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Mexico, 4/76-10/77 (5)
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324801944
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Mexico, 4/76-10/77 (5)
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Arthur F. Burns Papers
Federal Reserve Board Subject Files
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Mexico
International Monetary Fund. (07/1944 - )
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Balance of payments
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1977-10-31
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1977
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1976-04-01
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1976
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The original documents are located in Box B80, folder "Mexico 4/76 - 10/77 (5)" of the
Arthur F. Burns Papers at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
NATIONAL ARCHIVES AND RECORDS SERVICE
WITHDRAWAL SHEET (PRESIDENTIAL LIBRARIES)
FORM OF
CORRESPONDENTS OR TITLE
DATE
RESTRICTION
DOCUMENT
1. memo
E. M. Truman memo re Mexican financial situation (3pp. ) 11/4/76
C(A) B
sanityed 4/22/96 KBH
2. memo
copy of item 1 (3 pp. )
11/4/76
C(A)
3. memo
Henry Wallich to Burns re Mexican swap drawings
11/5/76
C(A)
(3 pp. opened 4/22/96 KBH
4. memo case, Truman to Burns, 11/13/76
4a. telegram
American Embassy Mexico to See. of State,
11/11/76
A
Mexico 14384 (3 pp. ) DECLASSIFIED 7/25/07 dal
opened 4/22/96
143H
5. memo
Edwin Truman to Buens re Mexcian swap drawings (1p.)
11/15/76
C(A)
6. memo case, Truman to Burns, 11/16/76
6a. telegram
American Embassy Mexico to Sec. of State
11/13/76
A
Mexico 14461, re Mexican economic situation (3pp.)
DECLASSIFIED 7/25/07 doe
7. memo case, Truman to Burns, 11/17/76
7a telegram
American Embassy Mexico to Sec of State,
11/15/76
A
Mexico 14518, re Mexican economic situation
(2 pp. )
DECLASSIFIED 7/25/07 dal
8. memo case, Truman to Burns, 11/18/76
8a. telegram
American Embassy Mexico to Sec. of State,
11/17/76
A
Mexico 14564 re Mexican economic Situation (3 pp.)
DECLASSIFIED 7/25/07 doe
9. memo case, Truman to Burns, 11/19/76
9a telegram
American Embassy Mexico to Sec. of State,
11/17/76
A
Mexico 14623, re Mexican economic situation (3pp.)
DECLASSIFIED 7/25/07 dal
10. memo case, Truman to Burns, 11/22/76
10a telegram
American Embassy Mexico to Sec. of State
11/18/76
A
Mexico 14674, re Mexican ecnomic situation (2pp.)
DECLASSIFIED 7/25/07 doe
10b. telegram
American Consul Hermosillo to Sec. of State,
11/19/76
A.
FILE LOCATION
Hermosillo 0333, re land problem in Sonora (6pp.¹
Arthur Burns Papers
DECLASSIFIED at ltr 2/22/08
SR
Federal Reserve Board Subject File, Box B80
8/14/84
Mexico, Nov. 4-30, 1976
RESTRICTION CODES
(A) Closed by Executive Order 12065 governing access to national security information.
(B) Closed by statute or by the agency which originated the document.
(C) Closed in accordance with restrictions contained in the donor's deed of gift.
GENERAL SERVICES ADMINISTRATION
GSA FORM 7122 (REV. 1-81)
NATIONAL ARCHIVES AND RECORDS SERVICE
WITHDRAWAL SHEET (PRESIDENTIAL LIBRARIES)
FORM OF
CORRESPONDENTS OR TITLE
DATE
RESTRICTION
DOCUMENT
10c. telegram
American Embassy Mexico to Sec. of State,
11/19/76
A
Mexico 14674, re Mexican èconomic situation
(2 pp. )
10d. telegram
American Embassy Mexico to Sec. of State,
11/19/76
A
DECLASSIFIED re Mexican ecnomic situation(2pp.
2/12/15
10e. telegram
American Embassy Mexico to Sec. of State,
11/20/76
A
Mexico 14754, re Mexican economic situation
(2 pp. )
DECLASSIFIED 2/12/15
11. telegram
American Embassy Mexico, to Sec. of State,
11/22/76
A
DECLASSIFIED Mexico 14819 re Mexican economic siutation (2 pp. )
2/12/15
12a. biography
Julio Rodolfo Moctezuma Cid, Secretary of Finance
12/1/76
A
and Public Credit, Mexico (1 p.)
Ex empted
12b. biography
Gustavo Romero Kolbeck, Director General, Bank
12/1/76
A
from
of Mexico (2 pp. )
declase
sb/se/e
12c. biography
Jorge Diaz Serrano, Director General, Petroleos
12/1/76
A
Mexicanos (1 p.)
13. memo case, Truman to Burns, 11/29/76
13a. telegram
American Embassy Mexico to Sec. of State,
11/24/76
A
Mexico 14904, re Mexican economic situation
(2 pp. ) DECLASSIFIED 2/12/15
13b. telegram
American Embassy Mexico to Sec. of State
11/24/76
A
Mexico 14956 DECLASSIFIED re Mexican ecnomic situation( (2 pp.
)
2/12/15
13c. telegram
American Embassy Mexico to Sec. of State,
11/26/76
A
Mexico 15016, re Mexican economic situation
(2 pp. )
DECLASSIFIED 2/12/15
FILE LOCATION
Arthur Burns Papers
SR
Federal Reserve Board Subject File, Box B80
8/14/84
Mexico, Nov. 4-30, 1976
RESTRICTION CODES
(A) Closed by Executive Order 12065 governing access to national security information.
(B) Closed by statute or by the agency which originated the document.
(C) Closed in accordance with restrictions contained in the donor's deed of gift.
GENERAL SERVICES ADMINISTRATION
GSA FORM 7122 (REV. 1-81)
RESTRICTED
[11-4-76]
RESTRICTED
HANDLE THE ATTACHED DOCUMENT IN ACCORDANCE WITH INTERNAL
INFORMATION SECURITY PROCEDURES FOR RESTRICTED INFORMATION
LISAARY GERALD ? FORD
RESTRICTED
RESTRICTED
Y. Maroni
November 4, 1976
Summary of Recent Information on the
Mexican Economic Situation
We have no statistical information on the Mexican economy
for the period after the abandonment of the 12.50 peso-per-dollar
exchange rate on September 1, except for the price indices for
September. In September, the national consumer price index was
3.4 percent higher than in August, and 14.7 percent higher than a
year earlier. The wholesale price index for Mexico City was 5.9
percent higher than in August, and 12.2 percent higher than a year
earlier.
The measures taken immediately after the introduction of
floating on September 1 appear to have had mixed consequences. The
23 percent wage increase came on top of increases already granted
during the year through collective bargaining, resulting in an
increase in wages for the year averaging around 30-35 percent. The
introduction of export taxes and the abolition of the tax rebates
for exporters have further raised costs for exporting firms. For
those relying on imported components, the increased peso cost of
imports represents an additional burden, only partly alleviated by
the reduction of import duties. Under these circumstances, several
American companies operating in Mexico have told the U.S. Embassy
that their export competitiveness has been impaired by the devaluation
and accompanying measures.
RESTRICTED
GERALD R. FORD LIBRARY
RESTRICTED
-2-
It would appear that this condition became sufficiently
widespread to prompt the authorities to reduce the new export
taxes effective on October 26 and to reintroduce selectively the
system of tax rebates for some exporters. But the second devaluation,
on October 28, dealt a new blow to firms with obligations denominated
in foreign currencies. A few American firms have told the American
Embassy that they were contemplating liquidating their inventories
and reducing their operations to a minimum.
The Mexican stabilization program agreed to in conjunction
with the IMF Extended Fund Facility arrangement is not due to become
operative until January 1. No commitments were made by the Mexican
authorities regarding the remaining months of 1976. However, there
are some indications that revisions in certain program targets may have
to be negotiated even before the program starts, as a result of the
deterioration which has occurred since the program was formulated in
August-September. This appears to be especially true of the public
sector target. The Government employees' wage increase (totaling at
least 23 percent) and other cost increases, together with lower income
tax collections from firms hard hit by the devaluation and the
accompanying measures, appear to have widened the public sector
deficit for 1976, making it that much harder to reach the 1977 target
for the public sector deficit to 6 percent of GDP.
The authorities did announce steps to hold down public
spending at the end of September, but their impact for the remainder
RESTRICTED
FORD is LIBRARY 9E8ALD
RESTRICTED
-3-
of 1976 is expected to be limited. Their principal significance
arises from the fact that they represent a signal for the future.
It is encouraging that the second devaluation, on October 28,
was not followed by demands for new wage increases. The fact that
business has been adversely affected by the various steps taken since
September 1 and that, as a result, something of an economic slowdown
has apparently been triggered, may have influenced the labor leaders
to take a more restrained attitude than after the first devaluation
on September 1. However, another wage increase may occur on January 1
when the minimum wage is due to be reviewed.
The dominant characteristic of the current Mexican situation
is that the general public has lost confidence in the Government's
pronouncements and in its ability to handle the economy's problems.
The Echeverria administration has less than a month to go and is
becoming increasingly powerless to act. Meanwhile, the Lopez Portillo
administration is not yet in office and the President-elect is not in
a position to make public statements about his intentions. As a result,
there is not only a power vacuum but also a lack of information con-
cerning what the new administration will do. The Mexican program
agreed to in conjunction with the Extended Fund Facility arrangement
is not widely known, and ignorance fuels lack of confidence.
On the external side, there is a wide divergence of opinion
as to the size of the current account deficit in the current year.
The Mexican authorities continue to speak of a deficit not exceeding
RESTRICTED
GERALD FORD LIBRARY
RESTRICTED
-4-
$3 billion, while the IMF staff is projecting it at $4.3 billion.
Actually, the two estimates are not comparable because of differences
in accounting for certain transactions. But the gap between the two
is considerably larger than in 1975, when the official Mexican
compilation put the deficit at $3.6 billion while the IMF staff's
was $4.1 billion. I have discussed the IMF estimate for 1976 with
the IMF staff and found that they assumed that the devaluation would
have a negligible effect on the balance of payments in the last four
months of 1976. Their estimate of Mexican imports is about 10 percent
higher than the 1975 level, but this seems high considering that, in
the first seven months of the year, imports were about at the same
level as in the same period of 1975. My own guess is that the 1976
deficit on current account (on the IMF basis) will be around $3.7
billion.
RESTRICTED
FORDO is GERALD LIBRARY
MEXICO: ECONOMIC INDICATORS
(NUT SEASONALLY ADJUSTED)
C.9a
November 4, 1976
1975 1975 1975 1976 1976 1976 1976 1976 1976 1970 1976 1976 1976
1973
1974
1975
Q2
Q3
Q4
Q1
Q2
Q3
MAR APR MAY JUNE JULY AUG S
1960 PRICES
REAL GDP(BIL.P)
354.1
375.0
390.9
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A. N.A. N.A. N.A. N.A. N.A. N.A.
IP (1973=100)
100.0
107.3
112.3
115.7 112.8 113.8 116.3 116.6 N.A.
123.3 113.6 118.8 117.4 N.A. N.A. N.A.
UNEMPLUYMENT
NOT AVAILABLE
WPI (73=100)
100.0 122.5 135.4
133.6 138.0 141.2 149.1 153.9 162.4
151.2 151.9 154.2 155.6 159.5 159.0 168.8
CPI (73=100)
100.0 123.7 142.3
140.3
144.8
147.8
154.2
158.2
163.2
156.2 157.2 158.3 159.0 160.3 161.9 167.4
M1* (Seas. adj.)
24.1
8.3
22.3
6.7
2.9
5.8
3.8
4.8
N.A.
1.0
1.7
3.1
-0.4
3.1
N.A.
N.A.
EXPORTS ($BIL)
2.1
2.8
2.9
0.8 0.7 0.8 0.8 0.9 N.A.
0.3
0.3
0.3
0.3
0.2
N.A.
N.A.
IMPORTS ($BIL)
3.8
6.1
6.6
1.7
1.6
1.9
1.4
1.7
N.A.
0.5 0.5 0.5 0.6 0.6 N.A. N.A.
TRADE BAL ($BIL)
-1.8
-3.2
-3.7
-0.9
-0.9
-1.1
-0.7
-0.8
N.A.
-0.2 -0.2 -0.2 -0.3 -0.3 N.A. N.A.
BALANCE OF GOODS
& SERVICES($BIL)
-1.3
-2.6
-3.6
-0.9 -0.9 -1.1 -0.6 -0.9 N.A.
N.A. N.A. N.A. N.A. N.A. N.A. N.A.
* Percentage change from previous period.
GERALD FORD
RESTRICTED-CONTROLLED
C.9b
FINANCIAL INDICATORS -- MEXICO
(dollar amounts in millions)
1975
1976
NOV 1-
Week ended
YEAR
QI
QII
QIII
AUG
SEPT
OCT
3
SEPT 29
OCT 6
OCT 13
OCT 20
OCT 27
NOV 3
EXCHANGE RATE (CENTS PER PESO, END OF PERIOD)
8.00
8.00
8.00
8.00
8.00
5.03
3.90
3.92
5.03
5.03
5.04
5.03
3.77
3.92
SDR VALUE OF PESO
.06842
.06924
.06985
.04364
.06957
.04364
.03398
.03398
.04364
.04351
.04367
.04363
.03398
.03398
SHORT TERM INTEREST RATE (E.O.P.)
12.94
13.11
13.11
13.11
14.00
14.36
14.36
14.36
14.36
14.36
14.36
14.36
14.36
14.36
LONG TERM INTEREST RATE (E.O.P.)
No appropriate long-term rate available
RESERVES (IFS, E.O.P.)
1,533
1,501
897P
1,159
AVAILABLE IMF CREDIT TRANCHES (E.O.P.)
433
620
615
621P
618
621P
621P*
621P
INTERVENTION, PURCHASES (+) OR SALES (-)
OF DOLLARS
-131
-189
-156
-241
-288
-122
(OF OTHER CURRENCIES; EQUIVALENT)
SWAP ACTIVITY
DRAWINGS (+), REPAYMENTS (-)
360
--
360
--
--
--
--
--
--
--
-360
-360
SWAP LINE -- 360
* With additional credits negotiated from the Compensatory
and Extended Fund facilities, Mexico overall access to IMF
credit could rise over time to $960 million.
RESTRICTED-CONTROLLED
GERALD R. FORD
November 4, 1976
[11-4-76]
RESTRICTED
RESTRICTED
HANDLE THE ATTACHED DOCUMENT IN ACCORDANCE WITH INTERNAL
INFORMATION SECURITY PROCEDURES FOR RESTRICTED INFORMATION
R-FORD & LIBRARY 038870
RESTRICTED
RESTRICTED
Y. Maroni
November 4, 1976
Summary of Recent Information on the
Mexican Economic Situation
We have no statistical information on the Mexican economy
for the period after the abandonment of the 12.50 peso-per-dollar
exchange rate on September 1, except for the price indices for
September. In September, the national consumer price index was
3.4 percent higher than in August, and 14.7 percent higher than a
year earlier. The wholesale price index for Mexico City was 5.9
percent higher than in August, and 12.2 percent higher than a year
earlier.
The measures taken immediately after the introduction of
floating on September 1 appear to have had mixed consequences. The
23 percent wage increase came on top of increases already granted
during the year through collective bargaining, resulting in an
increase in wages for the year averaging around 30-35 percent. The
introduction of export taxes and the abolition of the tax rebates
for exporters have further raised costs for exporting firms. For
those relying on imported components, the increased peso cost of
imports represents an additional burden, only partly alleviated by
the reduction of import duties. Under these circumstances, several
American companies operating in Mexico have told the U.S. Embassy
that their export competitiveness has been impaired by the devaluation
and accompanying measures.
RESTRICTED
FORD i GERALD LIBRARY
RESTRICTED
-2-
It would appear that this condition became sufficiently
widespread to prompt the authorities to reduce the new export
taxes effective on October 26 and to reintroduce selectively the
system of tax rebates for some exporters. But the second devaluation,
on October 28, dealt a new blow to firms with obligations denominated
in foreign currencies. A few American firms have told the American
Embassy that they were contemplating liquidating their inventories
and reducing their operations to a minimum.
The Mexican stabilization program agreed to in conjunction
with the IMF Extended Fund Facility arrangement is not due to become
operative until January 1. No commitments were made by the Mexican
authorities regarding the remaining months of 1976. However, there
are some indications that revisions in certain program targets may have
to be negotiated even before the program starts, as a result of the
deterioration which has occurred since the program was formulated in
August-September. This appears to be especially true of the public
sector target. The Government employees' wage increase (totaling at
least 23 percent) and other cost increases, together with lower income
tax collections from firms hard hit by the devaluation and the
accompanying measures, appear to have widened the public sector
deficit for 1976, making it that much harder to reach the 1977 target
for the public sector deficit to 6 percent of GDP.
