Finance Minister Jesus Silva Herzog was unexpectedly dismissed today at a critical moment in tense debt negotiations between Mexico and its international creditors, the government announced.
Silva Herzog, a favorite of U.S. officials and bankers, became isolated in President Miguel de la Madrid's Cabinet by opposing a clear-cut suspension of payments on Mexico's $98 billion foreign debt, a Mexican government official explained.
The president replaced Silva Herzog with Gustavo Petricioli, described as a friend of de la Madrid who is more likely to be a team player.
The dismissal appeared to raise the likelihood of at least a threat of partial suspension of debt payments. This would be a political stand by de la Madrid, declaring that the Mexican people have reached the limits of sacrifice for the foreign debt, according to banking and diplomatic sources.
The dismissal dimmed optimism voiced last week by Mexican and U.S. officials that Mexico was nearing agreement with the International Monetary Fund on a new package of credits to prevent Mexico from joining such countries as Argentina and Brazil in suspending payments, a European diplomat commented.
The departure of Silva Herzog removed from the president's team the man who has led negotiations on Mexico's crushing debt since nine months before de la Madrid took office in December 1982. It also could become a milestone in maneuvering by top officials in the ruling Institutional Revolutionary Party, who are jockeying for position to become de la Madrid's successor at the end of his term in 1988.
Silva Herzog, a 53-year-old career official with a master's degree in economics from Yale University, had been among the half-dozen figures most often mentioned as de la Madrid's possible picks. In the Mexican system, the president chooses his successor as the official party's candidate. His choice traditionally has been elected by an overwhelming margin.
Petricioli, 57, also a former Yale student, has had a long career in government finance, including posts in the Finance Ministry. He has been director since 1982 of the Nacional Financiera, a government credit institution. A government official said Petricioli immediately will assume Silva Herzog's role as point man in Mexican debt negotiations and that little policy change is likely because of the shift in personnel.
"Remember, all actions and decisions on the debt are taken by the president," said another official. "So don't expect a big change in relations."
The announcement gave no reason for Silva Herzog's replacement. In his resignation letter released by the Treasury Department later, Silva Herzog quoted "reasons of a personal character."
Silva Herzog, while warning of a debt payment suspension in public, argued for caution in private, particularly at a Cabinet meeting last night to prepare the Mexican position in upcoming talks with the International Monetary Fund, a government source said.
Banking and diplomatic sources said Silva Herzog, while accepting such a moratorium in principle, had argued that it should be worked out as far as possible in negotiations with the fund and private creditor banks, rather than announced unilaterally as a Mexican political stand.
Banking sources said Silva Herzog had been scheduled to leave soon, possibly as early as Wednesday, for another round of talks with International Monetary Fund officials in Washington.
Silva Herzog met here May 9 with Paul Volcker, chairman of the U.S. Federal Reserve Board, in what was seen as a key step in Reagan administration efforts to prevent Mexico from defaulting on its debt. Silva Herzog long has been regarded as the favored Mexican contact with U.S. financial officials, who appreciate his command of English and familiarity with U.S. banking ways.
De la Madrid's government has been sending increasingly explicit signals about the possibility of a partial suspension of debt payments on grounds that the economy can no longer bear payments required under terms of present schedules. Silva Herzog delivered such a warning June 5, refusing to rule out a suspension and telling an interviewer that "much depends on the results of these discussions and negotiations."
De la Madrid, who for months has been complaining that Mexico has reached the limits of its ability to pay, also indicated in a Mexican television interview June 10 that he was considering a suspension.
"I am now directing negotiations with the exterior that tend toward adjusting effective external debt payments to our ability to pay, and I understand that the ability to pay must be measured in such a way that it prevents a drastic fall in the Mexican economy and permits us to recover ability to grow with the shortest delay possible," he said.
Since then, however, Mexican and U.S. officials have been hinting that a deal is nearing completion between Mexico and the International Monetary Fund. The possibility of further funding from Mexico's private creditor banks, mostly in the United States, also depends in large measure on such a bargain with the IMF.
In the light of the recent reports of a possible agreement, the earlier warnings increasingly have been seen as a negotiating tactic.