Latin America, US pull together to address debt crisis
Not so many years ago, this city was a boom town, awash in oil money and the busy host to scores of jetlining international businessmen. Now, red ink seems to run deeper than oil and the heady summit meetings of the Organization of Petroleum Exporting Countries (OPEC) of the 1970s have given way to worried meetings on the suffocating debt crisis of the 1980s.
Under the wing of the Organization of American States (OAS), delegates from some 30 Latin and Caribbean nations huddled here last week to talk about the problem they all share: a crushing foreign debt totaling more than $300 billion - fully half of what the entire poor world owes the rich world.
For the first time in a decade, the OAS says, indebted Latin nations sat down with their chief creditor, the United States, to thrash out the economic crisis that has sent tremors throughout the world financial system.
Judging by statistics alone, the delegates might have come prepared for a brawl. Citing the ''worst (debt) crisis in 50 years,'' a Latin working paper ticked off the casualties of three years of world recession: a 10 percent drop in the region's per-capita income, 40 percent drop in the region's terms of trade (the relation of a country's export prices to its import prices), $119 billion of accumulated public account deficit, and social fabric stretched to the fraying points.
''It is imperative to reach an understanding here,'' said Jesus Puente Lleyva of Mexico. ''The alternative is chaos.''
Yet nearly all of the hundred-odd delegates, from the Nehru-jacketed Grenadans to the button-down Americans, maintained a cool diplomatic air. All participants praised the ''spirit of harmony and understanding.''
A feisty paper by the Ecuadorans, which was included in the OAS working paper , hit hard at the ''extern actors'' of the debt crisis. It severely criticized the industrialized countries' trade barriers, high interest rates, and other ''regressive policies'' that it said have kept the third world under yoke.
In turn, the Americans flatly asserted, to the dismay of the Latins, that ''there is no evidence of a general debt crisis affecting all countries, or even all LDCs (less developed countries), in an identical or even similar way.''
The Americans repeatedly stressed the need for ''internal adjustments'' (in other words, stopping big spending) on the part of the debtor nations.
Yet after 21/2 days of ''wordsmithing,'' as one US delegate called it, two stiffly opposed documents were melded into one diplomatic, often ambiguously worded five-page accord. A joke around the convention hall was the final document was so innocuous that ''even the commercial banks would sign it.''
The Latins strenuously dispelled the two greatest worries of bankers and government lenders: a debt cartel, which could bully creditors into more loans, and a moratorium, in which debtor nations would simply delay indefinitely payments on their massive debts, perhaps eventually going into default.
''We never expected concrete steps to come out of this meeting,'' said Diogo de Figueiredo, the Brazilian secretary of the Inter-American Economic and Social Committee. ''We are looking for recommendations rather than conclusions. This meeting is the first in a continuing link of dialogue.''
Of course, it will take more than talking to help the ailing Latin and Caribbean economies, which the OAS reckons will need another $100 billion in the next five years in order not to go under. But the Latins' plea for new financing , longer grace periods to pay, and lower ''spreads'' (the difference between the prime interest rate and commercial lending rates), will have to be negotiated case by case, debtor to creditor, and not in convention halls.
Increased government financing will likely rub voters in the US and other industrial countries the wrong way, since they are already grumbling about Latin ''bailouts.''
The Latin Americans themselves are also expected to show higher levels of commitment. Conspicuously absent from the Caracas meeting were the finance ministers from the area's largest debtors: Brazil ($90 billion), Mexico ($81 billion), Argentina ($40 billion), and Chile (between $17 billion and $18 billion).
Nor did the banks have a high profile. A lone Chase Manhattan representative slipped discreetly in and out of the convention hall, and another Western banker said, virtually behind a cupped hand, ''Bankers don't want to be seen around here.''
Yet virtually all OAS delegates roundly applauded the debt talks for what they did best - set the stage for more debt talks. The next round is scheduled to be held in Paraguay in October. Until then each debtor will be on its own, tending to its own financial troubles.
''What's important is that we've created dialogue between north and south,'' said Mexico's Puente Lleyva. ''And that's something that never really existed.''