The authorities did announce steps to hold down public
spending at the end of September, but their impact for the remainder
RESTRICTED
FORD is LIBRARY DERALTD
RESTRICTED
-3-
of 1976 is expected to be limited. Their principal significance
arises from the fact that they represent a signal for the future.
It is encouraging that the second devaluation, on October 28,
was not followed by demands for new wage increases. The fact that
business has been adversely affected by the various steps taken since
September 1 and that, as a result, something of an economic slowdown
has apparently been triggered, may have influenced the labor leaders
to take a more restrained attitude than after the first devaluation
on September 1. However, another wage increase may occur on January 1
when the minimum wage is due to be reviewed.
The dominant characteristic of the current Mexican situation
is that the general public has lost confidence in the Government's
pronouncements and in its ability to handle the economy's problems.
The Echeverria administration has less than a month to go and is
becoming increasingly powerless to act. Meanwhile, the Lopez Portillo
administration is not yet in office and the President-elect is not in
a position to make public statements about his intentions. As a result,
there is not only a power vacuum but also a lack of information con-
cerning what the new administration will do. The Mexican program
agreed to in conjunction with the Extended Fund Facility arrangement
is not widely known, and ignorance fuels lack of confidence.
On the external side, there is a wide divergence of opinion
as to the size of the current account deficit in the current year.
The Mexican authorities continue to speak of a deficit not exceeding
RESTRICTED
FORD is LIBRARY GERALD
RESTRICTED
-4-
$3 billion, while the IMF staff is projecting it at $4.3 billion.
Actually, the two estimates are not comparable because of differences
in accounting for certain transactions. But the gap between the two
is considerably larger than in 1975, when the official Mexican
compilation put the deficit at $3.6 billion while the IMF staff's
was $4.1 billion. I have discussed the IMF estimate for 1976 with
the IMF staff and found that they assumed that the devaluation would
have a negligible effect on the balance of payments in the last four
months of 1976. Their estimate of Mexican imports is about 10 percent
higher than the 1975 level, but this seems high considering that, in
the first seven months of the year, imports were about at the same
level as in the same period of 1975. My own guess is that the 1976
deficit on current account (on the IMF basis) will be around $3.7
billion.
RESTRICTED
FORD is LIBRARY
MEXICO: ECONOMIC INDICATORS
(NUT SEASONALLY ADJUSTED)
C.9a
November 4, 1976
1975 1975 1975 1976 1976 1976
1976
1976
1976
1970
1976
1976
1'
1973
1974
1975
Q2
Q3
Q4
Q1
Q2
Q3
MAR
APR
MAY
JUNE
JULY
AUG
SEP,
1960 PRICES
REAL GDP(BIL.P)
354.1
375.0
390.9
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A. N.A. N.A. N.A. N.A. N.A. N.A.
IP (1973=100)
100.0
107.3
112.3
115.7 112.8 113.8 116.3 116.6 N.A.
123.3 113.6 118.8 117.4 N.A. N.A. N.A.
UNEMPLUYMENT
NOT AVAILABLE
WPI (73=100)
100.0
122.5
135.4
133.6 138.0 141.2 149.1 153.9 162.4
151.2 151.9 154.2 155.6 159.5 159.0 168.8
CPI (73=100)
100.0
123.7
142.3
140.3
144.8
147.8
154.2
158,2
163,2
156.2
157.2
158.3
159.0
160.3
161.9
167.4
M1* (Seas. adj.)
24.1
8.3
22.3
6.7
2.9
5.8
3.8
4.8
N.A.
1.0 1.7 3.1 -0.4 3.1 N.A. N.A.
EXPORTS ($BIL)
2.1
2.8
2.9
0.8
0.7
0.8
0.8
0.9
N.A.
0.3 0.3 0.3 0.3 0.2 N.A.
N
IMPORTS ($BIL)
3.8
6.1
6.6
1.7
1.6
1.9
1.4
1.7
N.A.
0.5 0.5 0.5 0.6 0.6 N.A. N.A.
TRADE BAL ($BIL)
-1.8
-3.2
-3.7
-0.9
-0.9
-1.1
-0.7
-0.8
N.A.
-0.2 -0.2 -0.2 -0.3 -0.3 N.A. N.A.
BALANCE OF GOODS
& SERVICES($BIL)
-1.3
-2.6
-3.6
-0.9
-0.9
-1.1
-0.6
-0.9
N.A.
N.A. N.A. N.A. N.A. N.A. N.A. N.A.
* Percentage change from previous period.
GERALO
FORD
RESTRICTED-CONTROLLED
C.9b
FINANCIAL INDICATORS -- MEXICO
(dollar amounts in millions)
1975
1976
NOV 1-
Week ended
YEAR
QI
QII
QIII
AUG
SEPT
OCT
3
SEPT 29
OCT 6
OCT 13
OCT 20
OCT 27
NOV 3
EXCHANGE RATE (CENTS PER PESO, END OF PERIOD)
8.00
8.00
8.00
8.00
8.00
5.03
3.90
3.92
5.03
5.03
5.04
5.03
3.77
3.92
SDR VALUE OF PESO
.06842
.06924
.06985
.04364
.06957
.04364
.03398
.03398
.04364
.04351
.04367
.04363
.03398
.03398
SHORT TERM INTEREST RATE (E.O.P.)
12.94
13.11
13.11
13.11
14.00
14.36
14.36
14.36
14.36
14.36
14.36
14.36
14.36
14
LONG TERM INTEREST RATE (E.O.P.)
No appropriate long-term rate available
RESERVES (IFS, E.O.P.)
1,533
1,501
897P
1,159
AVAILABLE IMF CREDIT TRANCHES (E.O.P.)
433
620
615
621P
618
621P
621P*
621P
INTERVENTION, PURCHASES (+) OR SALES (-)
OF DOLLARS
-131
-189
-156
-241
-288
-122
(OF OTHER CURRENCIES; EQUIVALENT)
SWAP ACTIVITY
DRAWINGS (+), REPAYMENTS (-)
360
360
--
--
--
--
-360
-360
SWAP LINE -- 360
* With additional credits negotiated from the Compensatory
and Extended Fund facilities, Mexico overall access to IMF
credit could rise over time to $960 million.
GERALD
RESTRICTED-CONTROLLED
November 4, 1976
?
FORD
LIBRARY
RESTRICTED
E.M. Truman
November 4, 1976
Summary of Recent Information on the Mexican Financial Situation
1. The information that we have recently received on the Mexican
financial situation suggest three reasons why a drawing on the Federal
Reserve swap line should not be made available to Mexico.
A. The Mexican authorities are projecting a $204 million
net inflow during November and December, suggesting no immediate need.
B. The Mexican authorities have not identified any large
financing needs, e.g., debt repayments, that they are concerned about
meeting.
C. No takeout is available. (In this connection one might
note the precedent that the System might be setting in permitting a drawing
by Mexico, e.g., with respect to requests for swap drawings from the
Italians. On the other hand, Mexico does have an agreed program with the
IMF and has in prospect a change in government that should increase
confidence in the peso by early 1977.)
2. Two arguments might, nevertheless, be advanced for responding
favorably to the Mexican inquiry.
A. The threat to the banking system if, contrary to the
information we have received, Mexico cannot handle its debt repayments
would be serious.
B. The Bank of Mexico may need resources to make a creditable
showing in exchange markets.
DECLASSIFIED e E.O. 12958 See. 3.6
RESTRICTED
With PORTIONS EXEMPTED
E.O. 12958 See 15( )
FORD is GERALD LIBRARY
Federal Reserve Restrictions FOIA(5)(5)
MR 95-1, #17 Fed. Res. Hr. 2/13/96
By KBH NARA, Date 4/19/96
RESTRICTED
-2-
Supplementary Points
1. The estimates provided by the Mexican authorities on their
debts coming due in November and December are in fact only estimates.
They are derived from projections of the balance of payments for the
year 1976 combined with information on what has already occurred. In
other words, they are derived as a residual.
2. These estimates are based, in turn, on two crucial assumptions.
A. The Mexican authorities will be able to roll over $600 million
in short-term public-sector external debt over the next two months.
B. There will be no additional capital flight.
3. In the latter connection, it is disturbing to note the estimate
that during 1976 there has been an increase of $700 million in dollar-
denominated liabilities of the Bank of Mexico to the commercial banks and
as increase of $1,380 million in dollar-denominated liabilities of the Bank
of Mexico to public. enterprises. The first figure represents a substantial
potential claim on Mexican international reserves in the short run.
4. During September and October, Mexican international reserves
(excluding gold) declined by
Over the same period, "recorded"
net intervention sales of dollars were
(During this period
Mexico apparently sold about
of its gold
holdings, amounting to net sales of about
at $42.22 per ounce
or
at an average price of $115 per ounce.) The table below
summarizes these figures in millions of U.S. dollars.
RESTRICTED
GERALD :.. FORD
RESTRICTED
-3-
Total
Total Reserves
Change in
Recorded
Reserves*
**
Date
Excluding Gold
Non-Gold Reserves
Intervention**
Aug. 31
Sept. 30
Oct. 29
*
Gold is apparently valued at 90 per cent of the average U.S. dollar market
price for the preceeding three months or of the recent date, whichever is
less.
**
Change from the previous date.
5. We have received information indicating that as of June 30,
1976, Mexico's external debt was $23.6 billion. (Of this amount $17 billion
was debt of the public sector and $6.6 billion was debt of the private
sector, $5.9 billion was short term and $17.7 billion was long term.) These
figures are in broad. agreement with previous staff estimates. Mexico's
external debt is estimated to rise to $25.9 billion by the end of 1976, with
all of the rise in the public sector. The Mexicans apparently believe that
U.S. banks hold about 70 per cent of their external debt. This figure would
imply U.S. bank claims on Mexico on June 30, 1976, of about $16.5 billion.
Recorded U.S. bank claims on that date were $11.6 billion including an
estimated $0.7 billion in claims by agencies and branches of foreign banks
and maybe $1 billion in externally guaranteed claims. The only major omission
from data on U.S. bank claims on Mexico would be claims by subsidiaries of
U.S. banks. Such claims are unlikely to amount to more than $1 billion.
RESTRICTED
GERALD FORD
GERALD R. FORD LIBRARY
This form marks the file location of item number
1002
as listed on the pink form (GSA Form 7122, Withdrawal Sheet)
at the front of the folder.
RESTRICTED
[11-5-76]
1
RESTRICTED
MR 95-1,#18
143H 4/12/96
HANDLE THE ATTACHED DOCUMENT IN ACCORDANCE WITH INTERNAL
INFORMATION SECURITY PROCEDURES FOR RESTRICTED INFORMATION
FORD is LIBRARY GERALD
RESTRICTED™
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date November 5, 1976
To
Chairman Burns
Subject: Mexican Swap
From
Henry C. Wallich
I have promised Fernandez-Hurtado to call him today,
Friday, November 5. It is my impression that he would rather be
told "no" than to be kept waiting, because he must make immediate
decisions about his rate.
I spoke to Yeo, who is holding $150 million available
without requiring prior drawing upon the Federal Reserve, and I
have informed Fernandez-Hurtado of that fact. It is surprising
that he should have been under the misapprehension that prior
drawing on the Federal Reserve was required since Yeo is in daily
contact with him.
The information we have from Mexico does not indicate
that they have unmanageable maturities before them, unless there
are difficulties with rollovers. Thus there seems to be no clear
and immediate threat to our banking system. There obviously is in
the background a latent and very serious threat. In view of that
contingency, I suggest the following approach:
(1) Allow the Mexicans to draw on the Federal Reserve
pari passu with the Treasury up to $150 million.
(2) The total to be made available should be paid out in
small amounts, say, $25 or $50 million at a time, providing an
occasion to talk to the Mexicans each time to restrain their inter-
vention.
FORD & GERALD LIBRARY
-2-
(3) Because there is no take-out, the Mexicans should maintain
the dollar value of the pesos they give us by increasing the amount of
pesos if the peso declines. This provision has a precedent in the
maintenance-of-value clause of the IMF. It could be implemented in
an approximate fashion, by rewriting the swap every week or every month
at the then prevailing exchange rate if that rate had declined. We
would then have full collateral for our loan. While it is unlikely
that we would ever try to collect our loan by selling the pesos in the
market, and while the Bank of Mexico could prevent us from doing so by
blocking the peso account, nevertheless our position in negotiations
with the Bank of Mexico, and perhaps also in the eyes of possible critics
of the operation, would clearly be stronger.
Scott Pardee has major misgivings about this approach. He
argues that it would set a precedent for all other swaps and could also
be applied to U.S. drawings under these other swaps. I see no necessary
precedent or parallel, particularly since existing swaps contain some
asymmetries, for instance, with regard to loss sharing. Also, we do
not ordinarily offer a specific take-out in our own drawings.
(4) We might examine with Fernandez-Hurtado whether a swap
of the sort which the Treasury holds available for a second $150 million
would help Fernandez-Hurtado. This second $150 million that the Treasury
could supply would be kept by the Treasury as collateral, so that the
Mexicans do not effectively receive any funds and the Treasury runs no
risk. My impression is that the Mexicans can use this deposit for
FOR
is
GERALD
RARY
-3-
inclusion in their required minimum reserves, allowing them to draw
down their own reserve funds by an equal amount. Fernandez-Hurtado
told me that he was concerned about violating his required reserve
limit. Conceivably an arrangement of this sort with the Federal
Reserve, also to be used only pari passu with the Treasury, could
help him.
Fernandez-Hurtado told me that he was trying to manage a
trend in the rate with minimal use of resources. If he did not
succeed, he would have to go out of the market in a few days. Yeo
said that yesterday, Thursday, Fernandez-Hurtado made "a big push,"
presumably to set the rate on an upward trend, and failed. Yeo
would be in accord with a policy of doling out funds piecemeal and,
in general, going pari passu with the Federal Reserve.
FORD i LIBRARY 076870
CHAIRMAN BURNS
For Information Only
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date November 11, 1976
To
Board of Governors
Subject:
From John E. Reynolds
The attached note by Mr. Maroni describes the limited data
on recent lending rates in Mexico that are currently available.
FORD & LIBRARY GERALD
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date November 11, 1976
To
Mr. Reynolds
Subject: Mexican Interest Rates
From
Yves Maroni %
The Mexican rate of interest shown in the data that we
regularly distribute to the Board is the rate on six-month certificates
of deposits with a denomination of 1 million pesos or more, before de-
ducting the Mexican withholding tax. This rate is set by the Mexican
authorities, as are all other deposit rates, and changes infrequently.
It was last increased in August 1976, from 13.11 to 14.36 per cent,
the former level had been in effect since January 1976.
As regards interest rates charged by financial institutions,
very little up-to-date information is available from official sources,
and what is available from such sources is of limited usefulness. The
National Banking Commission of Mexico publishes with a considerable
lag averages of interest rates charged by selected banks in the Federal
District (Mexico City) on different types of loans. Its March bulletin,
the latest one available, shows that, in March, loan rates ranged from
10.63 per cent for mortgage loans to 14.11 per cent for discounts of
commercial paper. The IMF staff does not keep statistics on loan rates
in Mexico.
Morgan Guaranty Trust Company publishes in its "World Finan-
cial Markets" monthly review a table showing commercial bank lending
rates to prime borrowers in major countries. The October issue shows
the Mexican prime rate at 14.50 per cent at the end of September, un-
changed from the end of 1975. This is not consistent with the data
cited in the previous paragraph. I suspect that the averages reported
by the National Banking Commission include loans made at preferential
rates for specific purposes under special programs fostered by the
authorities, for example loans to finance exports. But I have not been
able to confirm this.
I spoke by telephone with a staff member at Morgan Guaranty
who explained that the rate quoted in "World Financial Markets" is
obtained from a Mexican commercial bank. He said that this is the
maximum rate allowed by the Mexican authorities, but that the banks
add some under-the-counter fees and also commonly require compensating
balances. He said that even the best customers must maintain com-
pensating balances, that such balances ranged from 10 to 15 per cent
before the September devaluation, but that, more recently, compensating
balances as high as 40 per cent had been reported to him.
LIBRARY GERALD R: FORD
- 2 -
I also spoke by telephone with Mr. Trigueros, an officer
in the New York office of the Banco Nacional de Mexico (Mexico's
largest commercial bank). He did not have current information about
lending rates at banks in Mexico but said that, some three months
ago, the prime rate for business loans of up to 11 months was 13.75
per cent. He said that this was a minimum rate set by the Government
and that banks were free to charge more for more risky loans. He
estimated that, depending on the borrower, rates went as high as about
17 per cent. He added that, on top of this, borrowers had to pay a
front-end fee which ranged from zero for the most creditworthy customers
to 1 3/4 per cent. He observed that the practice of requiring com-
pensating balances was rarely used in the past, but was beginning to
spread. However, he believed that the best customers were generally
not affected by this.
Mr. Trigueros offered to get more up-to-date information
from Mexico and to make it available to me. I thanked him and said
that I would call him again next week to find out whether he had ob-
tained anything more.
There are apparent inconsistencies in the information ob-
tained from the three sources reported here. I hope to be able to
clarify these matters through further inquiries.
