March 31 (Bloomberg) -- Mexican President Felipe Calderon said the country will activate a $30 billion to $40 billion credit line from the International Monetary Fund.

The peso strengthened on the comments, which eased concern that foreign reserves will dwindle. Activating the credit line makes the funds available and doesn’t imply plans to draw on it immediately, a Mexican government official said.

“We have our public finances in order and we’re able to take a line of credit of IMF in order to support the reserves of the central bank of $30, or even $40 billion, even this very same week,” Calderon, speaking in English, said today at a business seminar in London.

The IMF said March 24 it will double credit limits for nations struggling with the financial crisis and relax loan conditions for developing countries that need short-term assistance. Calderon had previously urged international organizations to respond more quickly to the global crisis and provide more liquidity to emerging market countries.

“We have been in discussions with Mexico -- as well as other strong-performing countries -- regarding this issue, and very much welcome President Calderon’s positive response to the Managing Director’s invitation today,” an IMF spokeswoman said in an e-mail.

Calderon’s announcement eased market concerns about the central bank’s policy of using its reserves to boost the currency by buying pesos, said Gabriel Casillas, an economist at UBS AG in Mexico City. The IMF credit line would increase foreign reserves, while a $30 billion swap line offered by the U.S. Federal Reserve wouldn’t, he said.

Remove ‘Worries’

“They want to remove any worries in the market about the reserves,” Casillas said. “This would be to stabilize the peso.”

The currency strengthened 1 percent to 14.1694 per U.S. dollar at 4:39 p.m. New York time, from 14.2879 yesterday.

The peso has risen 7.6 percent against the U.S. dollar in March, its biggest monthly rally in 14 years, after plunging for seven straight months as the global recession curbed demand for Mexican exports.

The currency got a boost on March 20 when the central bank made a bigger-than-forecast reduction in lending rates, signaling policy makers are committed to shoring up growth in Latin America’s second-largest economy.

Central Bank Governor Guillermo Ortiz said March 20 that Mexico may activate its $30 billion currency-swap line with the Federal Reserve “soon.” The central bank has sold $21.1 billion in reserves since October to help boost the peso.

Calderon’s remarks on the credit line may hurt investor confidence in Mexico because borrowing money from the IMF has a stigma attached to it, said Marc Chandler, head of currency strategy at Brown Brothers Harriman in New York.

“Does a strong country go to the IMF to borrow money? I say no,” Chandler said in a telephone interview. “It’s perceived to be a sign of weakness that countries go to the IMF.”

To contact the reporter on this story: Laura Price in London at lprice3@bloomberg.net; Jens Erik Gould in Mexico City at jgould9@bloomberg.net

Last Updated: March 31, 2009 16:50 EDT