· PDF fileI. II. III. Table of Contents Current External Debt External Service Payments...
! This'report is restricted to use within the Bank. No. E-236 RESTRICTED INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT THE EXTERNAL PUBLIC DEBT OF MEXICO Economic Department Prepared by: lames 1. Lynch Reviewed by: Carel deBeaufort August 18, 1952 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
· PDF fileI. II. III. Table of Contents Current External Debt External Service Payments Pledges . 1 . 3 . 4 . Table A-I: External Public Debt of Mexico Table . A-2
Current External Debt External Service Payments Pledges
1 3 4
Table A-I: External Public Debt of Mexico Table A-2: Estimated Contractual Interest and Amortization
Payments on the External Public Debt of Mexico
A-3 : History of the External Borrowing of Mexico A. Origin of the Debt 1 B. Recent Settlements 1 c. The Current Debt Outstanding 4
A-4: Assumptions as to the Disbursement of Undisbursed Portion of Export-Import Bank Loans as of June 30, 1951
A-4a: Assmnptions as to the Disbursement of Undisbursed Portion of Export-Import Bank: and IBRD Loans as of June 30, 1952.
A-5: Export-Import Bank of Vvashington Statement of Loans and Authorized Credits - Mexico
(Trus report was prepared by James J. Lynch, checked by Andrew C. Huang and reviewed by Carel deBeaufort)
TEE EXTERNAL :?UBLIC DDT OF MEXICO
I • Current External Debt 1I
1. As of June 30, 1951 the total external Government debt of Mexicodirect and guaranteed - was estimated at $506.2 million, of which $196~8 million was still undisbursed and $309.4 million·was.outstanding. Since J'tme 30 t 1951, Ivlexioo has assumed ne~T debts of $38.7 million consis ti~ of (1) $9 million loan for purchase of the Southern. Pacifio Railwayts Branch in I-lexico and (2) :rnRD loan of $29.7 million for electrio power development. (Amortization payments to date partly offset these increases.)
2. Practically $11 this debt is payable in U.S. dollars and may be summarized as follows~
a) Export-Import Bank loans ~..mounting to $2)4.1 million of whioh $160 million was undisbursed on Deoember 31, 1951 and by I"t.me:JO, ~~.5.2. $127.2 m~'lion remained. Part of this unutiliz~d amount,:p.30 million, bas been lCaneel1ed.
b) IEID loans amounting to $60.1 million, mostly in dollars, of whioh $23.3 million was outstanding an~ ~36.8 million undisbursed with the follOWing small amounts in other currencies: Canadian dollars -Us$26~ooo; Swiss francs - US$265,OOO; Italian lire - US$99,000; French francs -U5$20,000; Belgian francs - US$7,OOO.
c) ?ri<mte bank loans amountin~ to ;';21.5 million of \'lr,;.ch loans from the Bank of America account for $1605 million; Chase National Bank $1.7 million; First National Bank of Chioago $2 million; the IvIercantile Commerce Bank and Trust Company of st. Louis $709,000; and the Republic National Bank ~)f Da.llas $608,000.
d) Loans from private companies amounting to $).6 million. of '~Thich a loan from \'lestinghouse Electric International aocounts for $3.3 million, and International General Electric $361,000.
e) The remainin~ debts are mainly related to the settlement of the old external debt and of claims conneoted with the nationalization of the railroads and the oil industry, agrarian reform and the like. They consist of: (1) dollar bonds totalling. !~)88.4 million.3./, (ii) :386.5 million) the unpaid portion of the ~lo-Dutch oil settlement ori~inally amounting to ~130 million; (iii) $11.5 million, the unpaid portion of the Mexican and American B..I;rarian claims "rhich "Jere ori~inally settled at $19 million; ( i v) $400. 000 owed to the t·iexi can Pe trol eum Asphal t Company, a.nd ( v) $20,000 for unpaid Italian claiIYls, on which pa.yment was suspended beca.use of \'Tc:rld "lar II.
Listed on the followin?, pa~e are the total amounts in each category~ For details of the loans making up these totals, see Tables A-l and A-2.
See Ap';)endL"'5C A-3 for summary of history of the exterllc'"tl borro"'lin~ of Mexico. and I:BRD Economic Department Report "Mey.i,oo I s External Public Debt. Zconomic and Financial Causes of Debt and Debt Adjustment Plnns" dated J~uary 27. 1950. Partly held in Mexico, see Table .A.-I, Pages 6 and 7.
Summary of External Public Bebt of Mexico
National Government and Guaranteed Debt
(Ill thousands of dollars)
.b01IDED DEBT Total Government bonds under
1942 Agreement Total interest obligations
Total Railway bonds under 1946 Agreement
Total interest obligations
Total bonded debt .•••• , . . ..
