Peso Potshots Investors Call Mexico Remedy Insufficient

By Ap | St Louis Post-Dispatch (MO), January 4, 1995 | Go to article overview

Peso Potshots Investors Call Mexico Remedy Insufficient


Ap, St Louis Post-Dispatch (MO)


Foreign investors appear skeptical of the Mexican government's latest plan to stabilize the country's economy and regain their trust.

Many said Tuesday that the plan was insufficient and indicated President Ernesto Zedillo's administration was having difficulty grasping and dealing with the gravity of the country's economic crisis.

"One does not get the sense that anyone is in control here," said Jean van de Walle, a vice president with Alliance Capital Management in New York. "(The plan) looks very disorganized and confused."

The government accord with business and labor is aimed partly at keeping inflation under control as investors leave the country's stock market because of a weakened peso and economic turmoil.

Under the plan, businesses and labor agreed to wage and price restraints and the government agreed to cut spending, reduce taxes, and privatize some state-owned businesses in return.

But foreign investors, who began bolting from Mexico after the government's initial reforms last month ignited a crisis that sent the peso tumbling, remained wary. "The plan still gives no direction for the peso," said David Malpass, a senior economist with Bear, Sterns & Co. "That leaves interest rates high and growth slow or negative."

Many said the plan was too short on specifics to restore their confidence, which was undermined when the government abruptly devalued the peso two weeks ago without warning.

"I think probably the plan can be more comprehensive," said Robert Walberg, a stock market analyst with MMS International, a financial research concern in Chicago. "The statement is much, much weaker than people were hoping for in terms of near-term reform," agreed van de Walle.

Analysts said the government salvation plan offered Tuesday lacked deep cuts in government spending and ways to increase domestic savings, which would help stabilize the peso and restrain inflation. …

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