Basic HTML Version
PASTOR GENERAL'S REPORT, DECEMBER 31, 1982
PAGE 8
More than ever, Western banks also turned their attention to the
third world, competing fiercely in� borrower's market to dispose
of their excess liquidity, frequently at low interest rates with
small profit margins. Last year foreign banks poured more than
$19 billion of new money into Mexico alone, while the third
world's total foreign debt rose to $517 billion. [Note: an in
crease of $402 billion in only two ye'ars!J
�� � �-
By mid-1981, however, the Reagan Administration's tight money
policies were squeezing the entire world economy•.••This slow
down, in turn, softened oil prices and further weakened demand
for other raw materials. Within months, even the dollar surplus
from the Arab oil countries had dropped sharply. As a result,
acute financial crises have erupted like brush fires across the
developing world this year.
Yet it was only recently, when the larger countries of Latin
America began lining up outside the International Monetary Fund,
that their individual problems took on the dimensions of a global
monetary crisis. For example, Mexico, Brazil and Argentina��
tot�l of $200 billion abroad, which they cannot repay.
The immediate fear among bankers in New York and London was that
these countries might organize� "debtors' cartel" and unilater
ally declare a moratorium on all their debt servicing.
[Cuba,
incidentally, has called for the wiping out of all Third World
debts. Havana is in debt to the tune of $3 billion.] Such a move
would decimate the west's financial system, so bankers have tried
to show flexibility, ignoring defaults on interest payments and
even providing new credits in exchange for austerity programs
worked out with the IMF "We helped them� into this pickle,"
one foreign banker said, referring to Mexico's problems, "and
we've got no choice but to help them get out if we ever want to be
repaid."
Indicative of the further developed countries' bleak economic picture is
the "Christmas gift" that France just received, as reported in the December
27, 1982 WALL STREET JOURNAL. It is a gift with definite political strings
attached regarding the Middle East. Reports staff reporter Felix Kessler:
In the seasonal spirit, Saudi Arabia has bestowed a welcome
Christmas envelope containing something like $4 billion upon the
French government. And ever since, many of the French have been
ungraciously speculating whether any strings are attached.
The $4 billion is the apparent amount of a loan that the oil king
dom agreed to extend to France, according to Mideast and European
sources. But mystery and controversy surround the accord.•..
Finance Minister Jacques Delors refused all comment on either the
amount or the terms of the arrangement he signed last week in
Riyadh. Some French officials say their lips are sealed at the
request of the Saudis, who want to avoid other requests from
hard-pressed neighbors.