Rubin Sounds Global Financial Alert : Crises: Treasury secretary cites peso’s troubles in calling for international revamp to respond to such emergencies.

WASHINGTON — Treasury Secretary Robert E. Rubin warned Thursday that events like the Mexican peso crisis could become common in a world of rapid and overwhelming movement of capital, and he called for revamping global financial institutions to provide faster responses to emergencies.

“The issue here was partly Mexico and partly the potential for significant spillover effects in other developing nations in Latin America and developing and emerging nations outside of Latin America,” he said at a news conference in preparation for his trip Saturday to Toronto, where he will meet with the finance ministers of the G-7 group of powerful industrial nations.

“We need international financial institutions as modern as the problems they face,” Rubin said. He urged changes in the International Monetary Fund and the World Bank to help deal with fast-moving currency and trade crises. He did not offer any specific U.S. proposals but emphasized that he will push the issue aggressively at the meeting.

The Mexican situation “has given us a very good experience from which to talk about how we can work better and more effectively together to deal with financial market disruptions,” he said.

After it became clear that Congress was balking at President Clinton’s request for a $40-billion package of loan guarantees for Mexico, the Administration on Tuesday acted unilaterally, using $20 billion from a special exchange stabilization fund that can be disbursed by the President. The package of loans and guarantees gives vital assurance to private lenders that the U.S. government will repay loans if Mexico defaults.

Other help will come from the IMF, which is contributing $17.8 billion; the Bank of International Settlements, contributing $10 billion, and Canada and several Latin American countries, which together are contributing $2 billion.

The IMF’s executive board approved the contribution only after five European nations took the unusual step of abstaining from endorsing the agreement.

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The Europeans--Germany, Britain, the Netherlands, Belgium and Switzerland--notified IMF Managing Director Michel Camdessus of their abstentions one day after the 24-member executive board met to discuss the rescue package. None abstained during the meeting and the other executive board members remained in favor of the deal.

The Europeans objected that they had not had adequate time to consider the merits of the bailout, which they said would deplete resources that might be needed later to meet financial emergencies elsewhere in the world.

Top U.S. Treasury Department and IMF officials had hammered out the IMF’s $17.8-billion contribution, $10 billion more than the IMF had already pledged, after negotiating through Monday night and Tuesday morning. Clinton announced the new rescue package only hours after the IMF’s contribution was determined.

Action was imperative, Clinton Administration officials said, because the peso was reaching an all-time low, the Mexican stock market was falling, and investors everywhere were having second thoughts about the desirability of sending their capital to fast-growing countries.

The soft-spoken, reserved Rubin on Thursday came as close as he ever does to sounding like an alarmist. It was “critical that Mexico’s financial distress be arrested and that the situation be corrected,” he said.

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Rubin said one of his main missions as Treasury secretary will be to explain to the American people why efforts like the Mexico aid package are essential to the financial security and prosperity of the United States.

Looking to future crises, Rubin said he hopes to win a change of attitude in Congress, overcoming the strong opposition that made it impossible to win legislative approval for the Mexican loan guarantees.

“We really and truly are in a new world, a new world where we are dependent on other nations in ways that we never were before and in which we have global financial flows and global flows of trades and services,” he said.

The G-7 ministers will also discuss the economic transformation of Russia and the Ukraine into freely operating capitalist nations that are struggling to achieve economic stability and prosperity, Rubin indicated.

With the U.S. economy strong, and Europe and Japan also showing good business performance, the worries of recession will not be on the agenda at the Toronto meeting.

The G-7 members are the United States, Canada, France, Germany, Great Britain, Italy and Japan.