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IMF report

casts new light

on peso crisis

WASHINGTON: Mexican investors precipitated the spectacular crash of the Mexican peso late last year by staging a massive, last-minute run on their own currency, a new International Monetary Fund report finds.

The study, reported in Monday editions of the Washington Post, challenges earlier portrayals of the Mexican crisis by Clinton administration officials, the Federal Reserve and the IMF.

Officials had earlier suggested the peso crisis was triggered by primarily foreign, not domestic, investors dumping the currency in response to political unrest.

No comment was immediately available from the IMF.

The newspaper said the IMF report also suggested the peso crisis posed a relatively modest threat to the stability of the international financial system, contrary to warnings at the time from key administration officials.

It also provided a sympathetic assessment of the use of restrictions on the flow of capital across national borders by developing countries seeking to shield their economies from volatility in international financial markets.

According to the Post, the report talked of a dramatic upsurge in Mexican investors converting stocks, bonds and other assets from pesos to other currencies in the two weeks before December 20, when Mexican officials abandoned their pledge to defend the value of the peso against the dollar.

It suggested that the exodus of domestic capital set off a downward spiral in Mexican financial markets and hastening the withdrawal of foreign capital, forcingt the Mexican government to the brink of insolvency in late January.

The report noted that most foreign investors did not begin withdrawing their funds untill well after December 20.-Reuter