The Mexican government joins other nations of the world in issuing a government response to the effects of the global economic slowdown in saying it will lend as much as $1 billion to aid its auto industry.

Estimates are that financial institutions will get $600 million to facilitate credit to consumers. Some $100 million will go to dealerships, while an as-yet-undefined amount of several hundred million dollars would go to auto-industry suppliers.

Government loan terms have not been defined yet, but observers expect the bailout money will be assumed as syndicated debt to the borrowers, which implies asset confiscation if they fail to repay the loans. Funds may wind up being limited to wholly Mexican-owned companies, although this has not been publicly announced.

Mexico's new-vehicle production dropped about 50 percent in January compared with the same period in 2008, while exports were down nearly 60 percent. The contraction of the U.S. market was the main cause of the poor performance, since seven of every 10 vehicles exported are destined for the United States.

The contribution of the automotive industry to Mexico's economy is significant. It accounts for almost 4 percent of Mexico's gross domestic product and more than 12 percent of its industrial GDP.

The Mexican auto industry and the overall economy could be hit hard if General Motors and Chrysler were to end up in bankruptcy this year. For years, the auto industry has been Mexico's second-biggest exporter behind oil, but in recent months petroleum extraction and international crude prices have declined, relegating the 'black gold' to the third exporter position. Now, exports of televisions have become number one, and autos remain in the second position.