The World Bank may step up lending to Mexico next year under terms giving it expanded responsibility for monitoring economic policy here, banking and diplomatic sources said.
Mexico, now engaged in difficult negotiations for $2.5 billion in fresh funds from commercial lenders, is seeking complementary World Bank loans to assist its ongoing "structural adjustment" program, the sources said. Negotiations have already begun for a "trade development policy" loan that could bring Mexico as much as $500 million, a World Bank spokesman confirmed.
The negotiations "are at a very early stage, and the full amount of the loan has not yet been defined," the spokesman, who asked not to be named, said in a telephone interview. The proposed structural adjustment loans would place the World Bank in a role parallel to that of the International Monetary Fund as both a major lender to Mexico and a "policeman" of its economic program, analysts here said.
The special World Bank credit package "would fit in very nicely with the Baker plan" for new lending to Third World debtors, according to a Western diplomat here, who asked not to be named. U.S. Treasury Secretary James A. Baker III has urged that financing from multilateral lenders like the World Bank be bolstered to supplement additional commercial credits to big debtors.
In the past, most World Bank lending to Mexico -- as to most countries -- has been destined for specific investment projects. By contrast, structural adjustment loans provide general balance-of-payments support during times of economic transition, as well as funds for programs related to the country's policy goals. In Mexico's case, disbursement would depend on progress toward its commitment to the development of new export industries and the gradual dismantling of import barriers.
The credits could be disbursed in separate allotments and directed to different areas of Mexico's economy during the next two years, a diplomatic analyst said.
Mexico is unlikely to request further financing for its structural adjustment program until after its latest round of negotiations with the IMF, a diplomatic analyst said. The negotiations are expected to conclude early next year.
In all, Mexico might request as much as $1 billion in World Bank structural adjustment funds, another diplomat suggested. "In order to have a real impact on Mexico it would have to be at least that much," he said.
Mexican officials declined to confirm or deny that they will solicit the special loans. "We are going to see what kind of help" is available from the World Bank, Deputy Commerce and Industry Minister Luis Bravo Aguilera said in an interview this week.
Mexico's entrance into the General Agreement on Tariffs and Trade -- announced last month and expected to be formalized before the ministerial-level GATT conference scheduled for next September -- enhances Mexico's eligibility for a trade development policy loan, he acknowledged. While the World Bank "is respectful of our sovereignty" and "never demanded that we go into GATT," it "has closely followed and been kept up to date on our economic policy developments," Bravo said.
World Bank loans are cheaper than comparable commercial credits, with interest charges usually adjusted quarterly according to the bank's own borrowing costs. The World Bank is charging 8.8 percent interest for its loan to Chile and gave the country 15 years to repay, including a three-year grace period, a bank spokesman said.
Substantial structural adjustment loans to Mexico would mark the World Bank's emergence as a more prominent player in the Third World debt arena, analysts said. Other big borrowers, such as Argentina and Brazil, could request similar loans.
It is unclear whether the loans would be requested in addition to the $1.5 billion Mexico already has said it would seek next year.
The IMF, meanwhile, is being asked for a standby loan of $800 million next year. The IMF loan is seen as a prerequisite for creditor approval of Mexico's request for another $2.5 billion in commercial loans.