Am01.ttlt of issue as in 1942 and 1946 Agreements
Old par value New par converted to (redemption U.S. dollars value)
230,6}2 278,885 509.517
236,580 324,422 S61,072
Debt outstandin~ June 30-
1951, lJe~l par value
Debt outstandiD9 June 30. 1951 In currency Expressed in of payment U.S. dollars
506,160 ~: Debt contracted since June JO, 1951: Naclonal Financiera ~.
January 11, 1952.77, US$29,700; and'Bonds of Southern Pacific Railroad of Mexioo 3~1, 1951-67. US$9.000.
II. ~xternal Service Payments
3· In view of the then sizable amount of the unutilized Export-Import Bank funds (US$157.2 million as of December 31, 1951) certain estimates 't'fere made by the Mexican officials and the Export-Import Bank concerning the rtJe (see A-4 for details) at which these unused funds will be dra"lll down. Estimated service payments are based on these assumptions, consequently any material deviation from the assumed rate will cha~e the size of service ~'ayments in certain years. Ba.sed on the present debt authorized and outstanding plus the assumed rate of utilization, estimated total service payments ~or 1952 amount to the equivalent of US$50.2 million, of which $16.2 million is interest and $34.1 million is amortization. Total payments move downward to US$47.7 million in 1953 and remain around that level (except for a peak of US$So.6 million in 1954) through 1956. In 1957 they decline to US$43.7 million and in 1958 to US$39.7 million, gradually reaching US$35 million by 1963, ~dth a sharp reduction to US$21 milliom in 1964. Service payments continue at around US$20.L~ million in 1965, drop to US~18.4 million in 1966, to US$15.2 million by 1968 and are reduced by aprroximately a third in 1969 when they are esti~~ted to amount to ~S$lO.S million, gradually declinine to US$lO.2 million by 1973- They then ~radually drop to US$8.5 million by 1974, to US$3.8 million in 1975 and to US$2.2 million in 1976.
4. The sharp reduction to US$21 million in 1964 is a delayed reflection of the end of 'the oil and the a~rarian payments. The final pa.yment of US$8.7 million will be made in 1962. But, according to present schedules, the amortization of government dollar bonds at the rate of US$l million a year (new par) leaves a payment on these bonds of US$lO.9 million in 1963. The Nexican Government may be able to avoid meetin~ a cash pay_ ment of such propor tiona in 1963 by &cquirin~ sufficient bonds to retire the entire amount before 1963. In that case the 1963 service payments will be nearer the 1964 level than the estimate of US$JS million.
5. Listed on the following pa~e is the debt and interest and amortization schedule. For complete details see Table A-2.
!I In July, 1952, a revision of estimates pertaining to drawi .. ng dO\'Jll of 1.Ulutilized funds was made by IBRD based on the amounts uttu.tilized as of June 30. 1952, en both the ~~ort-Import Bank and IBRD loans. These revisions are not reflected in the service payments as sho~m here and in Table A-2. For details see A-~
Estimated Interest and Amortization Payments on the External Public Debt of Mexico
(In thousands 0f U.S. dollars)
T 0 tal Deb t Service payments
~ Debt out- PaZE!ents during :I.~ar b~ tl12e of currencl standing Amort1- In- Total U.S. Canadian Swiss Italian January 1 zation terest dollars dollars francs lire
6. The Agreements concluded in 1942 and 1946 for the adjustment of the old p~blic external debt provide that in the event of the failure of Mexico to make the required payments, all former rights of assented bondholders shall revive. These rights ir.clude, in the case of part 0-£ the old direct debt assignments of revenues and in the case of the old National Railways debt, mortgages \o}'hich have been preserved by IV:exico.
Table A-I: EXTERl'JAL PUBLIC DEBT OF MEXICO
National Government and Guaranteed Debt
(In thousands) Page _1
Amount of issue as in 1942 and Debt outstanding Debt contracted since 1946 agreements June 30, 19.51 June 30, 1951
ion Old :gar value New Old Ne,,, In Expressed In Converted par currency in
original to U. S •. (redemption par par of U.S.
currencies dollars 1/ value) value value payment dollars
ivalents of I.B.R.D. loans in currencies, other than U.Sz dollars, are fixed by agreement with the Bank. ivalent of the Ita.lian claims and of the obligation on the lwlexican Embassy Building in :Buenos Aires are hed by the Mexican Government.
cified in the debt adjustment Dlans a.s follows: a' ... l = $4.03; $1 = 4.85 pesos.
