The Small Business Administration announced a $200 million rescue program for U.S. companies along the Mexican border that are staggering from the recent devaluation of the Mexican peso, administrator James C. Sanders said yesterday.
He told a news conference the reduced-interest loan and loan guarantee program to hundreds of small businesses whose trade has been cut by as much as half would last "as long as this peso crisis exists." Owners of small businesses on the border in California, New Mexico, Arizona and Texas are eligible.
The Aug. 5 peso devaluation, the most recent and drastic of several over the last six months, made U.S. goods more than twice as expensive as they had been in border-town stores for Mexicans changing pesos to dollars. It also made Mexican goods far cheaper than U.S. products for American consumers armed with dollars.
As a result, both U.S. and Mexican shoppers headed south, and hundreds of shopowners north of the border estimate their business has plummeted 40 to 60 percent, California Gov. Edmund G. (Jerry) Brown Jr. said in a letter to President Reagan last week.
In addition, companies are faced with the likelihood of widespread defaults on consumer loans or credit extended to Mexican customers who will now have a much harder time paying the bill. American Express Co. has already cut off credit to its Mexican cardholders.
Every kind of business is affected. In the wall-to-wall stores that make up towns on the U.S. side of the 1,933-mile border, there are electronics and small appliance outlets that attract Mexicans planning to resell the items at home, chain department stores selling clothing and furniture, and large industrial component outlets that provide fertilizer, wiring, plumbing and manufacturing tools.
Americans have been flocking into Mexico to buy food, with steaks now selling at about $2 a pound and everything else similarly cheap, leaving U.S. border-town supermarkets virtually empty.
"We hope the situation will correct itself," Sanders said, adding that the program would be evaluated in December and extended if necessary. "The immediate crisis for these people is to pay their bills month to month."
In Mexico the economic crisis has meant an inflation rate of 100 percent and unemployment and underemployment approaching 40 percent. The government has appealed for international aid and has clamped down on the flow of dollars out of the country.
Trying to help Mexico through the crunch, the Reagan administration has agreed to put up $1 billion in advance for oil deliveries to the Strategic Petroleum Reserve. The Commodity Credit Corp. is guaranteeing $1 billion in private bank loans for Mexican firms to buy U.S. agricultural products, and the government is putting up half a $1.85 billion short-term loan by the Bank for International Settlements, based in Basel, Switzerland, to the Mexican Central Bank.
Edwin L. Dale Jr., spokesman for the Office of Management and Budget, said the programs would have "no appreciable effect" on the U.S. economy, although spending the $1 billion for oil in fiscal 1982 instead of 1983 would "add slightly to the deficit. But it's not money we wouldn't have spent anyway," he said.
Sanders said the $200 million SBA program would come from the SBA's 1982 budget and would be distributed by a beefed-up border bureaucracy in loans of up to $500,000 for 10 to 20 years at 14.5 percent interest, several points below the going rate. The agency also asked SBA lender banks in the four states to be "particularly sensitive" to the need for SBA-guaranteed loans, noting that Bank of America already has started offering lower-interest loans in California.
The package is being made available to any small business in the border area that "can just show us their gross receipts for the past six months and then what's happened in the past 30 days," Sanders said. "I don't think there'll be much trouble for merchants to demonstrate this."
Sanders gave political credit for the project to Republican officials in the four-state region, especially to San Diego Mayor Pete Wilson and Texas Gov. Bill Clements. "I never heard from Gov. Brown" of California, he said in response to a question.
Brown is deep in a bitter battle with Wilson for a U.S. Senate seat and his staff chief expressed outrage over Sanders' remark, noting that Brown twice had contacted President Reagan asking help for the stricken region.
"That's kind of chicken to give the credit to Wilson," said B. T. Collins, "but the important thing is that everything the governor asked for is going to happen."