Recession in Mexico Called Likely if Rescue Plan Fails
If Congress rejects President ClintonÛªs call to guarantee $40 billion in loans to Mexico, MexicoÛªs economy would almost certainly fall into a deep recession, according to economists. It couid also lead to a global financial crisis as panicky investors pull out the billions they have invested in the developing world.</br></br>And while the direct economic consequences to the United States would be relatively modest, the damage to the United States' prestige as a world economic leader would be severe, analysts said.</br></br>Rejection of the package would ÛÏundermine the importance of the United States in the world economy,Û said European Union Trade Commissioner Sir Leon Brittan.</br></br>"The prestige of the president, the Fed chairman and the leadership of both houses in Congress has been committed,Û said Robert Hormats, vice chairman of Goldman Sachs International. If Congress were to kill the aid package, ÛÏthe feeling in the rest of the world would be that we are a nation in disarray, a country incapable of addressing a crisis. ... The psychological blow would be enormous."</br></br>So far, the administration has been unable to find any argument to persuade a majority in Congress to support the loan guarantees. Opponents appear to have taken the upper hand, portraying it as a bailout for millionaires on Wad Street and short-sighted economic planners in Mexico City.