~ent made a debt settlement offer to the holders of a list of 15 bonds. These bonds included obligations , the City of Mexico, various states, and the Tehuantepec National Rail''1ay. The bonds '-Jere denominated , pounds sterling and Mexican pesos. For the purposes of the debt settlement original par values of the t 80% to the amount sho\'1n in the column hea~ed "Nett pa.r (redemlJtion value)" and all bonds t'fere made payable t payments were reduced by bet",een 76 to 89io for the different classes of debt i.e. secured, unsecured and ~sulting in an average interest rate on new par value of 40 014%. For pu~poses of retirement the bonds tegories as follows: secured debt, unsecured debt, a.nd internal and state debt. The agreement provides t ,,,il1 purchase or othert1ise acquire for cancellation at least $5,000,000 face amount of old par value
d that all Secured Debt will be retired Drior to January I, 1963. The government also agrees that it ed Debt und Internal and State Debt included in the plan before January 1, 1968. All ~ayments under
date according to contract. Interest obligations which had formerly been issued for defaulted small fraction of their value, as indicated above.
Summary by currencies U.S. dollars - disbursed and still outstandin~
- undisbursed Canadian dollars 6\'1is s francs Italian lira Argentine pesos French francs :Belgian francs
Exchange ratesa The dollar equivalents of I.B.R The dollar equivalent of the Itc figures furnished by the lviexicaI
11 Converted at the rates specified in the debi
gj In 1942 the Mexican Government made a debt s of the national government, the City of Mexj originally in U.S. dollars, pounds sterling bonds \'Iere reduced by about 80% to the amour in U.S. dollars. Interest payments were re internal and state debt, resulting in an aVE were divided into three categories as follo~ that the Mexican Govermnent ,,,111 purchase 01
each of the Secured Debt and that all Secure will redeem all the Unsecured Debt and Intel this plan have been made to date according interest ''1ere settled for a small fraction c
Table A-l: JJ}~T:iJ:UTAL PU:BLIC DEBT OF f\.L.;XICO - Continued National Government and Guaranteed Debt
Page 6 p-igible to participate in the plan. The follo\"ing fig,ul'es have been received from the Mexican Government pibution of bonds assented to the agreement:
~nt made a debt settlement offer to the holders of a list of 1,3 railw~ bond issues. These bonds were S. dollars, pounds sterling and Reichsmarks. They are now all payable in U.S. dollars under the plan. rs under this plrul kno\'ln as Plan A and Plan D. Plan A called for reduction of principal similar to nment bonds D.nd reduction of interest resulting in an averaGo rtlte' of 4.3S?f on nOH per vnlue. A sill1:ing the Plan A bonds by 1975. The sirucing fund accumulates at the rate of 4.35% p.a. based Gn new par value.
~n that it does not provide for any interest payments but rather provides for increasing redemption values ~ will retire the bonds by 1975. For this purpose tho bonds are divided in Classes A, B, C and D, each e of redemption values which rise from $217.10, $215.40, $214.40 and $214.30 per $1,000 of old par value and D respective~ to $1,000 for all classes in 1974. An annuity of $2,948,460 p.a. is provided for the
I1d Plan B bonds. plan lias delayed and did not go into operation until 1950. ~ou1d be made in equal instalments in the years 1950-1953.
It was amended to provide that the payment All payments have been made according to contract
1/ Enemy-owned bonds are not eligible to partie as to the geographical distribution of bonds
Location Mexico Ne\'! York London Paris Amsterdam Brussels 8\'Ii tzerland
Total assented Non-assented
Total (excl. ene~
Bonds amortized l(
~ In 1946 the Mexican Government made a debt SE
original~ denominated in U.S. dollars, pound There \'1ere two se:;}arate offers under this !J1B the 1942 agreement for government bonds and ] fund was provided to retire the Plan A bonds Plan :s differs from Plan A in that it does no over a period of years '"hich \'1i11 retire the class having its O\m. schedule of redemption v, in 1946 for Classes A, ~t C and D respective~ retirement of both Plan A and Plan 13 bonds. The rail\'Jay debt adjustment ulan \'Ias delayed due in the years 191~6-l949 \"'~uld be made in el to date.
Table A-I: EXTIJRl~AL ?UBLIC DEBT OF I,illJXICO - Continued
National Government e~d Guaranteed Debt
ico 6% Secured Gold Notes Series C dated June i, 1914 ico 6% Secured Notes, 2-year, due June 1, 1915
Bro. 252,508 Rm. 8,416,938
ret ically payable. However, they \'Iere considered valueless by the Supreme Court of Nev' York at the time lan was put through. The bonds are held partly in Germany and partly in Mexico. count, the amounts outstanding at the time of the plan were as follows:
Total bonds Reichsmarks bonds
Old par value
Net., par value
$ 48,064,409 o
Total bonds under plan 233,112,385 48,064,409 Enemy o\·med bonds 18,120.149 3,736,000
Net $214,992,236 !l $ 44.328,409 tual1y equivalent to the $218,460,000 sho\m above in the table since the Reichsmarlt bonds are valueless.