FORD & LIBRARY 07V835
November 15, 1976
MEMORANDUM FOR CHAIRMAN BURNS
FROM:
Ted Truman EMT
The Mexicans have asked the New York Fed what conditions
they must satisfy in order to draw the second $75 million under last
week's agreement for $150 million in drawings each on the Federal
Reserve and the Treasury.
Governor Wallich said it was understood that they must
have signed the $800 million private bank loan. (This is expected
today or tomorrow.) He would like to go along with whatever
Treasury does.
The Treasury staff is now checking with either Mr. Yeo
or Mr. Cross to find out what their thoughts are.
Can you give me or Governor Wallich some guidance on
this question?
FORD & LIBRARY 038870
4a
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
November 13, 1976
TO: Chairman Burns
FROM: Ted Truman
EMT
Attached for your information is a recent
cable on Mexico.
Attachment: Mexico 14384
2 GO
FORD & LIBRARY GERALD
DEPARTMENT OF STATE
ta
AMERICA UNITED
Department of State
TELEGRAM
STATES OF
A
CONFIDENTIAL
1380
PAGE 01
MEXICO 14384 120043Z
61
ACTION SS-14
TNFO OCT-01 ISO-00 ARA-06 E8-03 SP-02 TRSE-00 NSC-95
NSCE-00 FRB-01
ONY-00 $50-00 1032 W
11
070741
n 1123597 NOV 76 ZFF-4
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC IMMEDIATE 8564
N F I +) F N 1 MEXICO 14384
LIMDIS
FOR DISTRIBUTION FOR S. D, E, C, P. EB, ARA, S/F, TREASURY, NSC,
FRR ONLY
dal 7/25/07
return to
F.N. 11652: GDS
TAGS: EFIN
international Please Information Centet
SUBJ: MEXICAN ECONOMIC SITREP
REF: STATE 277224
1. EXCHANGE RATES. BANCO DE MEXICO CONTINUES TO COAX
VALUE: OF PESO UPWARD SLOWLY. OPERATING AT UPPER END OF BANK or
MEXICO SPREAD, COMMERICAL BANKS OPENED 11 NOV, AT 24.32 PESOS
PER DOLLAR TO BUY VS 2453. PESOS PER DOLLAR TO SELL, ON
10 NOV. HAD OPENED AT 24.31 VS. 2455 BUT CLOSED AT 24.20 vs.
24,45. ON 9 NOV PESO HAD BEEN QUOTED AT 24.55 vs, 24.79.
AFTER SECOND DEVALUATION BENCHMARK VALUE HAD BEEN 2002
PESOS TO BUY VS. 26.50 TO SELL ON 28 OCT. EMBASSY NOT
CERTAIN HOW MUCH CENTRAL BANK INTERVENING IN MARKET BUT HE
camy
RELIEVE IT TRYING TO STAGE MANAGE VALUE OF PESO UPWARD IN
CREATE PSYCHOLOGICAL IMPRESSION OF CONFIDENCE AND STIMUL ATE
health
RAPID REFLOWS OF FLIGHT CAPITAL. WE PELIEVE THAT THIS IS
NOT YET OCCURRING.
2. STATEMENTS OF INTEREST GROUPS. THE PRESIDENT OF THE CHAMBER
OF COMMERCE IN MEXICO CITY PROMISED 10 any THAT COMMERICAL ORGANIZ
TIONS OF MEXICO CITY WILL KEEP THEIR PRICES FIXED UNTIL
CONFIDENTIAL
GERALD FORD LIBRARY
FORM
DEPARTMENT OF STATE
Department of State
UNITED STATES OF AMERICANCE
TELEGRAM
CONFIDENTIAL
PAGE 02
MEXICO 14384 1200432
FND OF YEAR. IN THIS WAY HE INDICATED THE PURCHASING
POWER OF THE WORKERS WILL BE MAINTAINED AND WE HOPED AT
THE SAME TIME SALES WILL RECOVER. ME ALSO EXPLAINED THAT
THIS ACTION WILL SACRIFICE PROFITS AND THAT QUOTE ONE
COULD HOPE THAT THERE WILL BE NO NEW REQUESTS FOR WAGE
HIKES, AND THUS AN ENDLESS INFLATIONARY SPIRAL WHICH
MOREOVER WOULD CAUSE UNEMPLOYMENT AND REDUCTIONS IN
PRODUCTION UNQUOTE.
3. GOVERNMENT FINANCE. RECENT INFORMATION ON 800 MILLION
DOLLAR 51 BANK CONSORTIUM LOAN IS THAT LOANS 35 TO BE SIGNED
NOV. 16 AND THAT ONLY 200 OF MILLION OF IT CAR BE DRAWN
REFORE 1 DEC REMAINDER EXPECTED TO BE DRAWN DOWN QUICKLY
(WITHIN ONE TO TWO MONTHS) THEREAFTER. SOME BANKS HAD
TIRED TO MAKE ENTIRE LOAN DRAWABLE ONLY AFTER 1 DEC., BUT
COMPROMISED ON ABOVE TERMS.
A. RUMORS. DURING NOV. 5 DINNER AT AMBASSADORIS FOR
LIC. LOPEZ PORTILLO, ONE OF JLPIS STAFF TOLD E/C COUNSELOR
THAT THEY WERE EXPLORING IDEA OF MULTIPLE EXCHANGE RATES
TO DISCOURAGE CAPITAL FLIGHTS WHILE ENCOURAGING TRADE.
STORY IS NOW CIRCULATING IN MEXICO CITY THAT GOM WILL
FSTABLISH 17 PESO RATE FOR COMMERICAL TRANSACTIONSCAND
PAST OBLIGATIONS) AND 22 PESOS FOR CAPITAL TRANSACTIONS.
5. BUSINESS INFORMATION. FIRM INFORMATION THAT SAN
RAFAEL, LARGEST PRIVATELY OWNED PAPER PRODUCER AND
FORMER BLUE CIP FIRM, IRRETRIVABLY BANKRUPT. GOM HAS
REFUSED ASSISTANCE AND FIRM WILL HAVE TO BF REORGANIZED,
SOME U.S. BANK EXPOSURE BUT MINIMAL. BANCO NACIONAL DE
MEXICO, WHICH IS ALSO MAJORITY OWNER, WILL HAVE TO
ABSORB MOST OF LOSS. BANAMEX REPORTEDLY WILL BF
ABLE TO DO THIS HOWEVER WITHOUT SERIOUS REPRECUSSIONS,
FORD
DEVALUATION GAVE COUP DE GRACE TO SAN RAFEL FOLLOWING
BAD MANAGEMENT. REPORTS CONTINUE THAT MANY FIRMS SHOW.
ING NEGATIVE BALANCE SHEETS BECAUSE INCREASE IN PESU
GERALD
LIBRARY
LIABILITIES DUE TO DEVALUATION IS GREATER THAN CAPITAL.
STOCK MARKET CONTINUES TO DECLINE SLOWLY. INDEX AT
CLOSE 10 NOV. WAS 249.84 vs. BENCHMARK OF 273. 16 ON 28
0:5. VALUE OF GOLD CNETENARIO BETWEEN 79.00 DOLLARS
TO BUY vs. 82.00 TO SELL ON 10 NOV. VS. SPREAD UF 77.00 110
CONFIDENTIAL
UNARTMENT OF STATE
Department of State
OF AMERICA UNITED
TELEGRAM
CONF IDENTI
PAGE 03
MEXICO 14384 1200432
80.00 ON 28 OCT.
A. WAGES AND PRICES. CARTON MILK PRICES IN MEXICO
CITY ROSE FROM 5.15 PESOS TO 5.50 HAD BEEN 4.0 PESOS
UNTIL september.
7. AS WASHINGTON ADDRESSEES PROBABLY AWARE, MANY 60M
OFFICIAL STATEMENTS INTENDED TO LEAD MEXICAN RUB IDEAD
REVIEVE CONDITIONS ARE IMPROVING WHEN, IN FACT
SITUATION MAY BE OPPOSITE. EMBASSY INTERPRETS PARA-
GRAPH OF REFTEL TO MEAN THAT EMBASSY OFFICERS SHOULD
AVOID SOLICITING INFORMATION FROM HACIENDA AND BANK OF PEY
OFFICIALS WHICH ARE ONLY POSSIBLE SOURCES OF ACCURATE
INFORMATION. THESE CONSTRAINTS SERIOUSLY LIMIT
ABILITY TO REPORT FULLY.
TOVA
FORD is LIBRARY 076839
CONFIDENTIAL
FORM
6a
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
November 16, 1976
TO: Chairman Burns
FROM: Ted Truman EMT
Attached is a copy of our latest
cable on the Mexican economic situation.
Attachment: Mexico 14461
cc: Governor Wallich
FORD & LIBRARY
ARTMENT
OF
STATE
6a
Department of State
AMERICA UNITED
TELEGRAM
STATES OF
CONFIDENTIAL
4757
PAGE 01
MEXICO 14461 1300572
71-60
ACTION S5-14
TNFO OCT-01 ISO-00 ARA-06 EB-03 SP-02 TRSE-09 NEC-3
NSCE-00 FRB-01 SSO-00 ONY-00 AS-01 1033
13
C 1300207 NOV 76 ZFF-4
FM AMEMBASSY MFXICO
TO SECSTATE WASHDC IMMEDIATE 8607
As
N F I D E N T I L MEXICO 14461
TIMDIS
DISTRIBUTION FOR S. D, E, C, P. FB. ARA, S/P, TREASURY
NSC, FRB ONLY
dal 7/25/07
Please 111.
F.O. 11652: GDS
International Information Center
TAGS: EFIN
SUBJ: MEXICAN ECONOMIC STTREP 2
REF: A. STATE 277224 B. MEXICO 14384
1. EXCHANGE RATES AND CAPITAL MOVEMENTS: BANCO DE
MEXICO AGATN SFT TRADING RANGE OF PESO 12 NOV
AT 24.30. PESOS PER DOLLAR TO BUY vs. 24.53 TO SELL,
SAME AS YESTERDAY. REPORTS WF GET STILL INDICATE A
CONTINUING CAPITAL OUTFLOW OF MODEST PROPURTIONS.
?. STATEMENTS OF INTEREST GROUPS: THE HEAD OF THE
CONSUMER PROTECTION-AGENCY ANNOUNCED THAT IN SEPTEMBER
AND OCTOBER HIS AGENCY RECEIVED 55,990 COMPLAINTS.
ABOUT PRICE RISES AND THAT THEY WERE ARRIVING AT THE
RATE OF 2,500 A DAY. A TOURIST ASSOCIATION STATED
THAT CREDIT SALES IN DOLLARS OF AIRLINE TICKETS ARE OFF
95 PERCENT. PRESUMABLY TRAVELERS ARE AFRAID OF GETTING CAUGHT
WITH DOLLAR OBLIGATIONS AND FVFN CHEAPER PESOS IN FUTURE.
3. GOVERNMENT FINANCE: SOME BANKING CIRCLES EXPECT
GOM MUST COME UP WITH EXTERNAL FINANCING UF ABOUT
FORD . GERALD LIBRARY
CONFIDENTIAL
OF
STATE
Department of State
UNITED STATES OF AMERICA
TELEGRA
CONF IDENTIAL
PAGE 02
MEXICO 14461 1300572
6 BILLION DOLLARS IN COMING YEAR: 3.5 BILLION DUE
TO TRADE DEFICIT AND 2.5 BILLION DUE TO GOVERNMENT
DEFICIT. GREAT UNCERTAINITY ABOUT HOW THIS CAN 6F
MANAGED. CALCULATION BY EMRASSY AG ATTACHE SNOW THAT
IMPROVED GRAIN AND FEED PRODUCTION COULD REDUCE MEXICOSS
TMPORT BILL OF THESE ITEMS IN COMING YEAR BY AS MUCH
AS 196 MILLION DOLLARS. LAST YFSR MEXICO IMPORTED ABOUT
100 MILLION DOLLARS WORTH OF AGRICULTURAL PRODUCTS FROM
THE U.S.
1. RUMORS: AMBASSADOR INFORMED BY MEMBER OF BOARD
OF BANCO DE COMMERCIO YESTERDAY THAT DUAL EXCHANGE
RATE SYSTEM UNDER CONSIDERATION SIMILAR TO THAT MENTIONED
REFTEL (B) BUT HE MENTIONED RATES OF 15 FOR COMMERICAL
TRANSACTIONS AND 19 FOR CAPITAL TRANSACTION. THIS
DIFFERS FROM THE 17 VS. 22 SPREAD REPORTED REFTEL.
5. BUSINESS INFORMATION: TEXTILE INDUSTRY, PARTICULARLY
FIRMS IN PUEBLA AREA, APPEAR TO BE
TN GREAT DIFFICULTY. THE HEADS OF THE TEXTILE
AND CLOTHING ASSOCIATIONS ANNOUNCED THAT ABOUT 385
CLOTHING FIRMS AND 10 TEXTILF FIRMS HAD CLOSED AND
UNLESS SITUATION IMPROVED 40,000 WORKERS WOULD SOUN
RE OUT OF WORK. THE CAUSES OF THE FAILURES WERE
GIVEN AS THE INCREASE TN COSTS OF INPUTS DUE TO
DEVALUATION, THE LIMITATION OF PRICE INCREASES TO
10 PERCENT, THE FALL OFF IN SALES BY 35 PERCENT,
AND THE "DECAPITALIZATION" T.E. BANKRUPTCY,
OF FIRMS (REFERRED TO JN PARAGRAPH 5 OF REFTEL B).
NETTHER PRIVATE BANKS NOR GOVERNMENT WOULD LEND TU
THESE FIRMS, MOST OF WHICH APPEAR TO BE SMALL. AMBASS
ADOR VISITED PUERLA YESTERDAY AND CONFIRMED OBVIOUS
DISTRESS OF AREA. STOCK MARKET INUEX ROSE SLIGHTLY
(1,17 POINTS); FIRST TIME SINCE SECOND DEVALUATION
F. WAGES AND PRICES. CAMPILLO SAIN7, SECRETARY
OF INDUSTRY AND COMMERCE, STATED THAT AUTOMOBILE
FORD
PRICES WILL HAVE TO GO UP ON AVERAGE OF 38 PERCENT
SHORTLY. MONTHLY BULLETIN JUST RELEASED RY A LOCAL
BANK STATES THAT WHOLESALE PRICES WILL RISE RETWEEN
GERALD
LIBRARY
22 AND 25 PERCENT THIS YEAR. SEPTEMBER PRICES WENT
CONFIDENTIAL
DEPARTMENT
STATE
UNITED OF
Departmeni of State
TELEGRAM
STATES
CONF TDENTIAL
PAGE 03
MEXICO 14461 1300572
UP 6.2 PERCENT OVER THOSE OF AUGUST. ALREADY THROUGH
SEPTEMBER THIS YEAR WHOLESALE PRICES HAVE RISEN
16.3 PERCENT COMPARED TO 9.8 PERCENT FOR THE SAME PERIOD
YEAR. THE ARTICLE WENT ON TO STATE THAT DETOBER
PRICE RISES FOR MOST PRODUCTS WILL REFLECT THE
10 PERCENT OFFICIAL RISE GRANTED bY THE GOVERNMENT
CAL DERHEAD
LIBRARY GERALD ? FORD
CONFIDENTIAL
FORM DS-1652
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
November 17, 1976
TO:
Chairman Burns
FROM: Ted Truman EMT
Attached is the latest cable that we
have received on the Mexican economic
situation.
Attachment: Mexico 14518
cc: Governor Wallich
FORD is LIBRARY GERALD
Defense classification of this document is due
to the inclusion of U.S. Government information
officially clearified under Executive Order 10301
which provides that "A document
shall bear a
classification as least as high as that of its
highest classified component."
DEPARTMENT of STATE
7a
Department of State
STATE UNITED AMERICA
TELEGRAM
OF
CONFIDENTIAL 9188
PAGE 01
MEXICO 14518 160029Z
63
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TRSE-09 SSO-00 ONY-00 1032 W
15
111609
n 1523552 NOV 76 ZFF-4
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC IMMEDIATE 8629
1A
ONFI
0
E
N
Y
I
MEXICO 14518
Please return to
international Information Center
INDIS
dal 7/25/07
F. D. 11652: GDS
TAGS: EFIN
SUBJECT: MEXICAN ECONOMIC SITREP 3
FOR DISTRIBUTION FOR S, D, E, C, P. EB, ARA, S/P, TREASURY.
NSC, FRB ONLY
REF: (A) STATE 277224 (B) MEXICO 14461 (C) MEXICO 14499
1. EXCHANGE RATES. TRADING RANGE OF PESO ON 15 NOV.
WAS 24.10 PESOS PER DOLLAR TO BUY AND 24.32 TO SELL.
nown ABOUT 20 CENTAVOS FROM FRIDAY BANCO DE MEXICO
CONTINUES TO SLOWLY RAISE VALUE OF PESO,
2. STATEMENTS OF INTEREST GROUPS. THE PRESIDENT OF
THE NATIONAL CHAMBER OF THE FOOTWEAR INDUSTRY HAS
STATED THAT INDUSTRY IS FACING BANKRUPCY PROBLEMS
WHYCH COULD AFFECT 200.000 WORKERS. ITS PROBLEMS
SEFM SIMILAR TO THOSE OF THE TEXTILE INDUSTRY(SEE REFTEL
(8) PARA. 5).
