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Discussion Papers in Economics and Banking Department of Economics

11-1-1986

Latin American Debt: An Overview (DiscussionPaper #58)Antonio JorgeFlorida International University, Department of Economics, Antonio.Jorge@fiu.edu

Jorge Salazar-CarrilloFlorida International University, Department of Economics, Jorge.Salazar-Carrillo@fiu.edu

Raul MoncarzFlorida International University, Raul.Moncarz@fiu.edu

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Recommended CitationJorge, Antonio; Salazar-Carrillo, Jorge; and Moncarz, Raul, "Latin American Debt: An Overview (Discussion Paper #58)" (1986).Discussion Papers in Economics and Banking. 1.https://digitalcommons.fiu.edu/ecxdpeb/1

Discussion Papers in Economics

The Latin American Debt: an O v e ~ e w

Antonio Jorge Jorge Salazar-Carrillo

Raul Moncarz

Discussion Paper No. 58 November 1986

Department of Economics Florida International University

Miami, Florida 33 199

THE LATIN AMERICAN DEBT:

AN OVERVIEW

Antonio Jorge

Jorge Salazar-Carrillo

Raul Moncarz

Universidad Internacional de la Florida

INTERNATIONAL SYMPOSIUM ON CRISIS AND FOREIGN DEBT:

THE MEXICAN AND U.S. POINTS OF VIEW

May 19-23, 1986

UNAM, Mexico

"h7,en asked to dine with caviar and wine, the Lady of Kent knew well

what it meant, yet she went".

INTRODUCTION

Anonymous.

The international environment s i n c e the 1970s has been one of

scccessive shocks. These have come forth while the '~urodollar market .

corsclidated as a system uncontrolled by the* forces of the l enders of

last resort in the different countries. The international monetsry

authorities delinked from gold and accepted the floating of currency

e x c h a s e rates, and inflation and interest rates were allowed to vary

widely end attain the highe~t~levels in two decades. Confronted with

such shocks, and facing the international conditions just outlined,

the L s t i n 'Americans decided not to slow the wheels of industry by con-

su-.ing less oil, but rather to increase their rates of growth. 4

S i n c e the late forties the world has experienced an era of tre-

rner.50~~ econonic expansion. The Latin American countries, as part of

t h e developing world, have been growing at rates seldom paralleled in

history. Since 1950 the rates of economic growth of the developing

cou~tries have been averaging 5.5% a year, in real terms, w i t h Latin

America being slightly above the average. The ratios of investment .* . .LL

snd saving to total expenditure have increased substantially. In

Latin kmerica,gross domestic investment in the 1970s was close to

2 5 % of gross domestic product. Of course, there was still

a savings gap, and the usual nedd for capital inflows from those

Thus, batin America adjusted to the shocks, capital-rich countries.

. given the environment, by applyang thee same strategy t h a t had worked

bcfo re ; growing out of its problems.

But in addition, the Latin American countries begac to abanson

their older beliefs in the benefits of import substituting industrial- I

i z a t i o r a s part of t h e i r adjustihents to the momentous changes of the

They opened their eaonomies significantly. Export sur-

pluses in trade balances have not been infrequent in Latin America

Curing the seventies and early eighties. They are now only willing

to p r o m t e import su~stituting industry to the e x t e n t t h a t i t i s

j u s t i f i a b l e by dynamic comparative advantage within the various Latin

knerican integration areas. They are not so prone either to under-

take white-elephant type of inv+stments or to grant types of pro-

t e c t i o z that will create diffichlties downstream for their export in-

dustries,and even their primary product lines.

However, as a result of this combination of environment and pol-

icy, the Latin American total f~reign debt has reached $350 billion.

This debt is concentrated in the largest economies, and for those .C

countries the interest payments on the debt now represent close

to 50% of their ex~ort earnings~ For 1982 and 1983, per capita income

has 6eclined in these countries as they adjust their econonies to heavy

debt repayment.

