Basic HTML Version
the
DEBTBOMB
WhenWill It Explode?
by
Dan C. Taylot
Here's the bad news-and the good news!
L
TIN
America's and
Africa's ledger sheets
are soaked in red ink.
Gone are tbe heady days
when banks in Europe and
North America, bloated with oil
money, readily lined up thou–
sands of millions for Southern
Hemisphere nations.
A nightmare of debt, huge inter–
est payments and shattered dreams
have descended on the economi–
cally struggling Third World, espe–
cially the Latín world from Mexico
to Chile.
Ahead- The Good News!
In spite of tbe economic morass
and gloomy projections for the fu–
ture,
The Plain Truth
announces
good news is ahead for tbe Third
World! Better times do lie ahead
for this very generation.
There is indeed hope for
all
fu–
ture generations.
A time is coming, sooner than
bankers, politicians and economists
think, when nations will be freed
from today's burdensome interna–
tional debts and live with one an–
other in a world at peace, in joy
and prosperity.
For Now-A Message from Garcla
In the late l960s and I970s, the
leading debtor nations paid less
than 6 percent of their export earn–
ings. to service their externa! debts.
Today, sorne nations' debt servic–
ing payments would require more
12
than one third of their export earn–
ings ... if they could afford to pay
that much.
Peru's President-elect, Alan Gar–
cia Perez, told foreign banking con–
cerns last August that bis nation
would allocate only 1
O
percent of its
export earnings to make interest
payments. The financia! world took
a deep breath and quickly tried to
analyze the situation.
Peru's interest accumulated on
its foreign debt for 1985 amounted
to US$1, 100,000,000 or one third
of its total export income. But the
1
O
percent figure would really
change nothing since Peru had not
been paying more than 1
O
percent
of its export earnings before the
outspoken President Garcia's an–
nouncement.
President Garcia, on the other
hand, had nothing to lose. Peru
needs an infusion of investment for
its economy to grow. The Western
industrial world banks, however,
have only recently begun to exam–
ine seriously the possibility of mak–
ing further loans to Mr. Garcia's
and other capital-poor nations.
The Peruvian president's real
threat is that other Latín American
nations might create a debtor cartel
·through which a bargain could be
struck with creditors of Latín
America.
In addition to Mr. Garcia's pro–
posa!, Cuba's Fidel Castro offered
up a more drastic solution to dele–
gates from more than 30 Latín
American and Caribbean nations in
Havana: simply cancel the debts–
don't pay them back. Fidel Castro
called Latín America's debt ..math–
ematically, economically, politi–
cally and morally unpayable." Yet
even Cuba is careful to pay the
interest payments on its
US$3,400,000,000 debt to foreign
concerns.
The mounting debt crisis is set–
ting off alarms that require imme–
diate attention, domestical ly and
internationally.
.
......_
Seoul: Searching for Solutlons
~
New rays of hope for debtor na-
-
tions seemed to appear at the an-
...
nual meeting of the International -
Monetary Fund and World Bank at . '- ·
Seoul, South Korea, in October of
;..::::::...
last year.
~
Th~
United States proposed a :::;:;.---::
greater involvement by the World .
~
Bank in helping debtor nations fi- .,............. -
nance healthy economic expansion.
U.S . banks, as well as foreign -
~
banks, were urged to make new
loans to Third World debtor na-
tions rather than simply rolling
f
over old debts.
~
Few of the parties involved with
,,,
the burgeoning Third World debt
problem were satisfied with the re-
sults.
Debtor nations felt the scheme
wasn't far-reaching enough to spur
the growth of exports- growth
that is necessary to enable them to
cope with staggering interest pay–
ments. Yet U.S., Japanese and
other Western bankers are not en-
The
PLAIN TRUTH