3. GOVERNMENT FINANCE. THE SECRETARIA OF INDUSTRY
AND COMMERCE RELEASED TRADE DATA FOR 1976 THROUGH
AUGUST. FOR THE FIRST FIGHT MONTHS OF 1976 MERCHANDIZE
EXPORTS WERE 26,201.0 MILLION PESOS AND IMPORTS
52, 905.7 MILLION PESOS) GIVING A MERCHANDIZE DEFICIT
CONFIDENTIAL ¥
LIBRARY GERALD R. FORD
DEPA TMENT OF STATE
Department of State
SEXTES UNITED AMERICA
TELEGRAM
OF
CONFIDENTIAL
PAGE 02
MEXICO 14518 1600297
OF 26,703.8. 8. COMPARABLE FIGURES FOR 1975, 23,096.3,
52,227.5 AND 29,131.2. THE PRESIDENT OF THE CONFED-
FRATION OF CUSTOMS AGENTS ANNOUNCED THAT SMUGGLING HAD
FALLEN OFF 95 PERCENT SINCE THE DEVALUATIONS. ONE WUNDERS
HOW HE KNOWS, BUT REFORE DEVALUATION SMUGGLING WAS
DBVIOUSLY WIDESPREAD. THYS TENDS TO CONFIRM THE EMRASSY'S OPINION
THAT EXCHANGE CONTROLS OR DUAL EXCHANGE RATE SYSTEM WILL BF HARD 50
CARRY OUT IN MEXICO. MONEY IS FASIER TO CONCEAL THAN GOODS,
A. RUMORS. RUMOR WAS WIDESPREAD THROUGHOUT MEXICO
CITY FRIDAY, INCLUDING THE FOREIGN MINISTRY, THAT PESO
WOULD BE DEVALUED AGAIN OVER WEEKEND TO ABOUT 30 TO
THE DOLLAR. THIS IS ANOTHER EXAMPLE OF THE ALMOST
COMPLETE LACK OF CONFIDENCE IN THE POLICIES OF THIS
GOVERNMENT. THE GOVERNMENT OFFICIALS SENSING THIS
ARE SAYING NOTHING AND KEEPING A VERY LOW PROFILE ON
ALI. ECONOMIC STATEMENTS AS WFLL SINCE THE SECOND DEVALUATION.
5. BUSINESS INFORMATION. SEE PARA 2, AROVE.
6. WAGES AND PRICES. PRICES OF GASOLINE, OIL, AND
LIQUID GAS, WERE RAISED EFFECTIVE 15 NOVEMBER (SEE
REFTEL C). PRICES OF ELECTRICITY WERE RAISED TOO BUT
THE INCREASES VARY ACCORDING TO USE AND AREA AND ALSO
ARF PROGRESSIVE IN SENSE THAT LARGE USERS WILL PAY
MORE PER UNIT. HENCE NOT POSSIBLE TO ESTIMATE THE
TNCREASE CONCISELY. HOWEVER IT SHOULD BE NOTED THAT
MEVICAN PUBLIC SERVICES TENDED TO BE UNDERPRICED
REQUIRING GOVERNMENT SUBSIDY. THE REASONS GIVEN FOR
THE INCREASES WERE THE SAME IN BOTH INDUSTRIES: THE NEFD
FOR A GREATER RETURN TO COVER INVESTMENT REQUIRED
TO SATISFY EXPANDED FUTURE DEMAND. AUTOMOBILE PRICES
WERE RAISED EFFECTIVE 15 NOVEMBER AS INDICATED REFTEL
PBI. THE BASIC VOLKSWAGEN WENT FROM 66,090 PESOS
TO 84,000 PESOS. THE FORD LTD FROM 140,000 TO 240,000
AND THE ROYAL MONACO FROM 120,000 TO 220.000
CALDERHEAD
&
FORD
GERALD
LIBRAST
CONFIDENTIAL
MEXICO: ECONOMIC INDICATORS
C.9a
(NOT SEASONALLY ADJUSTED, UNLESS NOTED)
November 18, 1976
1973
1974
1975
1975
1975
1975
1976
1976
1976
1976
1976
1976
1976
1976
1976
1976
II
III
IV
I
II
III
MAR
APR
MAY
JUNE
JULY
AUG
SEPT
REAL GDP, 1970=100
119.4
126.4
131.8
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
REAL GDP, PER CENT
CHANGE (1)
7.6
5.9
4.2
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
INDUSTRIAL PRODUCTION
1970=100
122.7
132.8
139.0
143.2
139.7
140.8
144.0
144.3
N.A.
152.6
140.6
147.1
145.3
144.3
N.A.
N.A.
INDUSTRIAL PRODUCTION
PER CENT CHANGE (1)
9.3
8.2
4.7
8.2
-2.5
0.8
2.2
0.3
N.A.
9.3
-7.9
4.6
-1.2
-0.7
N.A.
N.A.
WHOLESALE PRICES
PER CENT CHANGE (1)
15.7
22.4
10.5
4.0
3.3
2.3
5.6
3.2
5.5
1.5
0.5
1.5
0.9
2.5
-0.3
6.2
CONSUMER PRICES
PER CENT CHANGE (1)
12.2
23.8
15.0
3.0
3.2
2.0
4.3
2.6
3.2
1.0
0.7
0.7
0.4
0.8
1.0
3.4
MONEY STOCK (M1) (S.A.)
PER CENT CHANGE (1)
24.8
20.9
22.3
6.6
2.9
5.8
3.9
4.7
N.A.
1.1
1.7
3.1
-0.4
3.0
-1.2
N.A.
PUBLIC SECTOR DEF.(-)
AS PER CENT OF GDP
-5.7
-7.8
-9.3
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
CENTRAL GOVT. DEF.(-)
AS PER CENT OF GDP
-4.4
-3.8
-4.3
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
EXPORTS (2)
IS BILLION)
2.4
3.4
3.5
0.9
0.8
0.9
0.9
1.1
N.A.
0.3
0.3
0.3
0.3
0.2
0.2
N.A.
IMPORTS i$ BILLION)
3.8
6.1
6.6
1.7
1.6
1.9
1.4
1.7
N.A.
0.5
0.5
0.5
0.6
0.6
0.6
N.A.
TRADE BALANCE (2)
($ BILLION)
-1.4
-2.6
-3.1
-0.8
-0.8
-1.0
-0.5
-0.6
N.A.
-0.2
-0.2
-0.2
-0.3
-0.4
-0.4
N.A.
BALANCE ON GOODS AND
SERVICES ($ BILLION)
-1.3
-2.6
-3.6
-0.9
-0.9
-1.1
-0.6
-0.9
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
(1) PER CENT CHANGE FROM PREVIOUS PERIOD. QUARTERLY CHANGES
AT QUARTERLY RATES; MONTHLY CHANGES AT MONTHLY RATES.
(2) MONTHLY DATA EXCLUDE EXPORTS OF BORDER ASSEMBLY PLANTS AND OF SILVER
AND ARE NOT CONSISTENT WITH QUARTERLY OR ANNUAL DATA.
GERALD FORD LIBRARY
RESTRICTED-CONTROLLED
C.9b
FINANCIAL INDICATORS -- MEXICO
(dollar amounts in millions)
1975
1976
NOV 1-
Week ended
YEAR
QI
QII
QIII
AUG
SEPT
OCT
17
OCT 13
OCT 20
OCT 27
NOV 3
NOV 10
NOV 17
EXCHANGE RATE (CENTS PER PESO, END OF PERIOD)
8.00
8.00
8.00
8.00
8.00
5.03
3.90
4.11
5.04
5.03
3.77
3.92
4.07
4.11
SDR VALUE OF PESO
.06842
.06924
.06985
.04364
,06957
.04364
.03398
.03573
.04367
.04363
.03398
.03398
.03545
.03573
SHORT TERM INTEREST RATE (E.O.P.)
12.94
13.11
13.11
13.11
14.00
14.36
14.36
14.36
14.36
14.36
14.36
14.36
14.36
14.36
LONG TERM INTEREST RATE (E.O.P.)
13.02
12.86
14.17
n.a.
16.03
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
RESERVES (IFS, E.O.P.)
1,533
1,501
1,585
870P
P
1,181
870P
651P
667P
AVAILABLE IMF CREDIT TRANCHES (E.O.P.)
433
620
615
621
618
621
466
596P*
INTERVENTION, PURCHASES (+) OR SALES (-)
OF DOLLARS
-314
-156
-241
-288
-122
-64
-211
(OF OTHER CURRENCIES; EQUIVALENT)
SWAP ACTIVITY
DRAWINGS (+), REPAYMENTS (-)
360
--
360
--
--
--
--
150
--
--
--
--
75
75
-360
-360
SWAP LINE -- 360
* Available under three-year Extended Fund
Facility program starting January 1, 1977.
RESTRICTED-CONTROLLED
November 19, 1976
GERALD FORD LIBRARY
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
November 18, 1976
TO:
Chairman Burns
FROM: Ted Truman EMT
Attached is the latest cable on the
Mexican economic situation.
Attachment: Mexico 14564
cc: Governor Wallich
Defense classification of this document is due
to the Inclusion of U.S. Government information
officially climisitied under E: scutive Order 10501
which provides that "A document shall bear a
classification as least as high as that of its
highest classified component."
FORD is LIBRARY 076870
DEPART
STATE
8a
Department of State
TELEGRAM
TES OF
CCD
EMT DD, SS
CONFIDENTIAL 2190
PAGE 01
MEXICO 14554 1702152
73
ACTION ARA-06
TNFO OCT-01 SS-14 ISO-00 NSC-05 NSCE-00 SP-02 ER-03 TRSE-00
FRB-01 SSO-00 1032 W
129515
n 1700107 NOV 76 ZFF-4
FM AMEMBASS MEXICO
TO SECSTATE WASHDC IMMEDIATE 8654
N F I F N A t MEXICO 14564
i INDIS
FOR DISTRIBUTION FOR S. D, E, C, P. EB, ARA, S/P,
TREASURY, NSC, FRB ONLY
doe 7/25/07
F. C. 11552: GDS
TAGS: EFIN
SUBJECT: MEXICAN ECONOMIC SITREP 4
REF: (A) STATE 277224 (8) MEXICO 14518
4. EXCHANGE PATES AND CAPITAL MOVEMENTS. TRADING
RANGE ON NOV. 16 FOR PESO WAS 24.10 TO BUY VS. 24,32
TO SELL, SAME AS YESTERDAY. BANKERS STILL BELIEVE
THERE IS A SLIGHT, BUT POSSIBLY INSIGNIFICANT CAPITAL
OUTLFOW.
P. GOVERNMENT FINANCE. BOTH FINANCE SECRETARY, MARTO
PAMON BETETA, AND BANCO DE MEXICO DIRECTOR, ERNESTO
FERNANDEZ HURTADO, REFUSED TO COMMENT ON PSEO DEVALUATION,
RECENT PRICES INCREASES, OR EVEN THE STATE UF MEXICAN
ECONOMY WHILE AT THE OPENING SESSION OF THE IBERO-
AMERICAN FEDERATION OF STOCK EXCHANGE MONDAY, NOV.
15. RAMON BETETA DTD STATE THAT THE MEXICAN BOLSA
HAS BEEN AFFECTED BY "THE DIFFICULT SITUATION OF SONE
COMPANIES WHICH HAVE HAD TO FACE AN INCREASE IN THE
I IMBILITIES IN FOREIGN CURRENCIES,' AND THAT "THE
NEXT ADMINISTRATION WILL HAVE TO STUDY CAREFULLY THE
CONF IDENT
FORD & GERALD LIBRARY
45
FORM DS 1652
DEPAR
STATE
Department of State
OF STATES AMERICA
TELEGR AMP
CONFIDENTIAL
PAGE 02
MEXICO 14564 170215Z
REVALUATION OF ASSETS OF FIRMS. CONFRONTING A DIFFICULT
FCONOMIC SITUATION."
3. RUMORS. RUMORS ARE AGAIN RAMPANT OF ANOTHER
DEVALUATION PENDING. HOWEVER, BANKERS DISCOUNT TALK
OF EXCHANGE CONTROLS OR MULTIPLE EXCHANGE RATE BECAUSE
GIVEN MEXICAN SITUATION BOTH ARE CONSIDERED SEYOND
GOM ABILITY TO HANDLE.
A. BUSINESS INFORMATION. FUNDIDORA MONTERREY, THE
THIRD LARGEST STEEL FIRM IN MEXICO. WHICH IS THE LARGEST
TOTALLY PRIVATELY OWNED ONE AS WELL, IS AMONG THE
I ARGE FIRMS PRACTICALLY BANKRUPTED BY DEVALUATION. ALMOST 01
THEIR LONG TERM DEBT WAS IN FOREIGN CURRENCIES, MOSTLY
DOLLARS, AND DEVALUATION WIPED OUT THEIR CAPITAL.
UNLIKE THE SITUATION OF SAN RAFAFL REPORTED SITREP 11,
FUNDIDORA IS SALVAGABLE, HOWEVER. NOT ALL FIRMS
ARE LOSING MONEY THOUGH. THE BANCO DE COMMERCIO
EXPECTS TO SHOW ABOUT 040 MILLION PESO PROFIT FOR
1975, DOWN ABOUT 50 MILLION CAUSED BY GOVERNMENT
DECREED WAGE INCREASES. CANADIAN EMBASSY INFORMS US
THAT CANADIAN BANKS HAVE ABOUT ONE BILLION DOLLAR TOTAL EXPOSURE
TN MEXICO BUT TERM STRUCTURE MAY BE SUMEWHAT SHORTER
THAN U.S. BANKS. U.S. BANKS HAVE MUCH MEDIUM TO
LONG TERM LOANS WHILE CANADIANS TERM STRUCTURE MORE
RAI ANCED WITH RELATIVELY MORE SHORT TERM LOANS. STOCK
MARKET INDEX CLOSED 15 NOV. AT 242.52, DOWN 1.65 FROM
FRIDAY'S CLOSE.
5 : WAGES AND PRICES. WITH THE INCREASE IN PRICES
OF GASOLINE, FUEL, AND ELECTRICITY COMES WORD THAT
THF PRICES OF BUS FARES, AUTO RENTALS, THE ENTIRE
ORAL PUBLIC TRANSPORT SYSTEM(WHICH RUNS AT A DEFICIT)
AND EVEN DRINKING WATER HAVE TO BE REEXAMINED.
6. STATEMENTS OF INTEREST GROUPS. THE PRESIDENTS OF
THF CONFEDERATION OF INDUSTRIAL CHAMBERS (CONCAMIN),
THF NATIONAL CHAMBER OF INDUSTRIAL TRANSFORMATION
(CANACINTRA) AND THE CONFDERATION OF NATIONAL CHAMBERS
OF COMMERCE (CONCANACO) ALL MADE SIMILAR STATEMENTS.
ALONG THE LINE THAT PRICE INCREASES FOR FUEL AND
FORD & GERALD LIBRARY
CONFIDENTIAL
FORM
1652
de STATE
Department of State
STATES OF AMERICA
TELEGRAM
CONFIDENTIAL
PAGE 03
MEXICO 14564 170215Z
FLFCTRICITY HAD RECOME NECESSARY. GOVERNMENT FIRMS
COULD NO MORE RUN AT A LOSS THAN PRIVATE ONES. HOWEVER
INDUSTRIAL USERS OF THSE PRODUCTS DID NOT NECESSARILY
HAVE TO RAISE THEIR PRICES. IN MANY CASES COSTS WOULD
GO UP LESS THAN ONE PERCENT AND COULD BE ABSORBED IN
MORE RATIONAL USE OF RESOURCES. NONETHELFSS LABOR LEADERS
no NOT SEEM TO BE A3 MODERATE IN THEIR STATEMENTS.
FIDEL VELAZQUEZ, SECRETARY GENERAL OF THE CTM STATED
THEY WERE THROUGH WITH WAITING FOR AN INCREASE IN
SAI ARIES WHILE OTHER LABOR LEADERS STATED THAT PRICES
CONTINUE TO RISE AND ERODE THE INCOME OF WORKERS.
CAI DERHEAD
FORD & GERALD LIBRARY
FONE IDENTIAL
FORM
DS
1652
BOARD DE GOVERNORS OF THE F
RAL RESERVE SYSTEM
November 19, 1976
TO:
Chairman Burns
FROM: Ted Truman EMT
Attached is the latest cable on the
Mexican economic situation.
Attachment: 14623
cc: Governor Wallich
Defense classification of this document is due
to the inclusion of U.S. Government information
officially classified under Executive Order 10501
which provides that "A document shall bear a
classification as least as high as that of its
highest classified component."
