Mexico yesterday paid back $250 million of the more than $50 billion it owes banks around the world -- the first principal repayment by a major Latin American debtor nation since the region's economic crisis erupted in August 1982.
The $250 million payment will be applied to a $5 billion loan that Mexico negotiated in late 1982 during the height of the debt crisis.
Only Uruguay has paid back any principal, and Colombia so far has not faced a debt crisis, although its economic condition is deteriorating.
Mexico, which is current on all interest payments due banks, apparently made yesterday's principal payment in an attempt to convince its bank lenders to approve a restructuring of all its debts that come due by 1989 into a 14-year loan.
The long-term Mexican loan, which the country's key bank lenders negotiated last August, has been hailed as the start of the second phase of the Latin American debt crisis -- a phase which deals with the region's debt and economic difficulties as a long-term problem rather than as a crisis that brings banks and debtors back to the negotiating table every year.
The complicated nature of the 14-year Mexican loan -- which involves more than 800 banks, $50 billion in debts and hundreds of separate loans -- prevented the agreement from being signed by the end of the year.
The tentative August accord called for Mexico to repay $1 billion in principal by Dec. 31, 1984, in return for the 14-year stretch-out of most of its repayments. Since the agreement was not ratified by the banks, Mexico's obligation to pay the $1 billion by year-end evaporated.
But in a "good-faith" move last month, Mexican Finance Minister Jesus Silva Herzog said the nation would pay not only the $1 billion when the 14-year loan is signed, but also would pay an additional $250 million in principal the next time Mexico was scheduled to pay interest on the $5 billion loan -- whether or not the accord had been ratified.
The interest date was yesterday. Citibank executive William R. Rhodes -- who heads the bank negotiating committee dealing with Mexico -- announced yesterday that Mexico paid the $250 million.
Mexico touched off the debt crisis in August 1982 when it told lenders it could no longer pay its debts on time.
In quick succession, Brazil, Argentina and Venezuela made similar pronouncements.
Mexico, and later Brazil, undertook stiff belt-tightening measures designed to reduce inflation rates, boost export earnings and conserve dollar reserves by cutting imports. The countries also slashed domestic subsidies and other government spending to reduce their budget deficits and their need to borrow.
The programs met the approval of the International Monetary Fund -- which lent the countries money and induced banks to lend them more to ease the harsh impact of their "adjustment" programs. Nevertheless, the economic austerity programs resulted in severe recessions in Mexico and Brazil.
Today, however, both countries appear to be emerging from recessions and have shored up their international financial situations so they no longer need new loans -- although all major debtor countries cannot repay their outstanding loans on schedule.