eligible to participate in the plan. The following figures have been received from the Mexican Govern-1 distribution of bonds assented to the agreement,
j} This debt consists of the following itemsl National Railways of Mexico 6% Secured Gc Na tional Railways of Mexico 6% Sec'ured He
These bonds are still theoretically payablE .' ! that the debt ao,:~1.stment plan was put throt
Taking these bonds into account, the amount
Total bonds Reichsmarks bone
To tal bonds undE Enemy o\·med bone
Net ~/ This amount is actually equivalen1
Bj Enemy-owned bonds are not eligible to partj ment as to the geographical distribution 01
Location Mexico New York London Paris .Amsterdam Brussels S\IT1 tzerland Total assented Non-assented To tal (e::;:c1 uding enemy-ottn Ene Il\Y-01rmed Total bonds
Table A-I: EXT.aRHAL PUTILIC DEBT OF tl]D:ICO - Continued l~ational Government and Guaranteed Debt
·----------------______________ P~~e 8
Old par value Per cent
$ 14.913,23.3 6.30
58,827,973 136, l~62,.368 23,169~673 18,120,lLJ-9
hern Pacific Railroad in Mexico were purchased by the Mexican Government in the latter half of 1951 for ~t $3, 000, 000 l'laS paid in cash and $9,000,000 in bonds. The bonds \I/ere given to Southern Pacific to be e bonds may be sold in Mexico.
erica loans to l'iJ'acional Financiera and the Banco de Comercio \1fere loaned to the Mexican Government for e. The loan to Banco de Comercio is gllal'an.teed by liiacional Financiera •
• 950,000 to Comission Federal de Electricidad by the Chemi(~a1 ]a.n!e & Trust Co.; interest 4 1/2%, commission instalments in 1952; guaranteed by Nacional Fin~~iera.. This loa.n has been exclu~ed 'becnUSf;) it is expected rter by loans already authorized by Export-Import Bany;: and sho\'m else't..rhere in the table.
'.~ of 1'1or1d 11ar II.
December 31, 1951 \'1as as fol1ov,s:
and still outstanding
1~1ars ~ dollars ranes
In currency of payment
$ Can$ S\1 fr
r June 30, 1951 was $11,931,390.
Expressed in U.S. dollars
12,539,.511 . 592,726
441,6,56 13,573,893 10.526,107 Y
$ 24, laO, 000
2J - Continued
Bonds amortized Plan A 3.057.753 Plan 13 11 11 855.480 Bonds outstanding
Assented bonds Plan A Plan :a
Non-assented EneIl\Vs.»owned Total
2/ The properties of the Southern Pacific RaiJ $12,000, 000. Of this amount $.3, 00<>; 000 \'Ias placed abroad. None of the bonds may be so
§J The proceeds of ~ank of America loans to l the Ferrocarril del Sureste. The loan to]
21 There is also a loan of $1~950,OOO to Cornis 1/4%: repayable in 5 equal instalments in 1 that it will be refunded later by loans aIr
W Payments suspended because of lforld ,v·· r II. !!/ Guaranteed by the Mexican Gov~rnment. !gj The status of this loan on December 31, 195
Disbursed and still outsta U.S, dollars Canadian dollars S\11 s s francs
Undisbursed ftl Total !!J The undisbursed balance as of June 30, 1951 W~
Table A-l: EXTERNAL PUBLIC DEl3T GF l·rcXICO - Continued National Government and Gua.ranteed Debt
Page 9 This loan \"las com~)lete1y undisbursed as of June 30, 1951. disbursed.
As of December 31, 1951 $31,935 (all repayable in dollars) had been
~ As of December 31, 1951 the status of this loan was as follows:
Disbursed and still outstanding u.s, dollars Canadian dollars Swi ss francs Italian lira French francs Belgian francs
Table .A,-2a ESTIMATED C01JTRACTUAL INTEREST AND AMORTIZATION PAYM}JNTS ON THE EXTERlTAL PUBLIC DEBT OF f.1EXICO - Contd.
!/ These amounts are as of June 30, 1951. For this reason the 1952 amortizations subtracted from these amotUlts will not produce the 1953 amounts outstanding since repayments and new authorizations in the 2nd six months of 1951 wer.e also taken into account.
~ This schedule was SUbmitted by the Mexican Government and shows that bonds will be retired at par. Actually bonds will probably be bought in the open market at prices below par, in \~hich case retirement may be effected much earlier.
jJ This schedule assumes that all bonds are Plan A. In any case, the cost of Plan A or Plan B is the same. See Notes 2 and 4 on Table A-l.
