Mexico, a nation of some 90 million people, shares a 2,000-mile border with the United States and is our third largest trading partner. Hundreds of thousands of American jobs depend on the economic well-being of Mexico. Our national security and future economic growth increasingly depend on Mexican democratization, economic liberalization, and stability. Managing our relationship with Mexico should accordingly rank as one of the very highest priorities of any American President. Unfortunately, the Clinton Administration's policy in Mexico has been a textbook example of incompetence, mismanagement, and deceit.

After ignoring clear indications of approaching crisis throughout 1994, the Administration appears to have helped stampede Mexico into a precipitous currency devaluation that devastated the Mexican economy. Then, after failing to rally his own Party behind his Mexican policy, the President acted unilaterally to extend billions of dollars in credits to Mexico, while simultaneously helping to impose conditions that drastically deepened Mexico's economic crisis and weakened the prospects for repayment of our funds. And now the President is flouting the will of Congress and violating the law by withholding documents that he is required to release as a condition for continuing the bailout--documents that might shed light on how the Administration's incompetence has put both American taxpayers and Mexico at risk.

Prologue: The Clinton Administration Ignores the Approaching Crisis

Throughout 1994 there were clear indications that Mexico was neither economically nor politically as stable as the Clinton Administration assumed. On January 1, 1994, almost a year before the economic crisis erupted, the Zapatista insurrection, an extensive armed uprising, broke out in the southern state of Chiapas; it continued throughout the year. In February, the International Monetary Fund (IMF) annual review of the Mexican economy warned that the country faced severe economic problems. In March, the presidential candidate of the ruling Institutional Revolutionary Party (PRI), Luis Donaldo Colosio, was assassinated during a campaign rally, precipitating a crisis of confidence in Mexico that led the Clinton Administration in April to extend a $6 billion temporary line of credit to bolster investors' confidence.

Despite these efforts, foreign investors' confidence in Mexico--and consequently their willingness to invest there--did not recover. During the summer of 1994, the intelligence community warned the Administration that a combination of factors, including continuing resistance by the Zapatista National Liberation Army (EZLN) in Chiapas and widening political scandals in the ruling party and the outgoing Salinas Administration, were creating a possibility of severe instability in Mexico. And throughout the runup to the August 17, 1994 presidential elections, the ostensibly independent Bank of Mexico obliged the Salinas Administration with a huge and dangerous expansion of the money supply in an attempt to promote the PRI's electoral prospects: during the first nine months of 1994 alone, the monetary base grew by 20%. A final warning was the assassination of PRI Secretary Jose Ruiz Massieu in September 1994, followed by the resignation in November of his brother Mario Ruiz Massieu, the Deputy Attorney General, who alleged a high-level coverup.

The President and his key advisers, however, were oblivious to these warning signs. During his February 1994 visit to Mexico City, shortly after the IMF's disturbing report on the Mexican economy, Treasury Secretary Bentsen stated that Mexican economic policies were "a model for all of Latin America." In March, after the Colosio assassination and the initial credit crisis, Secretary Bentsen reiterated that "Mexico is on the right economic track." Administration discussions with President-elect Ernesto Zedillo Ponce de Leon during his Thanksgiving visit to Washington reportedly focused on non-economic matters. And in speeches at Georgetown University in November and at the Miami Summit of the Americas in December, President Clinton lauded Mexico's economic prospects, stating at Georgetown that "the future looks brighter still and will be even brighter as the growth rate in Mexico picks up." Within days of Clinton's address in Miami, the Mexican economic crisis began. As the Washington Post recently reported, "U.S. officials now concede that policymakers did not understand that Mexico's economic problems would balloon into an international crisis.... In hindsight, many officials now say the Administration failed to take seriously the many warning signs throughout 1994 of a coming economic crisis...."

Clinton's Crisis Management: Making the Worst of a Bad Situation

Although the Administration's obstructionism has delayed resolution of the question, it appears that the Clinton Administration may well have significantly worsened the economic crisis, both by the economic advice that it gave the Zedillo government and by the draconian economic policies that were imposed on Mexico as a condition of the bailout.

