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PASTOR GENERAL'S REPORT, DECEMBER 31, 1982
PAGE 6
Brazil gets the additional $1-billion loan it needs to cover a
shortfall of commodity exports, the total package will be the
largest ever a ":' ar�ed by t�e IMF. Brazil already owes foreign
bankers $89 b1ll1on, having thus recovered from Mexico the
dubious distinction of being the world's most indebted nation.
Meanwhile, last week the telex machines in Mexico's Finance
Ministry were clacking once more, dispatching urgent cables to
the 1,400 foreign banks that hold Mexico's $SO-billion debt. The
message:
Mexico was declaring a moratorium on $20 billion in
principal payments due through the end of 1984 and requesting an
additional $5 billion in loans. Mexico needs the new money in
order to persuade the IMF to lend it another $3.9 billion.
Bankers rallied quickly, and IMF Managing Director Jacques De
Larostiere was expected to convey the Fund's approval of the
agreement. The loan••• will be a sign of confidence in the newly
installed administration of President Miguel de la Madrid. Said
one top international banker: "The new cabinet is consistent,
competent, and conservative."
In office only three weeks, de la Madrid has set out on a tough
economic program that includes higher taxes, reduced government
subsidies on food, lower budget deficits, and removal of most
foreign exchange controls.
Despite their success in putting together the huge loan packages
for Brazil and Mexico, banking and finance ministry officials
remain worried about the stability of the international money
systern. Financial wags are complaining about hastily arranged
billion-dollar loans to the "newly submerging countries."
Private bankers are concerned that as Argentina, Chile, Costa
Rica, and others queue for IMF cash, the fund will be drained.
U.S. Treasury Secretary Donald Regan frets about the global
effects of belt-tightening measures carried by IMF loans. Says
he: "Countries that go to the IMF for help are all told to export
more and import less. But that creates a puzzle. The indus
trialized nations are trying to export more and import less. How
can every nation do this simultaneously and still maintain an
international trading system?" Bankers around the world face a
sobering� year.
That phrase "newly submerging countries" is quite descriptive. Two or
three decades ago, nations in what is often called "the Third World" were
simply labeled "backward," perhaps with an air of superiority on the part
of the industrialized world. The United Nations, gradually reflecting
Third World numerical superiority, began using other terminology, attempt
ing to connote a mood of progress. Out went "backward," and just as quickly
"undeveloped." "Underdeveloped" was employed for a while, then "develop
ing," finally "newly emerging nations." Now, some of the latter, as far as
the bankers are concerned, have passed the terminological crest to become
"newly submerging countries."
Much of the world's economic mess is traceable to the quantum leap in oil
prices following the 1974 Arab oil embargo, coupled with another sharp in
crease in 1979. This crippled the Third World in two ways. First, the