GERALD FORD LIBRARY
DEPARTMENT OF STATE
II
Medico 9a
Department of State
HITED STATES OF AMERICA
TELEGRAM
CLEMT
GONF IDENTIAL
5088
SMT
PAGE 01
MEXICO 14623 1723532
64
ACTION SS-14
INFO OCT-01 ISO-00 ARA-06 SP-02 TRSE-00 NSC-05 NSCE-00
SSO-00 FRB-01 1029 W
7
017486
n 172308Z NOV 76 ZFF-4
PM AMEMBASSY MEXICO
TO SECSTATE WASHDC IMMEDIATE 8681
N
1
D
E
N
-
MEXICO /14623
LIMDIS
FOR DISTRIBUTION FOR S. D, E. C, P, EB, ARA, S/P, TREASURY
NSC, FRB ONLY
due 7/25/07
F. 0. 116521 GDS
TAGS: EFIN
SUBJECT: MEXICAN ECONOMIC SITREP 5
REF: (A) STATE 277224 (B) MEXICO 14518
1. EXCHANGE RATES AND CAPITAL MOVEMENTS. FOR THIRD DAY IN
ROW BANCO DE MEXICO SET TRADING RANGE FOR PESO AT SAME VALUES
24.10 TO BUY AND 24.32 TO SELL.
2. GOVERNMENT FINANCE. THE CONCLUDING OF THE EURODOLLAR LOAN
OF 800 MILLION DOLLARS WITH 64 BANKS PARTICIPATING GOT FRONT
PAGE HEADLINES IN ALL NEWSPAPERS. HALF OF THE LOAN HAS A TERM
OF FIVE YEARS AND THE SEVOND HALF ONE OF SEVEN YEARS. FINANCE
SECRETARY, MARIO RAMON BFTETA STATED AT THE SIGNING CEREMONIES
THAT THE EXPERIENCE OF PRESIDENT-ELECT JOSE LOPEZ PORTILLO N
ECONOMIC AND FINANCIAL MATTERS WILL ENABLE MEXICO TO PROGRESS
QUOTE IN SPITEA OF THE DIFFICULT ROAD AHEAD UNQUOTE. HF IS
ALSO REPORTED TO HAVE SAID THAT THE GOVERNMENT HAS PUT INTO
EFFECT A STARILIZATION PROGRAM WHICH WOULD OPERATE FIRMLY
AND GRADUALLY TO REDUCE THE DEFICIT IN PUBLIC FINANCES
AND FOREIGN DEPT. ACCION COMUNITARIA, A GROUP OF WELL-
INFORMED AND ECONOMICALLY TRAINED BUSINESSMEN, WHOSE PAST
GERALD FORD LIBRURY
FORM
DEPARTMENT OF STATE
Department of State
UNITED STATES OF AMERICA
TELEGRAM
CONFIDENTIAL
PAGE 02
MEXICO 14623 1723532
STUDIES HAVE GENERALLY BEEN ACCURATE, HAS ESTIMATED THE
1976 FEDERAL BUDGET DEFICIT TO BE 117.1 BILLION PESOS,
nown SOMEWHAT FROM 175'S 1130.6 BILLION. ALSO IT APPEARS
THE CURRENT ACCOUNT DEFICIT FOR 1976 WILL BE ABOUT THE
SAME MAGNITUDE AS 1975, I.E., ABOUT 3.5 BILLION DOLLARS.
THESE TWO FACTS INDIATE THAT MEXICO WILL NEED MORE THAN
THE 800 MILLION DOLLAR EUROLOAN AND THE RECENT IMF CREDIT
DRAWING OF 1.2 BILLION DOLLARS. MENAWHILE U.S.
PRIVATE BANKS INDICATE TO US THEY ARE BECOMING MORE CAREFUL
TN CONSIDERING ADDITIONAL LOANS TO EITHER GOM
AGENCIES OR PRIVATE FIRMS.
3. RUMORS. THSE ARE ALWAYS WIDESPREAD PARTICULARLY
THOSE CONCERNING A DUAL EXCHANGE RATE SYSTEM.
4. BUSINESS INFORMATION. THE STOCK MARKET INDEX CLOSED
16 NOV. AT 258.37 UP FROM THE 15 NOV. is INDEX OF 252.51.
5. WAGES AND PRICES. PETITIONS ARE POUTING INTO THE
SECRETARIAT OF INDUSTRY AND COMMERCE(SIC) TO AUTHORIZE
PRICE INCREEASES. THE MANUFACTURERS OF TORTILLAS WANT AN
INCREASE OF 30 PERCENT. INCREASES ARE BEING CONSIDERED
FOR TELEPHONE SERVICE, DOMESTIC AIRLINES, GROUND CARGO
AND PASSENGER CARRIERS, AND EVEN SALT. JET FUEL PRICES
ARE BEING RAISED 15 PERCENT AND AIRPLANE GAS 40 PERCENT.
DESPITE THE CONSIDERABLE NUMBER OF PRICE INCREASES
ANNOUNCED SINCE DEVALUATION WE DO NOT YET HAVE OFFICIAL
PRICE INDICIES TO GET AN ACCURATE IDEA OF THE AMOUNT OF
INFLATION DEVALUATION YS GENERATING WITHIN THE ECONOMY.
TT WILL BE AT LEAST ANOTHER MONTH BEFORE THESE BECOME
AVAILABLE.
6. STATEMENTS OF INTEREST GROUPS. ONCE AGAIN THE
PRESIDENT OF THE CHAMBER OF COMMERCE OF MEXICO CITY
CALLED UPON MERCHANTS TO RAISE PRICES ONLY ENOUGH TO
COVER COST INCREASES. THE ECONOMIC ADVISOR TO THE CIM
MEXICAN LABOR CONFEDERATION STATED THE RISE IN PRICE
OF ENERGY WOULD NECESSARILY LEAD TO A RISE IN THE
PRICE OF CONSUMER NECESSITIES. so FAR SINCE THE SECOND
DEVALUATION THE LABOR SECTOR HAS NOT DEMANDED A READJUST-
MENT OF ITS QUOTE REAL UNQUOTE WAGES. THE SECOND DEVALUA
FORD & LIBRARY 076839
CONFIDENTIAL
STARTMENT OF STATE
UNITED STATES OF the
Department of State
TELEGRAM
CONF IDENTI
PAGE 03
MEXICO 14623 1723532
TION SEEMS TO HAVE SHOCKED ALL SECTORS OF THE ECONOMY
TNTO REALIZING HOW SERIOUS THE MEXICAN ECONOMIC
SITUATION COULD ACTUALLY BE.
JOVA
FORD is 074870 LIBRARY
CONFIDENTIAL
FORM
DS-1652
Translation of Bank of Mexico Announcement
Appearing in the Newspaper "Excelsior,"
Monday, November 22, 1976
MEXICAN BANKS WILL SUSPEND TEMPORARILY PURCHASE AND SALE OF FOREIGN EXCHANGE
Considering that, in recent days, there have occurred excessive
conversions of national currency into foreign currencies, that these
conversions have no relation to the international flows of goods and
services, nor with the movements of productive investment capital, and
that these operations have been causing disorderly situations which
gravely disturb the exchange market, the Bank of Mexico, S.A., has re-
solved to adopt on a temporary basis and to make public the following
measures:
1. As from November 22, 1976, and until further notice,
the credit institutions will abstain from buying and selling foreign
exchange and gold coins.
2. Liquidation of foreign exchange obligations in favor of
or charged against credit institutions will continue to be effected as
is customary in the currency required. When the customers of the
institutions choose to effect this liquidation by delivering the equiv-
alent amount in national currency, the applicable exchange rate will
be the representative rate prevailing in the brokers' market.
3. All other banking operations will continue to be carried
out in the usual manner without any modification.
Bank of Mexico, S.A.
November 21, 1976
Translated by: Yves Maroni
November 22, 1976
FORD & LIBRARY GERALD
DEPARTMENT OF STATE
Omexico
Department of State
AMERICA UNITED
TELEGRAM
STATES OF
EMT
UNCLASSIFIED 5329
ss
PAGE 01
MEXICO 14779 221657Z
55
ACTION ER-07
TNFO OCT-01 ARA-10 IS0-00 SSO-00 INRE-00 USIF-08 NSC-05
AID-95 CIAE-00 COME-00 FRR191 TNR-07 NSAE-09 TRSF-03
XMR-04 OPTC-06 SP-02 CIFP-02 LAB-64 SIL-01 OMB-01
SS-15 STR-44 CEA-01 NSCE-00 1076 W
22
674483
n. 2216407 ( NOV 76 ZFF-5
FM AMEMBASSY MEXICO
TO SECSTATE WASHOC IMMEDIATE 8766
TNFO TREASURY WASHDC IMMEDIATE
Please return to
UNCLAS MEXICO 14779
international Information Center
F. O. 11652: N/A
TAGS: EFIN, MX
SUBJECT: SUSPENSION OF FOREIGN EXCHANGE DRERATIONS BY BANKS
4. SHORTLY AFTER MIDNIGHT NOVEMBER 22, THE BANK OF
MEXICO ISSUED THE FOLLOWING PRESS RELEASE:
2. PCONSIDERTNG THAT IN RECENT DAYS THERE HAVE BEEN
EXCESSIVE CONVERSIONS OF NATIONAL MONEY TO FOREIGN EXCHANGE
THAT HAVE NO RELATION WITH INTERNATIONAL TPANSACTIONS IN
CODDS AND SERVICES NOR DTD THE MOVEMENT OF PRODUCTIVE
INVESTMENT CAPTTAL OPERATIONS THAT HAVE GIVEN RISE TO
DISORDERLY STTUATIONS THAT SERTOUSLY AFFECT THE FOREIGN
EXCHANGE MARKET, THE BANK OF MEXICO HAS DECIDED TC ADOPT
AS A TEMPORARY MEASURE AND TO MAKE KNOWN THE FOLLOWING
MEASURES:
"!) BEGINNING NOVEMBER 22, 1976 AND UNTIL FURTHER
NOTICE, CREDIT INSTITUTIONS "ILL ABSTAIN FROM BUYING AND
SELLING FOREIGN EXCHANGE AND GOLD COINS.
"2. LIQUIDATION OF ORLIGATIONS IN FOREIGN EXACANGE
TN FAVOR OF OR AT THE CHARGE OF CREDIT INSTITUTIONS
WILL CONTINUE RETNG EFFECTED AS USUAL IN THE COMRESHONDING
CURRENCIES. WHEN THE CLIENTERE UPT THAT SUCH LIQUIDATIONS
i
FORD
UNCLASSIFIED
GERALD
LIBRARY
FORM
PRANTMENT OF STATE
Department of State
AMERICA
TELEGRAM
STATES OF
UNCLASSIFIED
PAGE 02
MEXICO 14779 2216572
RE EFFECTED BY THE DELIVERY OF THE EQUIVALENT VALUE IN
NATIONAL CHRRENCTES, THE REPRESENTATIVE RATE OF EXHCANGE
THAT RULES IN THE BROKERS' MARKET WILL BE APPLIED.
"3. ALL OTHER BANKING OPERATIONS WILL CONTINUE
RETNG EFFECTIVE IN THE USUAL FORM WITHOUT ANY MODIFICA-
TION."
3. WE ASSUME AROVE ANNOUNCEMENT TO MEAN THAT
COMMERCIAL BANKS WILL NOT UNDERTAKE FOREIGN EXCHANGE
TRANSACTIONS BUT THAT MONEY BROKERS, WHICH ARE LIMITED
TN NUMBERS, WILL MAKE THE MARKET.
A. THE MORNING PRESS CARRIES FOR THE MOST PART ONLY
THF TEXT OF THE COMMUNYQUE. WE HAVE NOT YET SEFN ANY
EXPLANATORY INFORMATION AND SUSPECT THERE WILL BE
CONSTDERABLE CONFUSION.
TOVA
FORD & GERALD LIBRARY
UNCL ASSIFIED
FORM DS-1652
Translation of Bank of Mexico Announcement
Appearing in the Newspaper "Excelsior,"
Monday, November 22, 1976
MEXICAN BANKS WILL SUSPEND TEMPORARILY PURCHASE AND SALE OF FOREIGN EXCHANGE
Considering that, in recent days, there have occurred excessive
conversions of national currency into foreign currencies, that these
conversions have no relation to the international flows of goods and
services, nor with the movements of productive investment capital, and
that these operations have been causing disorderly situations which
gravely disturb the exchange market, the Bank of Mexico, S.A., has re-
solved to adopt on a temporary basis and to make public the following
measures:
1. As from November 22, 1976, and until further notice,
the credit institutions will abstain from buying and selling foreign
exchange and gold coins.
2. Liquidation of foreign exchange obligations in favor of
or charged against credit institutions will continue to be effected as
is customary in the currency required. When the customers of the
institutions choose to effect this liquidation by delivering the equiv-
alent amount in national currency, the applicable exchange rate will
be the representative rate prevailing in the brokers' market.
3. All other banking operations will continue to be carried
out in the usual manner without any modification.
Bank of Mexico, S.A.
November 21, 1976
Translated by: Yves Maroni
November 22, 1976
FORD is LIBRARY 978839
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
November 22, 1976
FROM: TO: Ted Chairman Truman Burns EMT
Attached are the latest cables on the
Mexican economic situation.
Attachments: Mexico
14674
Hermosillo 0333
Mexico
14685
Mexico
14705
Mexico
14754
CC: Governor Wallich
FORD is LIBRARY
DEPARTMENT or STATE
IV
10a
Department of State
UNITED STATES OF AMERICA
TELEGRAM
CONFIDENTIAL
8614
EMT
MEXICO 14674 190038Z
55
PAGE 01
61
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TNFU OCT-01 ISO-00 ARA-76 FB-03 SP-02 NSC-05 NSCE-00 FRB-01
TRSE-09 CTAE-00 550-00 ONY-90 1032 W
036654
C '823357 NOV 76 18
FM AMEMBASSY MEXICO
TO SECSTATE WASHOC IMMEDIATE 8707
N N A L MEXICO 14674
LIMDIS
FÜR DISTRIBUTION FOR S. n, E, C, P, EB, ARA, S/P,
TREASURY, NSC, FRB ONLY
due 7/25/07
F. 0. 11652: GDS
Please return to
TAGS: EFIN
International Information Center
SUBJECT: MEXICAN ECONOMIC SITREP 6
REF: (A) STATE 277224 (B) MEXICO 14518
1. EXCHANGE RATES AND CAPITAL MOVEMENTS. FOR FOURTH
DAY IN ROW SANCO OF MEXICO SFT TRADING RANGE FOR PESO
AT SAME VALUF: 24.10 TO RUY AND 24. j? TO SELL, WE
BELIEVE BANCO DE MEXICO PLAN OF SETTING A LOW VALUE
TO THE PESO AT THE SECOND "FLOAT" Aivn THEN TRYING TO
ENCURAGE REPATRIATION OF FLIGHT CAPITAL BY SLOWLY
RATSING IT HAS NOT BEEN SUCCESSFUL. THERE STILL IS
ALMOST CERTAINLY A SMALL OUTFLOW OF CAPITAL DUE TO
I BACK OF CONFIDENCE IN THE PRESENT ADMINISTRATION.
HENCE THE BANK MAY HAVE CONCLUDED THAT THE GAME
WAS NOT WORTH PLAYING. HOWEVER, THE LONGER THE RATE
REMAINS FIXED THE HARDER IT WILL BF TO CHANGE IT IN
THE FUTURE. a BANKER IN MATAMOROS PUBLICLY STATED
THAT ANY FURTHER TINKERING WITH THE EXCHANGE RATE WOULD
FURTHER AFFECT PUBLIC CONFIDENCE.
2. GOVERNMENT FINANCE THE SECRETARY OF COMMUNICATIONS
FORD & GERALD ANBRARY
CONFIDENTIAL
OF STATE
Department of State
AMERICA
TELEGRAM
STATES OF
CONFIDENTIAL
PARE 1/2
MEXICO 14674 1900382
AND TRANSPORTATION ANNOUNCED THAT THE NATIONAL RAILKOADS
WILL SHOW A DEFICIT GREATER THAN 2.5 BILLION PESOS FOR
1970.
7, RUMORS. RUMORS PERSIST THAT THE INDEPENDECE
DAY DELEBRATION 0F SATURDAY, NOV. 29, WILL BE ACCOM-
PANIED 6 V ^ MILITARY COUP. IF SO, THIS IS INDOUBTEDLY THE
REST ADVERTISED COUP IN HISTORY, AND ALL RUMORS POINT
FOR MOCTEZUMA CID TO BE SECRETARY OF TREASURY.
s, HUSTNESS INFORMATION. NOTHING SIGNIFICANT.
5. WAGES AND PRICES. NO SIGNIFICANT.
6. STATEMENTS OF INTEREST GROUPS. THE SECRETARY
GENERAL OF THE AUTOMOBILE WORKERS STATED THAT SINCE
SEPTEMBER THE INDUSTRY HAS LAID OFF 20,000 PEOPLE FROM
YTS ORIGINAL WORK FOCE OF 50,000.