The evidence made available by the Clinton Administration to date does not yet clearly establish whether, once the crisis erupted, the Administration actively encouraged the Mexican Government to go forward with its drastic, precipitous devaluation of the peso. This is a critical point, because while there is a significant difference of opinion as to whether or not Mexico should have gradually devalued its currency, the abrupt, radical devaluation undertaken in December was clearly ill-conceived and badly mishandled. This devaluation, which within days virtually halved the value of peso-denominated assets, put the peso into a free-fall, destroyed confidence in the peso both inside and outside Mexico, and created the crisis that the Clinton bailout was designed to address.

Despite the severity of the crisis, the Democrats sought to manipulate it for partisan advantage throughout the negotiations for guaranty legislation--despite repeated offers of support from Republicans like Majority Leader Dole, Speaker Gingrich, Banking Committee Chairman Leach, and former President Bush. Minority Leader Richard Gephardt designated Rep. Barney Frank, a vehement opponent of NAFTA, as his lead negotiator, and the Democrats sought throughout the negotiation to use the guaranty legislation as a means of securing protectionist trade legislation. In addition, the President was unwilling or unable to expend political capital to secure significant Democratic support for his own proposal, even as he was describing it as essential. The Administration was apparently hopeful, for political reasons, that the package could be passed with almost exclusively Republican votes. As Chairman Leach subsequently stated:

As the lead negotiator on behalf of the majority in the House I was asked by the Speaker to bring to fruition a bill advancing the Administration proposal. After intensive negotiation between various parties on the Hill and within the Executive Branch, we were prepared to bring a bill encompassing 100% of the Administration's package to the floor within a week of the Administration's emergency request. We had only one precondition, that being that the approach and the methodology for consideration be endorsed in writing by the Democratic leadership in the House. Unfortunately, such was not forthcoming.

Economists and other observers have differed over the advisability of a loan guaranty program for Mexico. There has been a broad consensus, however, that the economic "conditionality" imposed on Mexico as part of the guaranty package has severely exacerbated the effects of the crisis. In an attempt to contain the inflationary pressures loosed by the massive currency devaluation, the Mexican Government was required to impose massive tax increases (including a 50% increase in the VAT, a phased 48.5% increase in fuel taxes, and a 20% increase in electricity rates) and astronomical interest rates. The Clinton Administration fully endorsed this conditionality. Apparently the Administration made little or no effort to require the sort of policies that would have promote economic stabilization and recovery, like privatization of the assets of the gigantic state-owned electricity and petroleum monopolies.

The results of these policies are economic recession and mounting political instability. Interest rates now stand at 80%, annual inflation is running at an estimated 40-50% annual rate, more than half a million people have lost their jobs since the devaluation, and hundreds of thousands more job losses are predicted. During the first quarter of 1995, loan defaults have increased by 45% and total nearly a billion dollars, portending a crisis in Mexico's already shaky banking industry. For the last several weeks, thousands of unemployed workers have clashed with police in the streets of Mexico City. For the first time since 1920, the Mexican Government cancelled the annual May Day labor march because of fear of civil disturbances. The long-term political outlook is bleak for a President elected with barely 50% of the vote in 1994 on the promise of "Wellbeing for Your Family" and 800,000 new jobs a year.

As an immediate matter, the draconian economic conditionality sanctioned by the Administration will dramatically weaken the odds that the United States and the other participants in the bailout will be able to recover the $47 billion guaranty package. A moribund Mexican economy will not promote the sort of investor confidence needed to give Mexico long-term access to international credit markets. Nor will it allow Mexico to offset the loss of foreign investment with internally-generated investment capital.