In the sections that follow an-attempt is made to consider the . .

r e c e n t changes in the environment of interrlation' a 1 trade dnd finance,

pzrtlcul~rly as they concern the Latin American nations. These are

c c z ~ l r r r e ~ t e d by an exanination of development strategies in present

These pieces are followed by an analysis of possible so lut ions

to short run di l e ,m~as through international public lending, particu-

l e r l y exszining the role of the InterAmerican Development Bank. .In

closing some conclusions are derived for economic stabilization policy

ir. Latin America, and for international agreement on private debt

r e p z y z e n t schemes.

RECENT CHANGES IN INTERNATIONAL TRADE AND FINANCE

The apparent cornucopia brought about by an expanding world trade

h a s never been a totally unmixed blessing. For one thing, like all

cumulative growth mechanisms, it partakes of the "riding on a tiger"

logic . Once the race starts , it cannot stop. At increasingly higher .. . *b

levels of activity the delicate mechanism of world trade can easily

~ e t derailed by a host of difficulties, ranging from the misalicnmeat

of e x c h a ~ g e rates to deflationpry domestic policies, not to exclude

the occurrence of purely stochastic events. Once one or a few countries

begin to react defensively to adverse happenings, the stage is set for

successive rounds of mutually damaging beggar-thy-neighbor type of

R e c e n t evenzs in the intetnational system of trade end finance

~ r o ~ i C e s good illustration. The system was thrown out of kilter by

the oil shock of 1974-1975, the oil shock of 1979-1980, and the

s n b s e q u e n t financial shock of 1980-1982. Heightened interdependence

h+d sccentuated the role imports played in determining domestic macro-

econorr-ic equilibrium, particularly after the liberalization of trade I

the: f c l l owed the ltecnedy and kokyo Rounds. However, the resulting

w o r l e of the eerly eighties led to a rising tide of protectionism.

T L.. t- ti1 19% i n t e r r z t i o n a l trade had first stagnated and then declined.

After ar. average annual &owth rate of eight percent in merchandise

tra6e =on? industrial countries for the period 1950-1975, the r e a l

vo1u.e of world cormerce increased by 1.5 percent in 1980, was flat

in 1981, and actually declined in 1982 and 1983. 3

In order to exemplify the nature of the highly sensitive inter-

dependence between world econo~ic activityo and trade, Bergsten and

Cline have recently postulated. the following Eelationship: "When

economic a c t i v i t y in t h e OECD countries is growing at a rate above

1.5 percent per year in real terms, their non-oil imports tend to grow . .

about three times as fast; yet, when the growth of product and incorne

is below 1.5 percent, their imports flatten out or decline".

current bright note is that economic expansion has been vigorous in the

Y . S. during the first, second, and third quarters. of 1984 (at an annual

rate of growth of G;NoP.. of over 6 percent), following the strong re-

covery of the economy in 1983. Likewise, Western European econocies

aF?ear tc be showing an average growth rate of G.1; P. above two per-'

cezt fcr the first three quarters of '1984. These encouraging develop-

aents m y help to bring about an amelioration of the protectionist

syclrs7.e. In addition to the recent stagnation in international tra6e.

z m o s t uzfavorable occurrence which also significantly worsened the

la ti^ L-~ierican economies, was also the drastic contraction in the

f l s v cf capital to less developed countries since 1982. To at in

&'~.ericz this had amounted to $38 billion in 1981, declining to half 4

t h z t figure in 1982, and to less than $4.5 billion in 1983. As a

r e s ~ l t , there were larger flows of capital from Latin America to the

r e s t the world approximately billion and billion

ir? 1963. The decrease in capital imports predictably led to a rapid

slow-down in the rate of growth of the external debt. 5

According to the ECLA estimates,-a successful rescheduling of the

external debt which would be compatible with the' maintenance of social

and political stability in the area, by holding the line on per capita

lncose at the 19S2 level, would require an annual flow of capitel i c t o

Latin A~erica of about $35 billion, which would roughly cover upconing

debt obligations for the next two to three years. Ai notee by the I

author in a recent publication: "If the flow - . af resources or its

ecco-panylng conditions are s ~ c h as to curtail or hinder the nornal I

ser*iicir.g ~f the debt and the developmental process itself, this vi 11 / te- t to b r i n ~ about the very nesults which are often feared by the