TOYA
FORD & LIBRARY GERALD
CONFIDENTIAL
of
DEP
STATE
10b
Department of State
UNITED STATES OF AMERICA
TELEGRAM
CONFIDENTIAL
2104
PAGE 01
HERMOS 03333 01 OF 02 2003297
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DODE-00 PM-04 H-92 INR-07 L-03 NSAE-00 NSC-05 PA-01
PRS-01 SP-02 SS-15 AID-05 COME-00 EB-07 FRB-03
TRSE-00 XMB-62 OPIC-03 CIFP-01 LAB-04 SIL-01 OMB-01
AGRE-00 1078 W
055290
C 1916467 (NOV 76 7619
FM AMCONSUL HERMOSILLO
Please return to
TO SECSTATE WASHDC IMMEDIATE 1123 International Information Center
TNFO AMEMBASSY MEXICO IMMEDIATE
A
SECTION 1 OF 2 HERMOSILLO 0333
MEXICO PASS AMCONSUL TIJUANA
F..0. 11652: GOS
TAGS
: PTNT, EGEN, MX
SUBJECT
: LAND TENURE PROBLEM IN SOUTHERN SONORA AT
CRITICAL POINT
REGIN SUMMARY: THE CONFLICT BETWEEN CAMPESINOS AND THE
OWNERS OF THE RICH IRRIGATED FARM LANDS OF THE YAQUI AND
MAVO VALLEYS IN SOUTHERN SONORA, THE BREADBASKET OF
MEXICO, REACHED A CRITICAL STAGE DURING THE PAST TWENTY
FOUR HOURS. RELIABLE SOURCES ADVISE THAT TEAMS OF SUR-
VEYORS FROM AGRARIAN REFORM SECRETARIAT (SRA) FLOWN INTO
DECLASSIFIED
E.O. 12958 3.6
SEC.3.6
CIUDAD OBREGON DURING EVENING OF NOVEMBER 18 BEGAN AT TWO
MR 07-117, #9. st etetr 2/22/08 2/22/08
BY dol NARA DATE 3/10/08
so M. NOVEMBER 10 TO "EXECUTE" JUST SIGNED PRESIDENTIAL
DECREES OF AFFECTATION OF PRIVATE LANDS, CONVEYING THESE
TO CAMPESINOS WHO HAVE BEEN CAMPING ON OR NEAR THE LANDS
TN QUESTION FOR THF PAST SEVERAL DAYS. ACTUAL EXTENT OF
I AND AFFECTED BY THESE PRESIDENTIAL DECREES, WHICH WFRE
SIGNED NOTWITHSTANDING EXISTENCE OF AMPAROS PROHIBITING
ANY SUCH ACTION UNTIL FANUARY 1977, NOT KNOWN AT THIS
CONFIDENTIA
GERALD FORD LIBRARY
FORM DS.1652
9.66
DEPAR
STATE
Dartment of State
OF STATES UNITED AMERICA
TELEGRAM
CONFIDENTIAL
PAGE 02
HERMOS 00333 09 OF 02 2003292
TIME. RUMORS HAVE IT THAT THESE COULD AMOUNT TO FIFTY
THOUSAND HECTARES OR MORE, BUT IN ALL PROBABILITY ARE
CONSIDERABLY LESS. TENSIONS IN CIUDAD OBREGON, SONORA,
AND THE SURROUNDING YAQUY VALLEY, ARE VERY HIGH, AND AN
NUTBREAK OF VIOLENCE AND BLOODSHED CANNOT BE RULED OUT.
CAMPESINO ORGANIZATIONS FORMING PACT OF OCAMPO HAVE
CALLED FOR A MASS CAMPESINO RALLY IN CIUDAD OBREGON ON
SUNDAY NOVEMBER 21. REPORTS ARE RIFE THAT SECRETARY
BARRA GARCIA OF SRA HAS REFN BUSING AND TRUCKING CAMPESINOS
AND AGITATORS FROM OTHER PARTS OF MEXICO TO SOUTHERN SONORA
TO SPEARHEAD ATTACK ON PRIVATE PROPERTY HERE, EMPLOYING
FLFETS OF CONASUPO AND CAMPESINO ORGANIZATION TRUCKS FOR
THEIR SUPPLY PAID FOR FROM FEDERAL MONIES. AGRICULTURAL
ACTIVITY IN THE AREA (PLANTING OF WINTER WHEAT) WHICH WAS
PAR BEHIND SCHEDULE TS NOW PARALYZED, ENDANGERING MEXICO'S
1977 WHEAT GRAIN SUPPLY. END SUMMARY
1. RECURRENT PATTERN OF PAST YEAR OF LAND INVASION BY ORGAN.
TZED CAMPESINOS, FOLLOWED BY EXHAUSTIVE NEGOTIATIONS MARKED
RY SONORAN GOVERNOR'S APPEALS TO CALM AND REASON AND TO
"STRICT ADHERENCE TO THE LAW", AND EVENTUAL PEACEFUL WITH-
DRAWAL OF THE "INVADERS", STARTED ANOTHER CYCLE ABOUT
NOVEMBER 10 WITH SFIZURE OF SIX BLOCKS IN THE YAQUI VALLEY
BY CENTRAL CAMPESINA INDEPENDIENTE (CCI) LED CAMPESINOS.
THTS WAS FOLLOWED AT END OF WEEK BY NUMEROUS "PARADAS"
OR DEMONSTRATIONS ADJACENT TO NUMEROUS FIELDS WHICH
CAMPESINOS CLAIM ARE PART OF SIMULATED LATIFUNDI AND WHICH
THEY VOWED THEY WOULD NOT LEAVE UNTIL THEY WERE GIVEN
SATISFACTION. ROTH INVADERS AND DEMONSTRATORS ARE REPORTED
TO BE WELL ARMED WITH MODERN FIREARMS. IT SHOULD BE NOTED
THAT LATEST RASH OF INVASIONS FOLLOWED IMMEDIATELY UPON
DECISION OF AMPARO TRIBUNAL MAGISTRATE IN MEXICO CITY END
OF LAST WEEK TO EXTEND AMPAROS PROTECTING LAND OWNERS UNTIL
JANUARY, WHILE ALLOWING SRA THIS ADDITIONAL TIME TO SUBMIT
SATISFACTORY EVIDENCE THAT THE PRIVATELY OWNED LANDS IN
DUESTION WERE BEING HELD IN VIOLATION OF LAWS AND CUNSTITU-
TION. ACTUAL EFFECT OF THE DECISION, WHICH WAS WIDELY HAILED
AS A VICTORY FOR THE FARMERS OVER THE CAMPESINOS, WOULD HAVE
REFN TO POSTPONE SETTLEMENT OF THE PROBLEM UNTIL WELL INTO
THE NEXT ADMINISTRATION.
FORD
CONFIDENTIAL
UNITED
GERALD
LIBRARY
652
0
STATE
Department of State
OF STATE AMERICA UNITED
TELEGRAM
CONFIDENTIAL
PAGE 03
HERMOS 03333 01 OF 02 200329Z
?. THE INTERMITTENT NEGOTIATIONS OVER THE SOUTHERN SONORA
I AND TENURE PROBLEM HAVE BEEN DRAGGING ON SINCE PRESIDENT
FCHEVERRIA'S APRIL 19 VISIT TO CIUDAD OBREGON CHERMOSILLO
OM 7/21/761 WHEN HF ANNOUNCED THAT HE WOULD RETURN IN ONE,
TWO OR THREE MONTHS, AS OFTEN AS NECESSARY, IN ORDER TO ALLOT
I ANDS TO CAMPESINOS "ACCORDING TO THE LAW". IN FACT,
FCHEVERRIA HAS NOT RETURNED, AND WHILE BARRA GARCIA HAS BEEN
BACK ON REPEATED OCCASIONS, HIS VISITS HAVE NOT RESOLVED THE
CONFLICT OR RESULTED IN ANY MORE AFFECTATIONS OF LANDS,
I ARGELY BECAUSE OF WIDESPREAD RECOURSE OF THE FARMERS TO THE
AMPARO PROCEDURE. SOMORAN PRIVATE FARMERS IN PARTICULAR, AND
THF PRIVATE SECTOR IN THE STATE IN GENERAL, ARE BITTER IN
THEIR DENUNCIATIONS OF BARRA GARCIA AND HIS SECRETARIATIS
ACTIVITIES, CHARGING THAT THEY HAVE ORGANIZED, ENCOURAGED,
AIDED AND ABETTED DISREGARD OF THE LAW AND CONSTITUTION,
INCITED TO VIOLENCE, AND USED ALI OF THE VAST POWERS OF THE
STATE AGAINST PRIVATE FARMERS AND THE RIGHT OF PROPERTY.
INVASIONS OF VARTOUS BLOCKS OF LAND IN BOTH THE YAQUI AND MAYO
VALLEYS WHICH HAVE DRAGGED ON FOR MANY MONTHS ARE SATD TO HAVE
REFN MADE POSSIBLE BY SURREPTITIOUS MORAL AND FINANCIAL SUPPORT
OF BARRA GARCIA AND HIS SRA PERSONNEL.
3. PRIVATE FARMERS' ORGANIZATIONS, DURING NUMEROUS ROUNDS OF
NEGOTIATIONS IN MEXICO CITY AT SRA AND FREQUENTLY AT LOS PINOS
HAVE OFFERED TO RELEASE FOR DISTRIBUTION TO CAMPESINOS UP TO
TEN THOUSAND HECTARES OF IRRIGATED LAND, PROVIDED CERTAIN
CONDITIONS OF COMPENSATION WERE MET, AND THAT THESE WERE IN
FACT ALLOCATED TO "LEGITIMATE" CLAIMANTS, MEANING REAL
CAMPESINOS AND NOT PERSONS WHO WFRE DEMANDING LAND BECAUSE
SOME WAS ABOUT TO PE DISTRIBUTED. THE DCAMPO PACT ORGANIZA-
TIONS WERE VARTOUSLY REPORTED AS DEMANDING 25,000 TO 30,000
HECTARES. SRA REPORTEDLY WENT THE CAMPESINOS ONE BETTER,
CLAIMING THAT 34,000 HECTARES WERE IMPROPERLY HELD BY PRIVATE
FARMERS AND SHOULD BF CONFISCATED AND DISTRIBUTED TO CAMPESINOS.
TT WILL BE RECALLED THAT THE GOM HAS ANNOUNCED THAT IT WILL
CLFAP 35,000 HECTARES OF NEW LANDS ADJACENT TO THE YAQUI VALLEY,
PRING THEM UNDER IRRIGATION, AND DISTRIBUTE THESE TO SEVEN
THOUSAND CAMPESINOS AT THE RATE OF FIVE HECTARES EACH. TEN
THOUSAND OF THESE NEW HECTARES HAVE ALREADY BEEN CLEARED BY
THE PROSPECTIVE OWNERS WORKING FOR WAGES, AND THE REQUIRED IRRIZA
CONFIDENTIAL
FORD & LIBRARY 078830
FORM
DS-1652
9.66
OF STATE
Department of State
UNITED STATES OF AMERICA
TELEGRAM
CONFIDENTIAL
PAGE 04
HERMOS 00333 01 OF 02 200329Z
RPT IRRIGATION WORKS HAVE BEEN STARTFU, INCLUDING BOTH IRRIGA-
VION AND DRINAGE CANALS. WHAT THIS HAS NOT FULLY TAKEN INTO
ACCOUNT IS THE PERENNIAL SHORTAGE OF IRRIGATION WATER, WHICH
is INSUFFICIENT TO SUPPLY EXISTING WATER-RIGHT LANDS EVENWHEN
SUPPLEMENTED BY PUMPED GROUNWATERS OF PELTIVELY HIGH SALINITY.
HYDRAULIC RESOURCES SECRETARIAT REGIONAL HEAD JUAN MUNOZ
ewn REP WHO WAS FOR MANY YEARS CHIEF OF THE MEXICALI VALLEY
TRRIGATION DISTRICT) WAS REPORTEDLY SO DISGUSTED WITH THIS
TECHNICALLY UNSOUND DECISION THAT HE RECENTLY LEFT HIS POSITION
FUR FARLY PETIREMENT, PATHER THAN BE FORCED TO CARRY OUT THE
PROJECT.
LIGRATE GERALD R. FORD
UNIT
DEPART
DS.1652
DEPARTMENT OF STATE
Department of State
UNITED STATES OF AMERICA
TELEGRAM
CONFIDENTIAL 2112
PAGE 01
HERMOS 00333 02 OF 02 200337Z
67
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DODE-00 PM-04 H-02 INR-07 L-03 NSAE-00 NSC-05 PA-01
PRS-01 SP-02 SS-15 AID-05 COME-00 EB-07 FRP-03
TRSE-00 XMB-02 OPIC-03 CIFP-01 LAB-04 SYL-01 OM8-01
AGRE-00 1078 W
055374
n 1916457 NOV 76
FM AMCONSUL HERMOSTLLO
TO SECSTATE WASHDC IMMEDIATE 1124
TNFO AMEMBASSY MEXICO IMMEDIATE
N
A
SECTION ? OF 2 HERMOSILLO 9333
MEXICO PASS AMCONSUL TIJUANA
1. CONVERSATIONS OF THF REPORTING OFFICER WITH FARMERS'
ORGANIZATIONS LEADERS IN SOUTHERN SONORA INDICATE THAT
THF TACTICS OF THE PRIVATE SECTOR WERE TO HOLD OUT
AGAINST THE ECHEVERRIA REGIME AS LONG AS POSSIBLE,
AND HOPEFULLY UNTIL THE NEW ADMINISTRATION TAKES OFFICE,
TN THE CONVICTION THAT THE LOPEZ PORTILLO TEAM WOULD ADOPT
SUUNDER ECONOMIC POLICIES IN AGRICULTURE. STATEMENTS BY
THE THEN-CANDIDATE TO THE FFFECT THAT "THERE IS NO MORE
IAND TO DISTRIBUTE" AND "LAND CANNOT BE STRETCHED LIKE
PUBBER" ARE RECALLED IN SUPPORT OF THESE HOPES. WHEN ASKED
WHAT WOULD HAPPEN TO THE THOUSANDS OF CAMPESINO CLAIMANTS,
NOW CAMPING OR SQUATTING IN SOUTHERN SONORA OR NORTHERN
SINALOA, THEY SAID THE MILITARY, "IF BACKED BY THE PRES-
TOFNT" WOULD SHIP THEM BACK TO WHENCE THEY WERE BROUGHT
BY BARRA GARCIA AND THE SRA, REACTIONS TO THE POSSIBILITY
THAT THIS MIGHT RESULT IN SOME VIOLENCE AND POSSIBLY BLOOD-
SHFD, WAS THAT MORE MEXICAN BLOOD HAS BEEN SHED OVER LAND
THAN ANYTHING FLSE.
CONFIDENTIAL
BERALD FORD LIBRARA
FORM
DS-1652
DEPARTMENT
or
STATE
Department of State
UNITED STATES OF AMERICA
TELEGRAM
CONFIDENTIAL
PAGE 02
HERMOS 00333 02 OF 02 2903372
5. LATEST REPORTS FROM CIKDAD OBREGON, RECEIVED FROM WELL
INFORMED, ALBEIT STRONGLY PARTISAN PRIVATE SECTOR SOURCES,
ARF THAT DURING THE LATE EVENING AND NIGHT OF NOVEMBER
18 MP 19 TEN AIRCRAFT ARRIVED AT CIUDAD OBREGON, SONORA
WITH THE PERSONNEL OF R3 BRIGADES OF SPA SURVEYORS AND OTHER
OFFICIALS, CARRYING FRESHLY SIGNED PRESIDENTIAL DECREES OF
FFFCTATION GRATING LANDS TO 50,000 *SO-CALLED CAMPESINOS",
AND THAT THESE TEAMS BEGAN THEIR WORK IMMEDIATELY, STARTING
AT TWO A.M. TACTIC OF WORKING DURING THE NIGHT IS NOT NEW
FOR THE TURN OVER OF THE SAN IGNACIO, RIO MUERTO, SUNORA
LANDS WHERE THE OCTOBER 1975 "MASSACRE" TOOK PLACE, MAS
CARRIED OUT TN SIMTLAR MANNER DURING THE NIGHT.
a. SUPPORT FOR REPORTS THAT OUTBREAKS OF VIOLENCE AKF FEARED
COMES FROM SCATTERED SOURCES: THE RED CROSS IN SONORA HAS
PEFN ORDERED TO CONCENTRATE UP TO FIFTY AMBULANCES IN THE
CINDAD OBREGON AREA; THE SRA HERMOSILLO OFFICE STAFF HAVE
REFN SLEEPING TN THEIR OFFICES FOR THE PAST Two DAYS TO Pc
AVAILABLE AT AIL TTMES: SONORA GOVERNOR CARRILLO MAKCOR
LEFT HERMOSILLO UNEXPECTFOLY DURING THE EVENING OF
NOVEMBER 18 FOR CIUDAD OBREGON.