In addition, the supposed guaranties negotiated by the Administration--such as access to PEMEX revenues--are largely a sham. Thus, it was recently reported that notwithstanding the bailout agreement, Japanese creditors have seniority over the United States with respect to the oil revenues. In addition, it is hardly conceivable that a Mexican Government willing to default on its obligations to the United States would continue to produce and export oil exclusively for our benefit.

The long-term implications of this potential instability for the United States are even more serious. The severe contraction in the Mexican economy, prompted in large measure by the Administration's ill-considered conditionality, will dry up Mexican demand for U.S. exports at the same time that it promotes increased illegal immigration. It may further inflame the Zapatista revolt in southeastern Mexico and may result in further political destabilization. And it could set back the already flagging effort to eradicate official involvement in drug trafficking to the United States. All in all, the process of economic and trade liberalization throughout Latin America, which had been promoted by NAFTA and economic stability in Mexico, has been dealt a severe setback.

The Clinton Coverup

A number of the above conclusions about the Administration's policy are tentative for the time being, because the Clinton Administration has repeatedly sought to obstruct bipartisan Congressional oversight of its Mexico policy. On March 1, 1995, the House of Representatives approved a Resolution of Inquiry offered by Rep. Marcy Kaptur (D-OH) by a vote of 407 to 221. The Resolution, H.Res. 80, requested the release of twenty-eight categories of documents within two weeks of its adoption. The Administration failed to provide any response to Congress during this two-week period: neither any documents (not even those already made available to the Senate), nor any explanation of the delay, nor any request for additional time. The Administration similarly ignored a related request from Chairman Spencer Bachus of the Banking Committee's Oversight Subcommittee, forcing the cancellation of his initial oversight hearings. On March 21, a week after the Kaptur Resolution deadline, the Administration wrote that it would "endeavor to complete production of responsive documents by May 15, 1995"--two months late.

As a result of this obstruction, the House and Senate added the Mexican Debt Disclosure Act of 1995 to the supplemental defense appropriation signed by the President on April 10, 1995. Section 406(a) of the Act provides that "no loan, credit, guarantee, or arrangement for a swap of currencies to Mexico...may be extended or (if already extended) further utilized, unless and until" the President submitted five specified certifications to Congress. The fifth condition was that the President "submit[ ]...a certification that...the President has provided the documents described in paragraphs (1) through (28) of House Resolution 80, adopted March 1, 1995." Instead, on April 14 the Treasury Department submitted a Presidential certification that:

The Executive Branch has provided the documents requested by House Resolution 80 adopted March 1, 1995, and described in paragraphs (1) through (28) of that Resolution. All documents identified as responsive to the Resolution have been provided to the entire House of Representatives. Pursuant to the terms of the Resolution, the Executive Branch has not provided those documents as to which the Executive Branch has informed the House that it would be inconsistent with the public interest to provide the documents to the House.

(Italics added). In an April 14, 1995 letter to the Speaker, the President's Counsel, Judge Abner Mikva, stated that the Administration "[is] prepared to reach appropriate accommodations, and to do so quickly," regarding the classified and unclassified documents being withheld, but that "[w]e expect you will agree that in limited cases involving special circumstances, certain documents...should not be disclosed to any Members of the House because it would be inconsistent with the public interest to do so." On April 17, the Administration released an additional $3 billion in medium-term loan guarantees to Mexico.

As Speaker Gingrich pointed out in a subsequent letter to the President,

[t]his certification clearly fails to satisfy section 406(a)(5) of the Act, which unambiguously requires certification that "the President has provided the documents described in paragraphs (1) through (28) of House Resolution 80, adopted March 1, 1995." Section 406(a)(5) does not permit certification that the President has provided "the documents requested in House Resolution 80", as you certified. Accordingly, it therefore does not incorporate the initial proviso of House Resolution 80, which excuses compliance "if [production of the documents is] not inconsistent with the national interest." Because you certified compliance with House Resolution 80, rather than certifying that the Administration had disclosed the documents specified in paragraphs (1) through (28) of that Resolution, your certification does not meet the criterion set by the Act for continuation of your Mexican assistance program.

