented and discussed. In the end, although Congress was not successful in stopping the use of the ESF, Congress was able to attach many obligations onto the money headed for Mexico. These obligations were Congress' perceived needed changes that had to occur in order for Mexico's economy to turn around. 38 |
