THE NEW agreements emerging between Mexico and the bankers set a hopeful and welcome precedent in the management of the Latin debts. It is just over two years since the debt crisis began, with Mexico's announcement that it could not fully meet its obligations. From that point until this summer, all of the quick fixes were designed simply to stave off the disaster of default and financial collapse. The current renegotiation is the first to look beyond the emergencies of the moment and to lay out a pattern of manageable payments for the long term.
Both sides were pushed toward this reorganization by the dangerous structure of the debt. Contracted in a time of chaotic borrowing in the late 1970s, too much of it was to come due in a short period over the next few years. The burdens have now been spread out more evenly from now until nearly the end of the century.
But other important improvements have been made here as well. In the hasty and anxious reschedulings of early 1983, the bankers charged very large premiums in the interest rates of the loans that they were extending. There was a hint of panic in the air, and they were demanding high prices to take large risks. Now the sense of risk has abated, and interest rates are being lowered in proportion.
Mexico has earned this improved treatment by its own vigorous and skillful action to bring its economy back into balance. But that is being accomplished only at substantial cost. The country has been through an extremely severe two-year recession -- far more severe, incidentally, than the last recession in this country. The Mexican economy is now beginning to grow again, but so far the growth is slow and hesistant in a country that has been accustomed for years to rapid expansion. Mexico's standard of living was being supported by a stream of borrowd money flowing in. With the crisis, that flow stopped as though a faucet had been turned. In one year the purchasing power of wages dropped about 20 percent.
Even with the new agreements the repayments will be very substantial. In order to carry that burden and simultaneously return to buoyant growth, the Mexican economy is going to need some of the capital that Mexicans have sent abroad for safety. A massive flight of capital was the immediate cause of the crisis two years ago. To the extent that Mexicans can now be persuaded to reverse that flight and bring their money home, the strains of debt repayment will be made lighter.
The new repayment agreements will also make a contribution here. By establishing an orderly schedule of repayment, they convey a promise of stability that will help induce the expatriate wealth to return. While managing the debts will be difficult, experience so far suggests that -- with a little luck and steady nerves -- it wil not be impossible.