Source:
IFIs Latin American Monitor
Wed Feb 01 2006
The example set by Brazil and Argentina of early cancelling their debts to the IMF is still present in Latin America. The Governor of the Bank of Mexico also proposed the possibility of using the considerable amount held by the country in international reserves to pay off the external debt.
The possibility of cancelling the external debt is still open to debate, both in the political and social sphere. Following the example set by Brazil and Argentina, the discussion started to take place in Venezuela. First, there was a proposal put forward by a deputy in Congress and then debate was left in the hands of civil society at the Social Forum that have just come to an end. There, at different workshops, NGOs stated their position with regards to early payments of external debt.
Now, it is Mexico’s turn. The Aztec country owes currently no debt to the International Monetary Fund (IMF); its foreign liabilities are mainly placed in international capital markets, with private banking and other multilateral financial institutions such as the World Bank and the Inter-American Development Bank (IADB).
Upon launching the Monetary Programme 2006, the Governor of the Bank of Mexico, Guillermo Ortiz Martínez, pointed out that “Mexico could certainly be using part of its reserves to pay off the external debt”. “The sole condition for implementing such action is the approval by the Mexican Congress in order to open budget spaces that may allow to obtain reserves without indebtedness”.
According to data from the Finance Ministry, the outstanding debt balance by end-2005 amounted to 67.36 billion dollars, while foreign exchange reserves reached a new historical amount of 69.60 billion dollars.
An early payment of the foreign debt makes sense provided it is proposed as an option to limit payment of accumulated reserves and to save resources in the liquidation of interests resulting from foreign indebtedness. In 2005, according to official figures, the federal government paid external debt interests in the amount of 7.08 billion dollars.
On the other hand, the Governor of the Bank of Mexico highlighted that inflation risks in 2006 will be posed by high oil prices as well as by rises in agricultural prices. Guillermo Ortiz forecasted economic growth in 2006 to be between 3.2 and 3.7 per cent, while last year the Mexican economy registered a growth rate of 3 per cent.
Related Information:
Venezuela also analises an early cancellation of debt
Argentina and Brazil: challenges of the cancellation of debt to the IMF
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