Shock waves from the collapse of Mexico's stock market and its currency, the peso, have spread to almost every major stock exchange and financial center in the world. From Brazil to Indonesia and Argentina to France, financial markets were dealt steep blows as their speculative house of cards began to collapse.
"It's got the look of a total disaster," said David Beckwith, head of international investing at John Hancock mutual funds. "It's so bad it defies description."
Since mid-December, the Mexican peso has lost 40 percent of its value to the dollar and the stock market plunged 18 percent. From Dec. 19 to Jan. 10, Brazil's stock market lost 33 percent and Argentina's 29 percent.
This week the Hong Kong dollar, Indonesian rupiah, Thai baht, Italian lira, Spanish paseta, French franc, Canadian dollar and U.S. dollar all lost value to the German DMark.
"People are nervous," stated Derek Saville of Standard Chartered Bank in London. "The economies are in for a rocky ride."
U.S. President Bill Clinton is one of those most nervous. Having rammed the North American Free Trade Agreement (NAFTA) through Congress, Clinton is caught trying to salvage the trade agreement which helped produce the Mexican economic disaster. He sent an urgent appeal to Congress this week asking for swift approval of a $40 billion loan package to bail out the Mexican economy.
"If we don't act now, Mexico faces a protracted economic crisis that would have severe consequences for the United States," Clinton said.
However, Clinton's loans come with many odious strings. Sen. Jesse Helms (R-N.C.) said he would only support the deal if "Mexico makes it a criminal act to try to leave the country without the necessary papers," a globalization of the racist, anti-immigrant Proposition 187 passed in California last November.
The loans will also come at a steep price to Mexico's economy and sovereignty. One stipulation puts the Mexican oil industry up as the main collateral. Should Mexico fail to repay the loans according to the time table set down in the agreement, those U.S. banks, corporations and the government which contributed the loan money would be able to take possession of Mexico's most important industry. U.S. corporations have been chafing at the bit to regain control of Mexico's oil since the government nationalized the industry in the late 1930s.
Opposition Democrats believe that the solution to Mexico's crisis is not massive loans, but a repeal of NAFTA. To that end, Rep. Marcy Kaptur (D-Ohio) and 15 other Congressional Democrats said they would submit legislation to pull the U.S. out of NAFTA, ultimately killing the agreement. The Democrats believe that the loans would only serve to "bail out businesses which moved their factories to Mexico" in the wake of NAFTA, destroying thousands of U.S. jobs.
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