Peso Slides to New Low Despite Promises of Emergency Plan
MEXICO CITY (AP) _ President Ernesto Zedillo’s delay in releasing a plan for addressing Mexico’s financial crisis sent the peso tumbling Thursday for a fifth straight day.
The Bank of Mexico, however, said the plan was expected ``very shortly.″ After weeks of delays, the Mexican currency was little assured. It lacked any clear signal that Zedillo could come up with enough of a plan to surmount the crisis.
The peso opened at 6.995 to the dollar but closed at a new low of 7.45 Thursday after trading as low as 7.7 during the day. The peso has eroded for nearly a week, closing at all-time lows each of the past five days.
The peso, worth about 28 cents when it began sliding on Dec. 20, is now worth less than half that.
The stock market was nearly flat, up 0.30 percent in the last hour of trading Thursday.
Businesses and labor were reported to be bracing for new austerity measures, including potentially heavy tax increases and restraints on wage increases.
Jose Madariaga Lomelin, president of the Bankers Association of Mexico, exhorted Mexicans to accept any tax increases as a necessary step.
``This is like a bitter medicine: You have to take it even though it is disagreeable,″ Madariaga was quoted as telling El Financiero, a Mexico City business daily.
Media reports said the 10 percent value-added tax could be raised along with the price of gasoline and electricity, while minimum wage increases could be held to as little as 6 or 8 percent.
Those reports could not be immediately confirmed.
Nonetheless, business leaders have already begun protesting expected tax hikes. Some 400 of them demonstrated Wednesday in the northern industrial city of Monterrey.
Ordinary Mexicans said they feared life would soon become even more difficult. Everything from telephone service and transportation to basic foodstuffs have become more expensive since December while paychecks lagged.
``We can’t afford any more increases,″ said Juan Carlos Aguilar, who runs a photography shop in Mexico City. ``Business has fallen 80 percent in the last several months and everything costs more, including film.″
Market vendors said business had plunged some 50 percent as the prices of food, particularly meat, has soared in recent months.
``Life is hard for all of us right now,″ said Jesus Murrillo, a rancher in his 60s, slurping a bowl of chicken soap at a nearby market. ``We don’t know where this is going.″
Zedillo had said he was waiting for Mexico’s congressional vote on a $20 billion bailout package from the United States before announcing his plans on how to stop the economic slide.
Mexico’s Congress voted Tuesday to accept the loan package despite opposition claims that the country was ceding too much economic control to American lenders at burdensome interest rates.
James Jones, the U.S. ambassador to Mexico, said he expected Zedillo’s emergency plan to be very tough and asked ``tremendous sacrifices″ of the Mexican people.
His comments, made Wednesday as he left a private meeting with Zedillo, were carried Thursday by El Financiero.
In Washington, U.S. Treasury Secretary Robert Rubin said he believed the Clinton administration’s plan and the Mexican government’s reforms would work.
``I believe that in time, investor confidence in Mexico will be restored,″ Rubin said Thursday.