7. THE RESULT OF THE PREVAILING TENSION AND UNCERTAINTY TN
SOUTHERN SONORA TS THAT PLANTING OF WINTER WHEAT IS BEHIND
SCHEDULE, WITH ONLY TWENTY FIVE PERCENT OF THE AREA PLATNIFU
ON THE COMPARABLE DATE IN 1975 THE FINAL DATE FOR PLANTING
WITHOUT SERIOUS ADVERSE RESULTS TO PRODUCTION IS DECEMBER 15,
AND TALK OF SIZEABLE AND COSTLY IMPORTS BEING REQUIRED AS
A RESULT IS ALREADY BEING HEARD. ON THE OTHER HAND, THREE
OF THE 85 FARMERS DISPOSSESSED UF THEIR LAND AT SAN IGNACIO,
RIO MUFRTO, SONORA HAVE FILED SUITS ON THEIR BEHALF AGAINST
PARRA GARCIA, HIS SUB-SECRETARY TORRES, AND AN ENGINEER
OROPEZA, FOR TWENTY ONE MILLION PESOS FOR DAMAGES AND VIOLA.
TION OF LEGAL ORDERS, ON THE GROUNDS THAT BARRA DISBEGARDED
PRESIDENTIAL ORDERS ON OCTOBER 29 THAT THE FARMERS DE COM-
PENSATED FOR THEIR CROPS, FARM IMPLEMENTS AND IMPROVEMENTS
LOST WHEN THEIR LANDS WERE TAKEN.
SACKSTEDER
&
FORD
GERALD
LISTAGE
CONFIDENTIAL
FORM
DS-1652
9.66
GERALD R. FORD LIBRARY
This form marks the file location of item number 100
as listed on the pink form (GSA Form 7122, Withdrawal Sheet)
at the front of the folder.
DEPARTMENT OF STATE
MEXICO
OF AMERICA UNITED MAKE
Department of State
TELEGRAM
/
CONFIDENTIAL 1085
LMT
PAGE 01
MEXICO 14685 1917072
A4
ACTION S5-14
TNFO OCT-01 ISO-00 SSO-00 EB-03 ARA-06 SP-02 TRSE-00 NSC-05
NSCE-00 FRB-03 CIAE-00 1034 W
047409
n 1917007 NOV 76
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC NIACT IMMEDIATE 8711
N E IDENTY A MEXICO 14685
LIMOIS FOR DISTRTBUTION FOR S,D, E, C, P, EB, ARA, S/P,
TREASURY, NSC, FRB ONLY
F.O. 11652: GDS
to
TAGS: EFIN
international Information Center
SUBJECT: MEXICAN ECONOMIC SITREP 7
DECLASSIFIED
REF: A) STATE 277224, B) MEXICO 14674
AUTHORITY state dept sys rev 5/4/06
1. SINCE SENDING REFERENCE B WE HAVE BEEN INFORMED THAT A
BY dal NARA, DATE 2/12/15
GREAT RUN ON THE BANKS IS UNDERWAY DUE ON PART TO RUMORS
(UNFOUNDED IN OUR OPINION) OF IMMINENT COUP ON NOV 20.
AMBASSADOR WAS TOLD (BY HIGH OFFICER OF BANCO DE COMERCIO
LAST NIGHT) THAT BANCO DE COMERCIO ALONE HAD TO BORROW
$26 MILLION FROM CENTRAL BANK YESTERDAY TO MEET DEMAND.
THE ENTIRE BANKING SYSTEM BORROWED OVER $68 MILLION FROM
CENTRAL BANK YESTERDAY.
2. AMBASSADOR'S SOURCE DOUBTED THAT BANCO DE MEXICO WOULD
RE ABLE TO CONTINUE THIS PAYOUT FOR LONG, AND TODAY IS
EXPECTED TO BE WORSE. LOCAL BANK STAFFS ARE OVERWHELMED AND
SOURCE STATED THAT COMMERCIAL BANKS MAY HAVE TO CLOSE BEFORE
NORMAL HOURS TODAY.
3, SOURCE ALSO DISCOUNTS COUP AND OTHER ALARMING RUMORS,
BUT SAYS THAT LEVEL OF CONFIDENCE IS SO LOW IN MEXICO THAT
PUBLIC WILL BELIEVE ANYTHING (EXCEPT WHAT GOVERNMENT SAYS).
CONFIDENTIAL
FORD & LIBRARY GERALD
FORM DS-1652
OF STATE
Department of State
UNITED STATES OF ,
TELEGRAM
CONFIDENTIAL
PAGE 02
MEXICO 14685 191707Z
A. IT TS INCREDIBLE THAT I HAVE BEEN DEPRIVED OF THE SERVICES
OF FINANCIAL ATTACHE PASCOE AT A TIME LIKE THIS AND DESPITE
EXPLICIT PROVISO THAT IF HE WERE CALLED TO WASHINGTON (IN
TTSELF UNWISE) HE BE BACK BY LAST WEEKEND. REQUEST PASCOE'S
IMMEDIATE RETURN, OR THE IMMEDIATE ASSIGNMENT OF A FOREIGN
SERVICE OFFICER OF APPROPRIATE BACKGROUND WHO WILL BE UNDER
MY CONTROL.
TOVA
&
FORD
GERALD
CONFIDENTIAL
FORM DS.1652
DEPARTMENT
of
STATE
OMEXICA
Department of State
of I AMERICA UNITED
TELEGRAM
CONFIDENTIAL
1309
PAGE 01
MEXICO 14705 191905Z
ss
AG
ACTION SS-14
TNFO OCT-01 ISO-00 SSO-00 EB-03 ARA-06 SP-02 TRSE-00 NSC-05
NSCE-00 FRB-03 CIAE-00 1034 W
049086
C 1918557 / NOV 76
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC NIACT IMMEDIATE 8721
F: N F I 0 E N t MEXICO 14705
HIMDIS FOR DISTRIBUTION FOR S, D, E, C, P, EB, ARA, S/P,
TREASURY, NSC, FRB ONLY
F.O. 11652: GDS
TAGS: EFIN
Please return to
SUBJECT: MEXICAN ECONOMIC SITREP 8
International Information Center
REF: A) STATE 277224, B) MEXICO 14685
1. SENIOR OFFICIAL OF BANCO DE COMERCIO HAS JUST CALLED ME
(18:45 A.M.) TO SAY THAT BANK WITHDRAWALS AND CONVERSIONS
INTO DOLLARS CONTINUE VERY HEAVY TODAY. DESPITE THIS, THERE
TS NOW NO RISK THAT BANKS WILL CLOSE EARLY AS BANCO DE MEXICO
HAS GUARANTEED TO PROVIDE DOLLARS IN ANY AMOUNT REQUIRED,
CONSIDERING THIS THE BEST MEANS TO CALM PUBLIC FEARS AND
SPECULATION. SOURCE BELIEVES THAT PRESSURES FOR CONVERSIONS
WILL CONTINUE AT LEAST THROUGH MONDAY BY WHEN IT IS HOPED
THAT A QUIET WEEKEND WILL HAVE TAKEN PLACE AND PUBLIC CON-
FIDENCE RESTORED.
DECLASSIFIED
2. IN THE MEANTIME, THERE ARE ALARMING RUMORS OF HEAVY
LAND INVASIONS IN THE NORTH AND OF THE FACT THAT PRESIDENT
FCHEVERRIA HAS REVERSED HIMSELF AND IS AUTHORIZING DISTRI-
AUTHORITY state dept sysrev 5/4/04
BY dal NARA, DATE 2/12/15
BUTION OF LAND IN THE YAQUI VALLEY NEAR CIUDAD OBREGON,
THROUGH AN OFFICIAL DECREE (WHICH, WE UNDERSTAND, WILL
APPEAR IN THE DIARIO OFFICIAL WHICH IS NOT DISTRIBUTED
PUBLICLY UNTIL MONDAY). THIS DECREE APPARENTLY OVERRIDES
JUDICIAL "AMPARO" GRANTED BY THE COURTS TO THE LAND OWNERS
UNTIL JANUARY 5. THIS HAS CAUSED CONSTERNATION IN BUSINESS
GERALD R. FORD LIBRANT
CONFIDENTIAL
89
DEPARTMENT OF STATE
Department of State
of STATE AMERICA UNITED
TELEGRAM
CONFIDENTIAL
PAGE 02
MEXICO 14705 191905Z
COMMUNITY AND I HAVE BEEN TOLD THAT THE EXECUTIVE BOARD OF
COPARMEX CCONFEDERACION PATRONAL DE LA REPUBLICA MEXICANA)
HAS BEEN CALLED INTO SESSION. BANK AND BUSINESS SOURCES
HAVE TOLD US THAT THEY CONSIDER THIS PRESIDENTIAL DECREE
AS ECONOMIC AND POLITICAL MADNESS, PARTICULARLY COMING AT
MOMENT OF GENERALIZED LACK OF CONFIDENCE AND IN THE LAST
DAYS OF AN OUTGOING REGIME AND OVERRIDING A COURT ORDER.
PWF WILL ATTEMPT TO REPORT SEPARATELY ON LAND INVASION
MATTER.)
JOVA
&
FORD
GERALD
LIBRARY
CONFIDENTIAL
in
STATE
MEXICO
Department of State
STATES of the
TELEGRAM
FUNFIDENTIAL
1761
EMT
PAGE 11
MEXICO 14754 200049Z
61
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TNFO OCT-01 TSO-00 ARA-06 FB-03 SP-02 TRSE-00 NSC-05
NSCE-00 FRB-01 CIAF-00 SSO-00 1032 W
053409
n 2008107 NOV 76
5M AMEMBASSY MEXICO
TO SECSTATE WASHOC IMMEDIATE 8757
Please to
it
:
F
I
N
T
T
+.
MEXICO 14754
International Information Center
FIMDTS I
FOR DISTRIBUTION FOR S. D, E, C, P, FB, ARA, S/P, TREASURY, NSC,
FRB ONLY
DECLASSIFIED
F.O. 11652: GDS
AUTHORITY state dept sys new 5/4/06
TAGS: FFTN
BY, dal NARA, DATE 2/12/15
SURJ: MEXICAN FCONOMIC STTREP O
REF: A) STATE 277224, R) MEXICO 14685, C) MEXICO 14705
1. DURING CONVERSATION LATE THIS MORNING BETWEEN
AMPASSADOR DENT (STR) AND MARIO RAMON RETETA, SECRETARY OF TREASURY,
LIC. BETETA STATED THAT YESTERDAY AND TODAY WERE DIFFICULT
DAYS FOR MEXICO AS IT WAS EXPERIENCING LARGE DEMAND FOR
DOLLARS. THIS DEMAND HAD BEEN GENERATED BY
BACK UF TRUST TN THE ADMINTSTRATION AND RIDICULOUS RECENT
RUNDRS. HE BELTEVED THESE RUMORS WERE PURPOSELY BEING
PLANTED BY DISAFFECTED ELEMENTS TN MEXTCAN SOCIETY TO
DISCREDIT THE CURRENT ADMINISTRATION AND AT THE SAME TIME
WEAKEN THE POSITION OF THE INCOMING ADMINISTRATION. AFTER
THIS WEEKEND HF SATD PEOPLE WILL SEE THAT THERE IS NO
FUUNDATION TO THESE RUMORS AND THE CONVERSION OF PESOS
TO DOLLARS WILL STOP. FORTUNATELY, THE TIME WAS
SHORT UNTIL THE NEXT ADMINISTRATION TOOK TO POWER,
ON: Y SEVEN WORKING DAYS, AND THERE WOULD BE NO
CATASTROPHE.
FORD is 976839 LIBRARY
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MEXICO 14754 200492
: BANKS REPORTED HEAVY RUN ON PESOS TODAY BUT THEY
PLOSED THEIR DOORS AS USUAL AT 1:30 ALTHOUGH MANY
PEOPLE WERE LEFT INSIDE TO BF SERVICED LATER.
INTERESTINGLY, BANKERS NOTED THAT MANY WEALTHY AND
SOPHISTICATED PERSONS WERE COVERTING PEOOS TODAY.
THEY ATTRIBUTED THIS TO CONSTERNATION CAUSED BY
SUPPRISE ANNOUNCEMENT AT 9:30 THIS MORNING BY
PRESTDENT FCHEVERRIA THAT THE GOVERNMENT WAS EXPRO-
PRTATING 100.000 HECTARES OF LAND TN SONORA FROM 72
FAMILIES THE LAND IS REPORTEDLY IN THE YAQUI VALLEY
AND TO BE DISTRIBUTED AMONG 8,000 CAMPSINO FAMILIES
SFE REFTEL C).
3. FOR FIFTH DAY IN ROW BANCO DE MEXICO HELD
THE EXCHANGE RATE CONSTANT AT 24.10 TO BUY AND
24.32 T1) SFLL.
JOVA
GERALD R. FORD LIBRABY
CONFIDENTIAL
DEPARTMENT OF STATE
Department of State
UNITED STATES OF AMERICA
TELEGRAM
LIMITED OFFICIAL USE 5737
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MEXICO 14790 221956Z
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TO SECSTATE WASHDC IMMEDIATE 8768
return to
INFO TREASURY WASHDC IMMEDIATE
international please Information Center
I LIMITED OFFICIAL USE MEXICO 14790
F. 0. 11652: N/A
TAGS: EFIN MX
SUBJECT: FOREIGN EXCHANGE MARKET OPERATION UNDER NEW SYSTEM.
REF: MEXICO 14779
1. FOLLOWING IS OUR PRELIMINARY UNDERSTANDING ON HOW THE
FOREIGN EXCHANGE MARKET IS NOW OPERATING BASED ON
CONVERSATIONS WITH BANKERS.
?. FOREIGN EXCHANGE TRANSACTIONS ARE BEING HANDLED BY
AROKERAGE HOUSFSICASAS OF VALORES) OR REGISTERED STOCK
EXCHANGE AGENTS (AGENTES DE BOLSA). AT LEAST SEVERAL
I ARGE BANKS (PANCO DE COMERCIO AND BANCO NACIONAL OF
MEXICO) CONTROL BROKERAGE HOUSES. THE BRANCHES OF THESE
RANKS ARE PUYING DOLLARS AND DOLLAR INSTRUMENTS AT RATES
SLIGHTLY AROVE 28 PESOS PER DOLLAR. OFFICERS OF BANCO
DE COMERCIO HAVE AUTHORITY TO CONVERT UP TO ssay. WHILE
THE TRANSACTION IS HANDLED THROUGH BANCO DE COMERCIO
OFFICES, IT SHOWS UP ON THE BOOKS OF ITS BROKERAGE HOUSE.
FORD is GERALD LIBRARY
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DEPARTMENT OF STATE
Department of State
UNITED STATES OF ,
TELEGRAM
LIMITED OFFICIAL USE
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MEXICO 14790 2219562
SALES OF DOLLARS ARE BFING MADE ON AN "AS AVAILABLE"
BASIS, AT A RATE ABOUT ONE PRECENT AROVE THE DOLLAR
BUYING RATE.
3. WHILE THE BANK OF MEXICO COMMUNIQUE(REFTEL) REFERS
TO MONEY BROKERS/CORREDORES DE CAMBIO), WE UNDERSTAND
THAT ALL STOCK MARKET PROKERS CARENTES OF BOLSA OR
CASAS OE VALOREST CAN PARTICIPATE IN THE MARKET.
A. WE UNDERSTAND THAT THERE HAVE NOT BFEN MANY
TRANSACTIONS THIS MORNING. CITTBANK IS HOLDING OFF
MAKING ANY TRANSACTIONS THOUGH THEY HAVE HEARD THAT
BANKS CAN IN FACT MAKE TRANSACTIONS A7 UR NEAR THE
RATES BEING RUNTED BY PROKERS.
5. THE MEXTCAN BANKERS WERE TO MFET WITH BANK OF
MEXICO AND TREASURY OFFICIALS THIS MORNING AT 11 A.M.
WE DO NOT YET KNOW THE OUTCOME. THERE IS CONSIDERABLE
CONFUSION AS TO HOW THE MARKET SHOULD OPERATE,
THIS BEING THE FIRST EXPERIENCE WITH A FLOATING RATE.
WE MAY HAVE TO MODIFY ABOVE DESCRIPTION UPON RECEIPT
OF NEW INFORMATION.