!:!/ No detailed information is available on the amortization schedule on these bonrls. The schedule sho\'1n above is an estimate based on fragmentary information from various sources.
sf Excludes Italian claims in an amount equivalent to $20,000.
~ The breakdown of I.B.R.D. loans into various currency groups merely represents the situation as it was at the time this table was made. TIle categories, other than dollars represent amounts disbursed and repayable in those currencies as of December 31, 1951. The dollar category represents runounts disbursed and repayable in dollars and also amounts p~able in Belgian francs ($6,915) and French francs ($20,023) which are too small to be shown separately, plus the undisbursed portion of the loans. Actually this undisbursed portion may be disbursed and repayable in a variety of currencies. HO\'lever, it ''las thought best since the loans are expressed in dollars in the aGreements, to classify them a.s dollars \-,hile still undisbursed.
11 Of the undisbursed portion of EX!;ort-Import Ban];.: loans, $29,700,000 is excluded, since it is understood that Mexico does not expect to utilize this amount.
~ Excludes obligation on the Mexican Embassy Building in Buenos Aires in an amount equivalent to $57,000.
IBRD - Statistics Section March 13. 1952
HISTORY OF THE EXTFRNAL BORROl'lING 01 lli!EDO:CO
A. Origin of the Debt
External foreign borrowing by the Mexican Government began in le24 and was followed by a series of defaults and adjustments which continued until 1886. steps taken by President Diaz to restore the country's credit paved the 'tolay for the period of heaviest borro'toJ'ing from priTate foreIgn sources, lasting from 1886 to 191). (In 1911, President Dlaz's regime was overtbro~m in a revolution which brought financial ruin to Mexico.) The entire debt went into default in 1914 and remained so until the early 1940's, with the exception of short intervals during which payme~ts were made. Service bas now been resumed on various defaulted obligations and on settlements regarding nationalized properties and other claims.
Total foreign bonds issued between 1824 and 1947 are estimated at the equivalent of about US$l billion. This estimate considerably overstates the net capital inflow into Mexico from foreign loans, since many issues represented conversions and refundin~ operations on loans that were floated between 1~24 and 191), when the issues totalled US$375.2 million, £91 million and French francs 280.3 million.
External borrowing in the ~940's had as its main objectives currency stabilization and do~estic economic development, The loans were principally inter-governmental and the chief sources 1rTere the United States Treasury Stabilization Fund, the 3xport-Im~ort Bank, the International Monetary Fund and the International Bank for Reconstruction and Development. During this period adjustments and payments were made on almost all cJaims against the Mexican Government arisin~ from expropriation of the oil industr.1. agrarian properties and railroads. and on property damage attributed to the revulution.
B. Recent Settlements
The fo11ovrin.g claims were adjusted: 1) Special claims of U.S. and certain other nationals attributable
to the revolution of 1910-1920 (Conven'tion of April 24, 1934). 2) General claims of U.S. nationals ori~inatin~ from the claims
convention of June 4, 1868 (Convention of November 19, 1941 -. see).)
,3) ~rarian claims of U.8. na tiona.ls ,,·,ho ,.,ere dive sted of land under the Ae;rarian F'ro.grDlIl of the revolution. By the COnVP..n'tiQl
of November 19, 1941, Mexico a~reed to pay the U.S. the gum of $40 million in full settlement of both these a~rarian claims and the general claims (see 2).
4) Petroleum claims, arisin~ out of the exnropriatlon of the pro:gerties of forei~-o\'med- oil companies in Ma.rch 1938. In 1940. the l-Iexican Gc,vernment settled "ri th the Sinclair Oil interests for $8.500,000. A settlement with the other U.S. oil cOIDp!Ulies follo1r,ed in 1942, the compensation beinp; fi~::ed at :';23,99.5.991
plus interest at J% from March 18, 1938. In an agreement concluded on Au~st 29, 1941 with the Mexican Eagle Oil Company, Ltd., in which the British and Hetherla.nds oil interests a.re represented, the compensation was set at $81,250,000 plus interest at 1J, from l·Iarch 18, 1938.
2. External Bonded Debt
In February 1919 an international committee. named the International Committee of Bankers f)n Mexico, was established to represent holders of defaulted Mexican securities. In 1922 this Committee, under the Chairmanship of Mr. T.W. Lamont of J.P. Morgan and Company, reached an a~reement with the Mexican Government ~ Indebtedness amountin~ t~ about $500 million principal and ~200 million accru~ interest. In 1923. however. the financial situation of Mexico deteriorated rapidly, with the result that the debt agreement was suspended by Presidential Decree of June JO, 1924. Budgetary improvement in 1925 led to new negotiations which ended in an amended agreement signed on October 23. 1925. This included the f~llowing modifications of the 1922 accord:
1) The unpaid annuities for 1924 and 1925 would be deferred. 2) The Government was no longer responsible for obligation.s of the
National Rail~m.ys except for loans it had guaranteed. The ra.ilways ''1ould remit each month their entire net earnlng~ to the International Committee.
