A SUPPLEMENT TO EUROMONEY - MEXICOWalking an economic tightrope Two years after the hit-and-run accident of the tequila crisis some observers say the Mexican government is still driving without a seatbelt. According to the country's harshest critics Mexico's future seems depressingly predictable. They expect the trade balance to move into deficit this year as economic growth fuels imports. This will force the government to rely more heavily on debt finance, which still accounts for 60% of foreign currency inflows. For pessimists, present conditions are strongly reminiscent of the period just before the 1994 peso devaluation. International bankers, by contrast, take a much more sanguine view. They have welcomed President Ernesto Zedillo's swift economic reforms and rapturously accepted the country back into the international bond markets. Mexico's rehabilitation began in earnest in July 1995 with a $1-billion floating-rate note, privately placed at 537 basis points (bp) over Libor. Last year, the government refinanced much of the funding it obtained from the international community in the aftermath of the devaluation. In the first quarter, it raised $2.6 billion at maturities of five to seven years. That was followed in July with a $6-billion hybrid FRN that paved the way for the government to prepay $7 billion of the $10.5-billion |