Mexico in IMF deal for image not cash Via NY Transfer News Collective * All the News that Doesn't Fit Mexico in IMF deal for image not cash, FinMin says 05:26 p.m Jun 01, 1999 Eastern By Caroline Brothers MEXICO CITY, June 1 (Reuters) - Mexico does not really need IMF money, but is pressing ahead with a deal with the multilateral lender because of the good signal it sends to the market, a Finance Ministry official said on Tuesday. Marco Provencio, Finance Minister Jose Angel Gurria's official spokesman, told Reuters it was image not need that has been driving Mexico's lengthy negotiations with the IMF, to whom it owes around $6 billion due between now and 2000. ``We're not in the agreement for the money,'' he said. ``We're in it for the signal.'' Mexico owed the IMF some $8 billion in 1999-2000, but has paid back more than $1 billion this year. Provencio said the message Mexico wanted to convey concerned its on-going, responsible economic management. ``The signal is continuity, the whole architecture for making sure we have a transition in good economic order from this administration to the next, that we will abide by the prudent management of economic policy,'' he said. He rejected arguments that opting for the IMF's newly agreed Contingency Credit Line (CCL) -- rainy day funds to stave of contagion from external crises -- would have given the same signal without the stigma IMF deals can entail, saying the CCL was an instrument for nations that saw problems looming. Mexico heads into presidential elections next year and its economic team is doing its utmost to shake off the curse of the financial crises that have accompanied most changes of government since the mid-1970s. Sources close to the deal say Mexico's negotiations with the IMF are virtually complete. ``The deal is all but done,'' one source said. However, it still requires review by the IMF board of governors, which may take place in July. One Finance Ministry source said the deal was likely to emerge at around 120 percent of Mexico's quota, at around $4.2 billion and would last 17 months. Other sources concurred. The money Mexico owes the fund is the last of the emergency cash it borrowed to shore up its economy during the meltdown unleashed by the 1994 peso crash. Sources say Mexico's negotiations were originally for a higher amount. Gurria told Reuters at the recent IMF-World Bank spring meeting that the country was seeking a $5.2 billion 18-month standby agreement in a deal he expected to be finalised by the end of June. Some economists say the smaller total reflects IMF concerns not to be seen to be allowing countries to simply refinance their obligations with the Fund. ``The IMF wants to remove as much as possible the idea that it rolls over a payment schedule,'' said one economist. ``New money is available, but it is significantly less than they have to repay.'' Other sources said there was some slippage in the likely settlement dates that will take negotiators through till July. That means the agreement will be one month shorter than envisaged so as not to run over the Dec. 1, 2000 deadline when Mexico's next president is expected to take office. The sources said there were unlikely to be any onerous conditions agreed in return for the disbursement. ``The Institute for the Protection of Bank Deposits (IPAB) is up and running and the chances for a fiscal reform have reached a political impasse,'' said one source. IPAB is an agency set up to nurse Mexico's banking sector back to health. That means the deal will contain few surprises. Instead it is likely to reaffirm Mexico's commitment to tight fiscal targets and other macroeconomic variables set out in the 1999 budget, a Finance Ministry source said. Provencio said the government would publish at least its letter of intent with the fund. ``All that can be published will be published,'' he said. Copyright 1999 Reuters Limited. ================================================================= NY Transfer News Collective * A Service of Blythe Systems Since 1985 - Information for the Rest of Us 339 Lafayette St., New York, NY 10012 http://www.blythe.org e-mail: nyt@blythe.org ================================================================= nytcamer-06.02.99-09:17:00-19176