J) The oil export duties, previously assi~ed to the services of both the direct debt and t~e railtora.y' debt, were now allotted to the former alone. These taxes were to be supplemented b.Y $5 million a year payable out of the oil production taxes.
Due ~o continued contraction of the 011 industry, the oil export duties proved to be inadequate for the service of the loans. The deficit on serTiee charges was made up in 1926 by the Government, by borrowln~ on a short-term basis from the Irl,ternatlonal Comi ttee and the :Bank of Mexico. ~ 1921 the defici t was aga.~n covered in thi $ way, but the Government fa.iled t9 make ~ood its guarantees on railway bonds. At the end o:f' 1927 the GoTernment decided that it ,.,ould be unable to meet service for 19~a. Discussions were started ,.,1th 'the International Committee and pending the conclusion ot a new agreement, the service wa.s aga.in suspended.
The International Co~~ittee sent two experts, Messrs, J.E. sterret and J .S. Davis to Mexlc.o tQ invest~~ata the fiscal and economic position with special reference to Hexlco's ca.pacity to meet her obliga.tions, ~ their report of May 1928, the experts rea.ched the conclusion tha.tthe Treasury had not yet regained that 8~te of solvency \'1hich would e~ble it to meet promptly c~rent expenses and senice che.r~s. It was estimated that the Government would be able ~o apport~on only )0 million pesos to debt purposes. Hor.over, since the funded debt co'ftred by the agreements Of 19~ and 1925 was ca.ly part of the ~·1exican c1ebt. the experts recommended thai a comprehensiTe debt plan should be drawn up, .
Followlng discuss19DS with the In~e~nat19~ Committee, a law was 8Dac'ec). em Januaw 25. 1929 authorlz~ the eQn.e11dat~o~ of the debt $.n~
a single issue. On Ju.1y 2.58 1929 a new agreement based on this la\'1 was concluded be~'leen the Government and the International Co~.~:ttee. The issues comprising the direct government debt were to be converted into a single new 45-year refunding issue; a separate agreement was to be concluded between the bondholders and the railways, \'lhich "18re to be reorganized into a nel'l Mexican Company. Before the ne\-, agreement could be implemented 1~lexico became involved in the world depression and a supplementary agreement was si~ned on January 29. 1931 to suspend transfers for two years. ~'11ng to continued adverse conditions the Mexican Congress, which had never ratified the 1929 and 1931 agreements, finally declared them ineffective on January 27, 19,32.
Government Debt Settlement - 1942
After a lapse of ten years, the Intern~tional Committee and the Government resumed negotiations for a n~1 agreement, which was concluded on November 5. 1942. This agreement is still in effect and provides for liquidation of direct ~overnment debt only. Bondholders were required to establish by re.~istl"ation that their bonds ''lere non-enemy owned; theY'"were a,bt). ~eqored 'bo -present -them ~or .st&'lJllp~·4a. -.videnoe of .tJ;CCi3'ptin.t! term-s tjf settlement. Payments were to be made either in pesos or dollars, at th~ option of the holder, at the fixed rate ~f 4.85 pesos per u.s. dollar. Assenting bonds \-lere to be retired at the rat-e of one peso per dollar of nominal principal. Redemption of the secured issues was to commence in 1948 and to be completed by January 1, 1963. at least $5 million face amount bein~ retired each year. The remaining issues \'Tere to be redeemed by January I, 1968. Accrued arrears of interest from 1923 to 1943 \PTere to be lIquidated for 1% of their face value. For interest arrears prior to 1923, the payment was to be 0.2% or O.l~ according to their class. I·texico "ras to resume payment of current interest in 1943 and to provide for this purpose an annuity not exceeding ten million pesos.
National Railways Settlement - 1946
The plan fOr readjustment of the railway debt ~ms outlined in the July 2.5, 1930 agreement ""hich never came into effect. In 1937 the railroads were expropriated by the Government. Negotiations for the ~ettlement of the debt started in 1942, but no agreement ,~s reached until February 20, 1946. The settlement made at that time is now in effect. Bondholders are offered a choice between flPlan An and ;.t'Plan Bn; aJ.I payments under both plans are to be made either in dollars or in pesos at the fixed rate of $1 for each 4.85 ,esos.
