Monday, Sep. 10, 1984
Giving a Big Borrower a Break
When ministers from eleven debt-ridden Latin American nations met last June in Cartagena, Colombia, they called on bankers to lower interest rates and relax repayment terms on the region's $350 billion in foreign borrowing. Last week a committee of 13 large lenders agreed to grant such key concessions to Mexico. In a major breakthrough in the relations between bankers and their Latin borrowers, the creditors' group decided to allow Mexico to retire nearly half of its $95 billion in debt over 14 years instead of the originally scheduled six. The committee, led by Citibank Senior Vice President William Rhodes, also consented to reduced interest rates that will save Mexico an estimated $500 million a year. Said one banker: "The Mexicans got a tremendous deal." Details of the ambitious plan are still being ironed out, and the agreement will need approval from 527 other banks with loans to Mexico.
Similar concessions had been urged for months by Federal Reserve Chairman Paul Volcker and International Monetary Fund officials as a means of aiding Latin Citibank's Rhodes countries like Mexico that have tried to solve their economic problems. If the Mexican plan proves successful, the next debtor to receive easier terms could be the region's biggest borrower, Brazil, which owes nearly $100 billion.