DEBT Latin America Hangs in the Balance
FOLLOWING THE FINANCIAL PRESS THE LAST few months one is reminded of Mark Twain's famous rebuttal: "reports of my death are greatly exaggerated." Third World debt seems to have become an...
...LEVEN REGIONAL DEBTORS HELD THEIR fourth meeting in Santo Domingo last February...
...So far not much has changed about the way creditors or lenders operate, and most seem interested in delaying real solutions...
...The situation is somewhat analogous to a dinner party," said one observer...
...Latin America's debt crisis is complex, and reports of its demise are greatly exaggerated...
...The hardest part is always dividing up the check, so let's have another round of coffee...
...objections...
...By March, it was clear that these schedules were not so realistic as the press had portrayed...
...Rumblings about the future can also be heard in financial circles...
...The New York Times appeared not quite sure there was anything to make a fuss about, reporting in December that "the 'international debt crisis' never quite crystalized...
...Alfonsin has reportedly sought $500 million from the Reagan Administration to tide the country over until it can again live up to IMF standards...
...Argentine President Radl Alfonsin arrived in Washington in late March amid reports that his government has already failed in meeting the terms of its sixmonth-old IMF agreement, particularly on inflation...
...Private bankers have suspended talks on rescheduling loans totalling about $45 billion, an accord that was prematurely heralded in February as a "milestone...
...The 11 will make a joint statement at April's World Bank/IMF interim committee meetings, based on the notion that the debt crisis demands political as well as financial solutions...
...Argentina has yet to receive any of the monies the IMF promised and has not firmed up the terms of new loans the private banks agreed to provide...
...But the Mexican economy does not incite the kind of banker confidence it once did...
...We've asked some close observers of the debt crisis to share their analyses...
...Why the volte-face...
...The group has taken pains not to scare off the banks, giving up plans to schedule their own debt summit against U.S...
...Federal Reserve Chairman Paul Volcker has been encouraging banks to beef up their capital bases as a cushion against big losses that a default could bring...
...Jeff Frieden, Cheryl Payer and Al Watkins each approach the topic from a different angle, and the three do not necessarily come up with the same set of answers...
...Impressed with Mexico's good performance in cutting inflation and increasing exports, the banks granted a much-lauded rescheduling last fall...
...Debtor countries and their lenders are working out realistic long-term solutions...
...Between September 1984 and January 1985 the region's three largest debtors-Mexico, Brazil and Argentina-all achieved new stretched out agreements with the International Monetary Fund (IMF) and creditor banks...
...Obstreperous debtors, such as Argentina, have been muscled into accepting austere financial programs," wrote Fortune...
...Major problems could abruptly resurface," warned The Wall Street Journal, backing up an observer's assessment that the debt crisis is "in remission at best...
...Third World debt seems to have become an onagain, off-again crisis...
...The debt crisis has done more for Latin American political integration than 150 years of rhetoric," a deputy foreign minister told The Washington Post...
...This issue of the Report looks at a question that looms large in Latin America today...
...Brazil has also failed to comply with IMF inflation targets and the fund has stopped remaining disbursements on a $4 billion program...
...Yet as we go to press, worried tones are again creeping into business-page prose...
...While hardly the "cartel" the creditors feared, the Cartagena Group is continuing efforts to arrive at a common approach...
...Whatever the problem, by February the Times was convinced "the worst is over...
...As we looked deeper into the topic, we found there are no easy explanations of how the region's debtors got where they are, or how they're likely to get out...
...Discontent with austerity is growing, and after a slowdown in capital flight, as much as $20 million is reportedly leaving the country daily...
...Evidence is building that the international debt crisis is over," began a Fortune magazine piece in mid-February...
Vol. 19 • March 1985 • No. 2