Plan A provides for redemption at the rate of one peso per dollar. of nominal principal. On reduced principal, interest is to be paid at 4.35%. The bonds are to be retired over a period of 29 years by a sinkin~ fund of 1.78% of the modified principal amount. Plan B provides for a larger sinking fund without interest payments. This sinlcing fund will permit redemption of the bonds on a slid1n~ scale risin~ Over a period of 29 years from somewhat over 21 cents per dollar of principal to par. Arrears of interest on ra,1l",a.y obligations '-Tere settled on the same terms as arrears of interest on government debt.
c. The Current Debt Outstanding
The present external debt of Mexico is made up of three major segments: 1) the debts arising from the nationalization of oil and railroad uroperties anti 'the settlement of other claims; 2) the loans made to Mexico dating from the early 1940's to the present time by ~1mbarik and the International Bank, and .3) loans from pr1vate banks and cor;)orations. The individual se.t;Illents of these three categories of debts are discussed in detail below.
1. Nationalization Debts
~e results of various settlements (see B) were'
a) National debts consisting of dollar, sterling and peso bonds, equivale~t in the original par . value to ~230.6 million, \'lere settled for about 2070 of the old par value at a n~'l par established at $47.6 million. Amortization of this debt since the time (1942) the program was put into operation has reduced the principal to a current ,~43.4 million. Obligations amounting to $278.9 million, representing mainly unpaid interest due since the default in 1914 through the early forties, were settled for :~2 million.
b) A group representing dollar, ster11n~ and reichsmarks investment in the railroads with a total original par value converted into U.S. dollars equivalent to $2)6.6 million, were settled for the equivalent of $48.1 million. Amortization since the program was put into effect as of Januar,r 1, 1950, has now reduced the debt to $45 million. Interest in arrears amounting to $324.5 million was settled for $2.4 million.
The settlements of both these bonds and the national debts in (a) ,~ere similar in that they reduced the par amounts by about 80~'6 and made only token payments on the back interest. Taking both settlements into considers. tion a billion dolla.rs \'lorth of bonds and back interest "rere settled for the equivalent of ~~lOO million. Dua to amortiza. t10n payments this amount has no\-, been reduced to $88.4 million. Since these tl,'TO debt adjustment pl::.ns ''lere put into operation, interest and amortization payments ha'I'~! been met accordin~ to the debt agreements.
c) payments in settlement of the claims of U.S. oil companies were completed in 1947. Settlement of the expropriated Anglo-Dutch oil properties involved a total paymen~' of $130 million, to be pa,id in annual installments of $8.7 million. Payr.1ents have been made consistently on this debt and at the present time it has been reduced to ~86.5 million.
d) ~11.5 millioll is still due under the so-called United states Claims Settlement of l-Tovember 19, 1941. The agreement fixed Hexico 1 $ tota\l liabili ty at $40 million of \'Thich :V3 mi:i,lion had been paid prior to the convention, $; million l-m,S paid on ratification and the remainder \<1as to b'B paid in 13 annual installments.
2. Loans since 1940 from Government and Interna~ional Or~an1;at!ons
Since 1941 a. n~1 phase of internationa.l financi~ has taken place in Mexico consisti~ mostly of loans from ~overnment and international organiza tiona as f ollo\Ols ~
a) The Export-Import Bank has carried the major portion of the new financin~ with loans authorized since 1941 amounting to $282.2 million, of which ~4.9 million were cancelled or have expired; $115.5 million have been dra.wn down (of which $lK>.9 million have been repai.d). leaving $161.8 mill.ion 1.mutilized a.s of the present time. This unutilizEld fund has been earmarked for various economic development programs and will be drawn do~m by 1953 cr 1954. Listed in A-5 are the individual loans.
b) T\,10 loans from the International Bank for Reconstruction and Development totalling $34.1 million were appro~d in January 1949 for Nacional Financiera and the Federal Electricity Commission, an a~ency of the Mexican Government. The p~oceeds of one loan, ~24.1 million, are be~ used to finance the purchasa by \'Ihe Commission of materials and equipment necessary for the cO~91etlon of ae~eral projects in its 1947-1952 construction program. Proceeds from the 0 ther loan amounting to ~lO million ,-rere loaned on a short-term basis to the Mexican Light and ?ower Company, a private company, to finance part of the cost of its expansion program. This loan was refunded in April 1950 and increased to .~26 million. A third loan l-ra.S authorized in October 1950, amounting to $10 million, to a consortium of eight private Mexican banks and Nacional Financiera. to be used for financial assistance to small enterprises. A fourth loan of $29.7 million by lEaD to Me~ico for electric power development was made in January 1952. The funds from this loan will be used to finance imports of equipment and materi.9.1s needed to carry out seven major projects in the 1952-55 construction program of Mexico's Federal :t;lectrieity Commission.