JOVA
FORD i LIBRARY GERALD
LIMITED OFFICIAL USE
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DEPARTMENT or STATE
EXICO
Department of State
of STATE AMERICA UNITED
TELEGRAM
CONFIDENTIAL 6238
EMT
PAGE 01
MEXICO 14819 230003Z
Please return to
55
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70
ACTION ARA-06
TNFO OCT-01 SS-14 ISO-00 E9-03 SP-02 TRSE-00 NSCE-00 NSC-00
FRB-01 SSO-00 1032 W
079398
C 2223452 (NOV 7622
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC IMMEDIIATE 8788
5 N F I D F N T I MEXICO 14819
LIMDIS
FOR DISTRIBUTION FOR S, D. E, C. P. EB, ARA, S/P,
TREASURY. NSC, FRB ONLY
DECLASSIFIED
F.O. 11652: GDS
TAGS: EFIN, MX
AUTHORITY state dept sep rev 5/4/06
SUBJECT: MEXICAN ECONOMIC SITREP
BY dal NARA, DATE 2/12/15
REF: A) MEXICO 14700, B) MEXICO 14779
1. EXCHANGE RATES AND CAPITAL MOVEMENTS. AS NOTED IN REFTELS
MEXICO IS NOW ON A TRULY FLOATING EXCHANGEEEE RAIF AS BANCO DE
MEXICO WITHDREEW FROM FOREIGN EXCHANGE MARKET. AS OF NOON TODAY
RATE BEING QUOTTTED WAS SLIGHTLY MORE THAN 28 PESOS PEP DOLLAR
(SFE REFTEL A). ACCORDING TO PRESS CAPITAL OUTFLOW PAC BEEN
RUNNING 10 TO 15 MILLION DOLLARS A DAY FOR LAST WEEK 000P 80,
HOWEVER IT INCREASED RAPIDLY AT END OF LAST WEEK TO ABOUT
150 MILLION ON FRIDAY. BANCOO OF MEXICO UNDOUBTED SAW 10%
OF THIS COMING IN THE FEW DAYS PREECEDING ACCESSION TO POWER
OF LOPEZ PORTILLO ON DECEMBER 1 AND DEEEECIDED IT COULD NOT
FINANCE SUCHHHH A DRAIN. REPORTEDLY A "OPEN" MARKET IN DOLLARS
OUTCKLY DEVELOPED AT THE AIRPORT AFTER THE EXCHANGE BOOTH
CLOSED FRIDAY AFTERNOON, THIS MARKET HAD TRADED THE PESO ATT
ABOUT 26 TO THE DOLLAR.
GERALD FORD LIBRARY
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DEPARTMENT OF
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Department of State
OF STATE AMERICA UNITED
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PAGE 02
MEXICO 14819 2300032
2. GOVERNMENT FINANCE. THE NAATTIONAL TELEPHONE COMPANY,
TEFEELEFONOS DE MEXICO, WILL HAVEEEE A DEFICIT OF 14 BILLION
PESOS THIS YEAR ACCORDING TO THE LEADER OF THE TELEPHONE
WORKERS. HE ALSO STATED THAT THE SITUATION WASS AGGRAVATED
BY THE FIRM HAVING
THE MAJOR PART OF ITS LIABILITIFEFES IN
not LAKS AND THOUGHT THAT RAAATES WOULD BE INCREASED BETWEEN
15 AND 20 PERCENT.
3.
RUMORS. (SEE MEXICO 14711)
A. BUSINESS INFORMATION. NOOTTHING SIGNIFICANT.
5. WAGEEEES AND PRICES. NEWSPAPERS REPORTITT GREAT PRICE INCREASES
TN ONE OF MEXOCI'S MAJOR DOWNTOWN MARKEEETTS OVER THE WEEKEND
PRICES OF FRUITS AND VEGETABLES ALMOST DOUBLED. SFLLERS
CUESTIONED STATTTTED THEY HAD NOT FAITH TN THE VAAALUE OF THE
PESO. NEWSPAPERS TTODAY STATE THAT A REPORT JUST REFELEASED
BY BANCO NACIONAL DE MEXICO, WHICH WE HAVE NOT YET RECEIVEED,
SAYS THAT WHEREAS THE MONEEEFY SUPPLY HAD BEEN INCREASING AT
AN ANNUAL RATE OF 22 PERCENT
THROUGH AUGUST 1976, IN SEP
TEMBER THE RATE OF INCREASE JUMPEED TO 42 PERCENT. THIS IS
ANN ASTOUNDING RATE OF INCREASE PARTI
rui ARLY WHEN THAT AT
THIS TIME PEESO CURRENCY AND ACCOUNTS WERE INCREEASINGLY BEING
CONVERTED TO DOLLAARS. ONE OF THE MAJOR REASONS FOR THTS
JUMP IN THE RATE OF MONETAARY EXPANSION COULD HAVE BEEN THE
NEED TO FINANCE THE GROWING PUBLIIC DEFICIT BUT this EXPLA-
NATION DOES NOT SEEM AT THIS TIME TO BEEE SUFFICIENT NOR DOES
THE LIQUIDATION OF PESO TIME DEPOSITS AND INSTRUMENTS SINCE
THESE DO NOT FITTTURE IN THE MONEY SUPPLY.
TOVA
GERALO FORD LIBRARY
CONFIDENTIAL
FORM DS-1652
GERALD R. FORD LIBRARY
This form marks the file location of item number 12a-12c -
as listed on the pink form (GSA Form 7122, Withdrawal Sheet)
at the front of the folder.
CONF IDENT IAL
November 29, 1976
TO:
FROM:
Ted Truman
Chairman Burns EMT
Attached are the latest cables on the Mexican economic
situation.
Attachments: Mexico 14904
Mexico 14956
Mexico 15016
cc: Governor Wallich
Defense classification of this document is due
to the inclusion of U.S. Government information
officially classified under Executive Order 10:01
which provides that "A document... shall bear a
classification at least as high as that of its
highest classified component."
GERALD R. FORD LIBRARY
DEPARTMENT OF STATE
Department of State
UNITED STATES OF AMERICA
TELEGRAM
CONFIDENTIAL
1571
PAGE 01
MEXICO 14904 241824Z
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NSCE-00 FRB-01 SSO-00 1032 W
24
111003
n 2418012 NOV 76 ZFF-4
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC IMMEDIATE 8830
A: N F I P E N T 7 A to MEXICO 14904
TIMDIS
FOR DISTRIBUTION FOR S.D.E.C. P, EB, ARA, S/P, TREASURY, NSC, FRB ONLY
DECLASSIFIED
F.O. 11652: GDS
TAGS: EFIN MX
AUTHORITY state dept sys crew 5/4/06
SUBJECT: MEXICAN ECONOMIC SITREP
BY dal NARA, DATE 2/12/15
REF: MEXICO 14819
1. EXCHANGE SYSTEM. ON SECOND DAY OF NEW EXCHANGE SYSTEM,
DOLLAR LAR BUYING RATE OF BANCO NACIONAL DE MEXICO (BANAMEX)
DECLINED FROM 25.5 AT THE OPENING TO 22.0 AT ONE P.M.
DOLLAR SELLING RATE ROUGHLY 10 PERCENT MORE, MAKING FOREIGN
EXCHANGE BUSINESS PROFITABLE. BANAMEX OFFICIALS TELL
US THAT DECLINE WAS DUE TN PART TO SELLING BACK OF DOLLAR
CURRENCY THAT WAS PURCHASED LAST THURSDAY AND FRIDAY,
RUT IN A MUCH SMALLER VOLUME. MARKET NOV. 23, AS NOV. 22,
WAS DOMINATED BY INDIVIDUALS AND CHARACTERIZED BY SMALL
TRANSACTIONS. COMPANIES APPEAR TO BE HOLDING OFF FOR THE
TIME BEING.
2. ONE BANKER TOLD US THAT ALL TRANSACTIONS OVER $5, 900,
HAVE TO BE REPORTED TO THE BANK OF MEXICO PRIOR TO EYECUTION AS A
RESULT, ONE PURCHASE OF $50, 000 WAS BROKEN INTO ELEVEN TRANSACTIONS.
3. PUBLIC UNDERSTANDING OF THE NFW MARKET IS STILL LIMITED. MONDAY'S
NEWSPAPERS MERELY REPRINTED THE BANK OF MEXICO'S COMMUNIQUE WHICH
&
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GERALD
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Department of State
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MEXICO 14904 2418242
GAVE THE IMPRESSION, PERHAPS DELIBERATELY, THAT ALL FOREIGN EXCHANGE
TRANSACTIONS HAD BEEN SUSPENDED. NOV. 23 PAPERS NOTE THAT BROKERAGE
HOUSES ARE ENGAGING IN FOREIGN EXCHANGE OPERATIONS, BUT DO NOT
PROVIDE
GUIDELINES FOR BUYING DOLLARS. THE INDIVIDUAL HAS TO FIND OUT FOR
HIMSELF.
1. THERE ARE FIVE OR SIX BANKS THAT HAVE CASAS DE VALORES (BROKERAGE
HOUSE). WE HAVE NOT YET CONFIRMED THAT ALL THESE ARE OPERATING IN THE
FOREIGN EXCHANGE MARKET, THOUGH ONE, BANCO DEL ATLANTICO, ADVERTISED
SERVICES OF ITS BROKERAGE HOUSE IN NOV. 23 PAPERS.
W.E ARE AWARE OF SEVERAL BANKS, INCLUDING CITIBANK,
THAT ARE NOT ENGAGIN IN FOREIGN EXHCANGE TRANSACTIONS.
5. BAND DE COMERCIO OPENED NOVEMBER 23 AT 25.5 BUYING
AND 27.5 SELLING. IT CLOSED AT 22.0 BUYING AND 25.0
SELLING. IT OPENED AT 23 BUYING AND 25 SELLING ON NOVEMBER 24.
NIDE SPREAD TS DISCOURAGING TRANSACTIONS.
6, WHILE SHARP DROP IN RATE FROM MONDAY'S 28 PESOS PER
DOLLAR MAY BE DUE TO MARKET FORCES, SOME OBSERVERS
SUSPECT THAT BANK OF MEXICO MAY BE MANIPULATING THE
MARKET.
% ONE HALF OF $800 MILLION LOAN IS TO BE DRAWN DOWN
ON NOVEMBER 24 AND THE OTHERHALF ON NOVEMBER 29.
FOREIGN BANK REPRESENTATIVE TELLS US THAT BANK OF AMERICA
SENT LETTER TO TREASURY REQUESTING DETAILS ON IMF PROGRAM
$5 WELL AS RELEVANT FUND AND WORLD BANK DOCUMENTS.
TREASURY REPLIED THAT FUND AND BANK PROHIBITED THE
RELEASE OF THESE DOCUMENTS, BUT GAVE A RESUME OF THE EFF
PROGRAM.
JOYA
FORD in GERALD LIBRARY
CONFIDENTIAL
DEPARTMENT OF STATE
Department of State
UNITED STATES OF
TELEGRAM
CONFIDENTIAL 2040
PAGE 01
MEXICO 14956 250022Z
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121282
n 2423577 NOV 76 24
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC IMMEDIATE 8848
S O N F I F N T I A L MEXICO 14956
IMDIS FOR DISTRIBUTION FOR S,D,E,C, P, EB, ARA, S/P,
TREASURY, NSC, FRB ONLY
DECLASSIFIED
FO 11652 : GDS
AUTHORITY state dept sysee 5/4/06
TAGS : EFIN MX
SUBJ : MEXICAN ECONOMIC SITREP
BY dal NARA, DATE 2/15/15
REF : A) STATE 277224: B) MEXICO 14904
1. EXCHANGE SYSTEM. TODAY, NOVEMBER 24, DOLLAR BUYING RATE
CONTINUED TO DROP. BANCO DE COMERCIO REPORTS THEY OPENED
AT 25 PESOS TO BUY DOLLARS AND 23 TO SELL, BUT CLOSED AT
24 AND 21 RESPECTIVELY. HOWEVER, OFFICIAL NOTED OTHER BANKS,
AND EVEN BANCO DE COMERCIO BRANCHES OUTSIDE OF MEXICO, WERE
QUOTING SOMEWHAT DIFFERENTLY ALTHOUGH TENDENCY WAS THE SAME.
MARKET CONTINUES TO HANDLE MOSTLY REQUESTS BY INDIVIDUALS, SOME OF
WHOM TRADED LARGE AMOUNTS. STILL LITTLE CORPORATE ACTIVITY
RETNG NOTED. DOLLAR BUYING RATE DROPPING DUE TO DOLLAR
OFFERINGS CONTINUING SOMEWHAT LARGER THAN DEMAND. BECAUSE
BANKS HAVE NO GUARANTEE THAT BANCO DE MEXICO WILL BUY
THF DOLLARS FROM THEM, OR THE RATE IF IT BUYS, THEY ARE
TRYING TO BALANCE THEIR POSITIONS. BANCO DE COMERCIO
TOOK IN A LARGE AMOUNT OF DOLLARS AT 28 PESOS EARLY
MONDAY LEAVING IT VERY LONG ON DOLLARS. HOWEVER, IT
HAS NOW ALMOST BALANCED ITS POSITION. INFORMANT
R.
EMPHATIC THAT BANCO DE MEXICO NOT IN THE FOREIGN
EXCHANGE MARKET IN ANY MANNER.
GERALD
CONFIDENTIAL
FORM
DEPARTMENT OF STATE
Department of State
OF STATE UNITED NAME AMERICA
TELEGRAM
CONFIDENTIAL
PAGE 02
MEXICO 14956 250022Z
: OTHER ECONOMIC FRONTS. THESE ALL CONTINUE
REMARKABLY QUIET WITH NOTHING SIGNIFICANT TO REPORT.
TOVA
BERALD R.
FORD
CONFIDENTIAL
TRANTMENT OF STATE
Department of State
AMERICA UNITED
TELEGRAM
STATES
OF
CONFIDENTIAL
7047
PAGE 01
MEXICO 15016 2700092
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NSCE-00 FRB-01 SS0-00 ONY-09 /032 H
26
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n 2623557 NOV 76 ZFF-4
FM AMEMBASSY MEXICO
TO SECSTATE WASHDC IMMEDIATE 8884
&
A N F E N MEXICO 15016
I IMDIS FOR DISTRIBUTION FOR S,D,E,C,P, FB, ARA, S/P,
TREASURY, NSC, FRB ONLY.
DECLASSIFIED
FO 11652 : GDS
TAGS : EFIN, MX
AUTHORITY state dept. syster 5/4/06
SUBJ : MEXICAN ECONOMIC STTREP
BY dal NARA, DATE 2/12/15
REF : A) STATE 277224 B) 14904
1. EXCHANGE SYSTEM. YESTERDAY, NOVEMBER 25, BANKS WERE
PUVING DOLLARS AT 23 AND SELLING AT 24. TODAY, THE
RATES REMAIN THE SAME. MARKET MAY BE CONSOLIDATING.
TRADERS HAVE FORGED THE WARROWING OF THE BUYING
AND SELLING SPREAD BY SHOPPING AMONG BROKERS.
P. OTHER ECONOMIC FRONTS. THE LEADER OF THE MEXICAN
LAROR CONFERATION, FIDEL VELAZQUEZ, STATED THAT THE
LABOR MOVEMENT WILL NOT ASK FOR A GENERAL INCREASE
AT THIS TIME. WHILE THE PESO FLOATS THE DETERIORATION
OF PURCHASING POWER CAN NOT RE CALCULATED. HOWEVER,
THE NATIONAL MINIMUM SALARIES COMMISSION WILL HAVE
TO FIX A NFW MINIMUM WAGE JAN 1, 1977. SINCE THE
SECOND DEVALUATION. OCT 27, LABOR HAS SHOWN REMARKABLE
FOREBEARANCE IN NOT IMMEDIATELY CLAIMING A WAGE INCREASE
TO RESTORE REAL INCOME. THIS COULD BE DUE TO SEVERAL
FACTORS: EVEN ORGANIZED LABOR IS FEELING THE PINCH
OF UNEMPLOYMENT AND THE SHOCK OF THE SECOND DEVALUATION
TO WHICH THE IMMEDIATE PRICE AND WAGE RISES FOLLOWING
R.
FORD
SERALD
CONFIDENTIAL
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DEPARTMENT OF state
Department of State
of AMERICA UNITED
TELEGRAM
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CONFIDENTIAL
PAGE 02
MEXICO 15016 2709092
THE FIST CONTRIBUTED.
3. RUMORS. EMBASSY OFFICERS HAD BEEN TOLD BY OFFICIALS
OF TREASURY THAT MARIO RAMON BETETAN CURRENT SECRETARY
OF TREASURY, WILL BE APPOINTED AMBASSADOR TO THE
UNITED STATES. NEWSPAPERS SPECULATED THAT LIC.
ANTONIO CARRILLO FLORES, FORMER SECRETARY OF FOREIGN
AFFAIRS AND TREASURY AS WELL, WOULD BE NAMED DIRECTOR
GENERAL OF THE BANCO DE MEXICO. HE WAS SECRETARY OF
TREASURY IN 1974 DURING LAST DEVALUATION AND IS
CONSIDERED A "SOLID MAN. FINALLY, RUMOR IS CIRCULATING
TN BUSINESS AND BANKING CIRCLES THAT ERNESTO FERNANDEZ
HURTADO, CURRENT DIRECTOR GENERAL OF BANCO DE MEXICO,
VISITED WASHINGTON EARLY THIS WEEK TO PLEAD FOR A
MORATORIUM ON DEPT REPAYMENT.
TOVA
R.
GERALD
FORD
LIBRARY
CONFIDENTIAL