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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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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 Gerald R. Ford donated to the United States of America his copyrights in all of his unpublished writings in National Archives collections.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 ACTION SS-14 INFO OCT-01 ISO-00 EB-03 ARA-06 SP-02 NSC-05 NSCE-VP 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 ACTION SS-14 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 67 ACTION ARA-10 TNFO OCT-01 ISO-00 SSN-00 NSCE-00 INRE-00 USIE-00 CIAE-00 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 ACTION ARA-10 TNFO OCT-01 TSO-00 SSO-00 NSCE-00 INRE-00 USIE-00 CIAT+00 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 ACTION SS-14 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 CONFIDENTIAL OPEN STATE epartment of State UNITED STATES TELEGRAM OF CONFIDENTIAL PAGE 02 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 PAGE 01 MEXICO 14790 221956Z 12 ACTION ARA-19 TNFO OCT-01 ISO-00 ARAE-00 INRE-00 SSO-00 NSCE-00 USIE-00 CIAE-00 DODE-00 PM-04 H-02 INR-67 L-03 NSAE-00 NSC-05 PA-01 PRS-01 SP-02 SS-15 AID-05 COME-00 EB-07 FRB-03 XMP-02 OPTC-03 CTEP-01 LAB-04 SIL-01 OMB-01 CEA-01 STR-04 TGA-02 ABF-01 PER-01 OPR-02 1089 W 22 076673 n 219307 NOV 76 ZFF-6 FM AMEMBASSY MEXTCO 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 LIMITED OFFICIAL USE 45 FORM DEPARTMENT OF STATE Department of State UNITED STATES OF , TELEGRAM LIMITED OFFICIAL USE PAGE 02 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 FORM DEPARTMENT or STATE EXICO Department of State of STATE AMERICA UNITED TELEGRAM CONFIDENTIAL 6238 EMT PAGE 01 MEXICO 14819 230003Z Please return to 55 International Information Center 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 CONFIDENTIAL FORM DEPARTMENT OF STATE Department of State OF STATE AMERICA UNITED TELEGRAM CONFIDENTIAL 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 A7 ACTION SS-14 TNFO OCT-01 ISO-00 EB-03 ARA-06 SP-02 TRSE-00 NSC-05 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 & FORD CONFIDENTIAL GERALD LIBRARY state of A Department of State UNITED AMERICA TELEGRAM STATES OF CONFIDENTIAL PAGE 02 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 63 ACTION SS-14 INFO OCT-01 ISO-00 ARA-06 EB-03 SP-02 TRSE-00 NSC-05 NSCE-00 FRB-01 SSO-00 ONY-00 1032 W 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 70 ACTION SS-14 INFO OCT-01 ISO-00 FB-03 ARA-06 SP-02 TRSE-00 NSC-05 NSCE-00 FRB-01 SS0-00 ONY-09 /032 H 26 017586 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 LIBRARY DEPARTMENT OF state Department of State of AMERICA UNITED TELEGRAM STATE 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