3. Loans from Private Banks and Corporations
a) Total private bank loans outstanding as of June JO, 1951, amount to $21.5 million of \\rhich the Bank of America holds $16.5 million. A major portion of this amount, $15 million, ~ms used for road projects. The Chase National Bank of New York (now $1.7 million) and the First National Bank of Chica~o made loans of $2 million each, the Republic National Bank of Chicago made a loan of $608.000 t ~"1d the Merean tile Commerce National Bank and Trust Corporation, st. Louis, one for $709,000.
b) Loans from private companies outstanding as of June 30, 1951, amounted to $3.6 million, consisting of a loan by the \'restinghouse Electric Internationa.l Company nO"l amounting to $3":3 million, and one from International General Electrio for $361,000.
c) Southern Pacific Ra.i1+oad of Mexico properties were sold to the Mexican Government for $12 million. The Government paid 25%, 1.e., $3 million in cash. The balance, ~9 million, is ocvet"ed by ~'Iex1can Government bonds bearing J~ and amortized serially over 15 ye~s.
Assumptions as to the Disbursement of Undisbursed Portion of Export-Import Bank Loans as of June 10, 1951
Amount Amoun t as sumed to Loan undisbursed 2nd half ~ l'1ame of 0 b1i~or 6lJols.l 1221 338 Fred Leighton J !I 4'(,7 Nacional Financiera 344- y 427d Nacional Financiera 1,000 776 427J Nacional Financiera 1.375 1,375 42'7X Naciona1 Financiera 5.000 y 427L Naciona1 Financiera 2,250 2,250 ~ 487 Naciona1 Financiera ,!J.l},OOO
Assumptions as to the Disbursement of Undisbursed Portion 0-£ E}..""1)ort-Import :Bank and rnRD Loans as of June 10, 191)2
lame of obligor
EXPORT-IMPORT BAliK LOANS
Government and government-guaranteed loans Nacional Flnanciera~ S.A, Nacional F1nanciera~ S.A. Nacional Financiera~ S.A~ Bacional Financiera. S.A. Bacional Financiera, S.A. Bacional Financiera, S.A. Nacional Financiers, S.A. Nacional Financlera~ S.A. Nacional Financiera, S.A. Naclonal Financiera, S.A. Naclonal Financiera, S.A. Nacional Financiers, S.A. Nacional Financiera, S~A. Nacional Financiera, S.A. Nacional Financiera, S.A. Nacional Financiera, S.A. Nacional Financiera, S.A~ Haclonal Financiera, S.A. Bac10nal Financiera, S.A. Nacional Financiera, S.A. NAcional Financiera, S.A.
~otal government and government-guaranteed loans
Loans to private companies Fred Leighton,. Incorporated Cia Fundldora de F .yA.. de Monterrey t S. A. Mexican Gulf Sulphur Company Cia Minera Fernadez, S.A.
Nacional Finaneiera,S.A Rail~m.y equipme .... " (United Mexican States) 362 Rail"ray of Me • 7 t .. - ~; _I. .. ... r
Cia Fundidora de F.y.A. Steel-mill equi: ., •• t. .
" I de Monterrey,S.A. 366 Ele ctrical eq' '" . Nacional Financiera,S.A Materials and (United Mexican States) 379 supplies Nacion~l Financiera, S. A. United states e( (United Mexican States) facilities anI
" .~. . - Vnallotted 427 services Nacional Financiera,S.A. Nueva Cia. Elee'
" , .. <., t (United Mexican States) 427-A Chap ala , S.A. It rt It 427-:13 Agri cuI tural eq' • . .... - . :
.. - . ' - ,.-. ," ~ . tJ n II 427-D Rail way equi pmei . : ~. t ~ .. ~ ,-~ •.. .1..~, ' . .. (: ~ .. " It " 427-E Two sugar mills .. to • ..... , . ,
" If " 427-0- Ammonium sulfa t ~ Tamp i co-C i udad 1\
II 11 " 427-H \,lorks 11!
" II " 427-J Rail way equi pmel Rail"ray e('~uipmel
*11 II tI 427-K Pacific Ry. oj It n II 427-L Coal mine devel<
Na clonal Financiera,S.A.
• La Consolidada,S.A. (United Mexican states) 452 Raw materials Nacional Financiera,S.A. Development of I: (United Mexican states) transportatiol
- Unallotted ~ 487 tions and ele~
" n WI 487-A Falcon Dam and F
~-IMPORT EANlC OF tTASHINGTON STATEMENT OF LOANS AND AUTHORIZED CREDITS - MEXICO (Continued)
Commodi ty or Purnose
i Alto Canal sion of steel mill
noing erection of sUlphur ant
l~OOO~OOO~OO 17,500,000 0 00 5,000,000.00
Principal Cancellations Balance not Amount Disbursed Princiua1 Re- Outstanding & E)...-nil'&tions yet Disbursed by Eximbank paid on Loans on Loans