MEXICO CITY (Reuters) - Mexico asked the International Monetary Fund to extend a credit line to Latin America’s No. 2 economy to more than $70 billion on Tuesday as a safety net in case of more global financial market turmoil.
President Felipe Calderon said Mexico had asked the International Monetary Fund to boost the country’s current credit line with the IMF from $48 billion to around $72 billion.
“This is a financial insurance policy that will fully protect the economy from any external turbulence,” Calderon said after meeting with IMF Managing Director Dominique Strauss-Kahn.
“This is a credit line of a precautionary nature that, just like in past instances, Mexico does not plan to use,” Calderon added.
Strauss-Kahn said the IMF was in the process of approving the request and praised Mexico’s economic policies during the global financial crisis that kept the country’s debt from bulging.
Mexico has yet to tap its credit line with the IMF, which first set up the facility in early 2009 when the global financial crisis knocked Mexico’s peso currency to a record low.
Strauss-Kahn also described the credit line extension as a precaution, saying he hoped Mexico did not have to use it.
The IMF forecasts the Mexican economy will grow 5 percent this year and 3.9 percent in 2011.
Mexico and other emerging market economies are concerned about what will happen when the United States and other rich nations eventually raise interest rates and rein in government spending.
Higher U.S. rates could lead investors to pull money out of emerging markets like Mexico to invest them in safe-haven U.S. Treasury debt.
A statement from Mexico’s currency commission, made up of the central bank and Finance Ministry, said that the credit line, when added to the central banks’s dollar reserves, would provide Mexico with close to $200 million to defend its currency from external shocks.