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Show Hinckley Journal of Politics Spring 2000 lowing months it became quite evident that Congress was going to do everything possible to make sure Mexico did not receive U.S.-backed dollars. The American Executive/Legislative Struggle over What Should Be Done President Clinton The December 20, 1994 devaluation caught the U.S. Presidential administration as off guard as it did the investors. There had been no warning from Mexico that its leadership was considering the possibility of devaluation. After news of the devaluation, President Clinton initially took a passive attitude. If he were to treat Mexico's devaluation as a crisis, he risked worsening the crisis. President Clinton knew the financial market was fickle, and that whatever he said or did would or could cause drastic reaction. His best option was to remain calm. In an effort to do just that, quietly after several days of market reaction, "the United States took the lead in arranging a rescue package of $18 billion" (Lustig 1998, 169). It was presumed that "[the United States'] $18 billion would calm market agents since it covered the outstanding tese-bonos held by foreigners coming due in 1995" (Lustig 1998, 177). However, this amount turned out to be insufficient to calm investor fears. Investors still worried that the Mexican government would be forced to declare the inconvertibility of the peso. Furthermore, a lot more than $18 billion of foreign monies had been invested in Mexico. Not only were the tese-bonos holders asking for their money, but all of the other investors were wanting their holdings back too, a total of over $50 billion. Thus, the U.S. aid of $18 billion was far too short of the amount needed to satisfy the substantial debt the Mexican market had incurred. It quickly became evident that in order to calm the markets and stop the financial "meltdown," the rescue package had to be large enough to calm the fear of default. Otherwise, panic selling and the spillover into other markets would not be halted (Lustig 1998, 170). President Clinton began to put together a package, entitled the Mexican Stabilization Act, that would amount to over $40 billion in aid. Although he initially hoped to be able to bypass Congress, it became more and more evident that he would need to gain Congressional approval for the package. Clinton began his lobbying campaign on an unexpectedly bright note. Senate Majority Leader Robert Dole and Speaker of the House Newton Gingrich were both in support of the package and guaranteed Congressional backing. Congress As soon as the word got out about Mexico's devaluation, former critics of NAFTA were firing away once again. These critics included both the pro-labor or liberal left of the Democratic Party and the protectionist right of the Republican Party. An example of this interesting combination of critics included the pro-labor and consumer advocate, Ralph Nader, joining with protectionist Ross Perot to decry NAFTA as a failure. Specifically, critics argued, "the peso's steep drop, by making Mexican exports to the United States much more competitive with American goods, would make the United States regret its agreement to freer trade" (Bennet 1994), prompting freshman Senator Barbara Boxer (D-CA) to advocate legislation allowing Congress to reassess U.S. participation in NAFTA (Roett 1996, 37-38). Such opposition though did not keep Senator Dole and Speaker Gingrich from feeling confident; since they had had enough votes for NAFTA a year earlier in a Democratic-held House, surely they could find enough votes in the now Republican-controlled houses. On January 18, 1995 they joined President Clinton by endorsing his proposal, asserting the U.S. had a high interest in Mexico. However, in the week that followed, the White House, Dole, and Gingrich learned the proposed aid package would not be approved as easily as they initially anticipated. The first criticisms came from the unpredictable freshmen. Several of them started circulating letters among themselves urging each other to stand in opposition to the proposed legislation. One letter stated, '"We are opposed to this proposal because we were elected to Congress to clear up the mess in Washington, not to approve a handout to the international financial community. We need to focus our energies on passing the Contract with America"1 (quoted in Roett 1996, 37). Only two days later, powerful Republican Jesse Helms (NC), Chairman of the Senate Foreign Relations Committee, vowed to hold '"exhaustive and perhaps exhausting hearings on the pros and cons of the Administration's proposal,"1 adding that the '"vast majority"1 of Senators he had spoken with were opposed to a Mexican bailout (quoted in DePalma 1995). Finally, as "moderate" Republicans and many Democrats joined in the opposition, leaders Dole and Gingrich both started to distance themselves from the package. Senator Dole exclaimed, "'He [Clinton] needs to work within his own party. We're not going to carry the whole load here and get hung out to dry"1 (Roett 1996, 37). However, Clinton and the White House staff were having little luck with their own party. For example, the Democratic Whip in the House, David Bonior of Michigan, declared that, '"We must not be sending money to Mexico just to prop up a nation with the fastest growing number of billionaires in the world"1 (quoted in Roett, 1996,37). While the debate in Washington only seemed to be intensifying, the conditions in Mexico were only getting worse. The few investors who remained were faced with a currency that had been worth 3.46 pesos to the dollar at the start of the crisis, and had since declined to 5.585 pesos to the dollar, with no signs of leveling off (DePalma 1995). President Clinton tried to counteract the opposition in Congress by sending Alan Greenspan, Chairman of the Federal Reserve System; Robert Rubin, Secretary of the Treasury; and Vice President Albert Gore to Capitol Hill in a desperate appeal for support. However, due to their lack of 37 |