As you know, under the terms of the Act the continued legality of your Mexican guaranty program depends directly on your providing certifications that the conditions specified in the Act have been met. Because you failed to provide such a certification, the program, including your decision subsequent to signing the legislation to release an additional three billion dollars to the Mexican Government in medium-term loans, has been rendered unlawful. The Administration must bear full responsibility for this situation and its consequences, which could easily have been avoided.

The Speaker further pointed out that "Judge Mikva's statement concerning permanent nondisclosure of documents contradicts the tenor of his discussion over a month ago with Chairman Leach of the Banking Committee and Chairman Cox of the Policy Committee. At that time, Judge Mikva expressed confidence that there would be no difficulty about arranging appropriately controlled access to all the requested documents, at least for appropriate Members of Congress.... I also do not understand why the Administration believes that it is inconsistent with the public interest for Members of Congress chosen with your concurrence and that of senior Congressional leaders of your own Party to review these documents (apparently including unclassified documents)."

On May 5, Judge Mikva responded by providing a two-page opinion from the Justice Department's Office of Legal Counsel, whose three-paragraph legal analysis concluded that

[a]lthough the statute cites only to the numbered paragraphs of House Resolution 80, it must be read as also incorporating the initial, unnumbered paragraph of the Resolution. The numbered paragraphs simply set forth a list of specific categories of documents requested by the House of Representatives. Those paragraphs do not, however, contain, any request for documents. The House's request for documents is contained in the initial paragraph of the Resolution, which immediately precedes the numbered paragraphs.... That paragraph thus sets forth the essential information about the universe of documents that is subject to the request: they must be documents that are in the possession of the executive branch and they must be documents for which it is "not inconsistent with the public interest" to provide them to the House of Representatives. In addition, the paragraph indicates to whom the President should provide the documents: the House of Representatives.

Letter from Hon. Walter Dellinger, Assistant Attorney General, Office of Legal Counsel, to Judge Mikva (April 14, 1995).

The Justice Department's analysis is thoroughly tendentious. The initial paragraph of H. Res. 80 does not contain "the House's request for documents," nor does it "provide the President with information essential to his ability to make the statutory certification. The House's requirement that document be produced is contained in section 406(a) itself, which entirely supersedes the request made in the initial paragraph in H.Res. 80. Moreover, if the Administration took seriously its view that "section 406(a)(5) must be read to incorporate the [initial] paragraph" of H.Res. 80, it would have been impossible for President Clinton to certify that he had "provide[d] to the House...not later than 14 days after the adoption of this Resolution" the requested documents. Indeed, the obsolete date reference in the initial paragraph makes perfectly clear that the initial paragraph was not, and could not have been intended to be, incorporated in section 406.

The remaining argumentation of the opinion is equally dishonest. The recipient of the documents is entirely obvious in context, and is moreover specified by section 406(b), which provides that "[f]or purposes of the certification required by subsection (a)(5), the President shall specify, in the case of any document that is classified or subject to applicable privileges, that, while such document may not have been produced to the House of Representatives, in lieu thereof it has been produced to specified Members of Congress...." (Italics added.) The public interest proviso in the initial paragraph of H.Res. 80 is similarly not "information essential to [the President's] ability to make the statutory certification" required by section 406; the materials in question are fully delineated by section 406 itself as "the documents described in paragraphs (1) through (28) of House Resolution 80"--paragraphs comprising five single-spaced pages of descriptive text. And the Justice Department's final suggestion--that without incorporating the initial paragraph, the President would not have realized that section 406 called only for "documents in the possession of the executive branch"--does not merit a response.

It would be unfortunate if the lengthy treatment of the Justice Department's legal arguments set out above suggests that the legal question involved is close or difficult. The statute in question is clear, and the Justice Department's three-paragraph analysis would, if argued in court, be sanctionable. There is no question whatsoever that the President and his senior officials have acted in knowing, flagrant violation of federal law to obstruct congressional oversight of their activities.