r .2s t pessinistic observers. In that case, 'their inclination w i l l be I to attribate the +i.:perienced ceality to the operation of some inevitable

forcss thst preseternined the outcome itself rather thar? to the very

stye policies which are adopted in order to forestall its occurrence." 1

I I

PRESE?JT DEVELOPMENT STRATEGIES, IN LATIN AMERICA

X t e r the practical experiences of the post-war decades and the

tbecretical advances in the f i e l d of development strategy, largely

base2 on accumulated empirical evidence, a sensible and eclectic

position widely shared by many academians and policy makers seems to

be emer~ing. Extreme autarchic views and dependentist positions are '

rapidly receding as viable solutions to the complex problems of world I

development and trade. ~ l t h o j g h it is apparent that institutional

and organizational changes and adjustinents in the economic relations I

.* . . cC

between developed and less de$eloped countries, .leading to a more I

balance6 relationship among them, is clearly looming in the horizon I

and graeaally asserting itself as the wave *of the future, it is equally

evident that increasing interdependence and not dewlinking is the only

acswer to the needs an8 aspirations of the people of the world.

- Obv~ously, each country and regional grouphg will have t o find

its o w 2 position. which in turn will probably have to change over t i m e .

Konetheless, progress has been made insofar as the range of admissible

d e s i s t i o n from t h e i n t e r v a l of e f f i c i e n t solutions has been narrowed. .

ir t h i s r e s p e c t , i t is interesting t o refer in p a s s i n g to the r e c e n t

w,-rl: of econo~ists l i k e Bela Balassa and Hollis Chenery as an example

In Esszy 1 of h i s recently published book, The Newly Industrisl-

i t i r : c Courtries in t h e World Economy, Balassa

p~iots c s t thet: "The experience of developing countries in the p o s t - d

w z r pe r i cd leads to certain policy prescriptions. F i r s t , while infant

i - d a s t r y c o n s i d e r a t i o n s c a l l for the preferential treatment of manu-

facturins a c t i v i t i e s , this should be done on a moderate scale, both

t o a v o i d t h e establishment and the maintenance of inefficient indus-

tries and t o e n s u r e the continued expansion of primary production for

domestic and for f o r e i g n m a r k e t s . Second, one should provide equal

t r e a t m e n t to exports and to import substitution in the manufacturing

sector, in order to e n s u r e allocation according t o comparative a d v a n t a g e

and the exploitation of economies of scale." He goes on to indicate

I I that, "Ar. outward-oriented devblopment strategy should not be interpret-

i . .

ed to mean favoring exports ovkr import substitution. Rather, it is

c h a r a c t e r j z e d by providing sirnklar incentives to product ion for domes-

tic an5 for export markets."

J. very illuminating i l l u s ration of Balassa's views is their ap- t I plicztion to theexperience of Latin American countries within the I frcnework of first-stage and siecond-stage import substitution in the

I . post-war period. His discussi)on of the experiences of Argentina, Brazil,

Color.5iaf and Mexico, withAnijtially heavily inward oriented strategies,

follotied by moderation of sam$ after the beginning of the second stage,

would seen to accord well with t h e actual performance of the couritries

ix question. I

I

I Along t h e same lines, thq most recent work of Hollis Chenery

I

and the actual economic perfokmance of the countries involved on the

1

Balassa s findings and his poiicy implications and prescriptions. After

.- . other, Chcnery indicates the dvantages , shortcomings and limitations

1 Structural C h m c e and Developvent Policy,

which recapitulates an$ supplements his earlier investigatio~s I I

with Watanabe and Syrquin, fubdamentally confirms the basic outline of

discussing various patterns ob development based on empirical e v i - ,

I

dence regarding the strategieb and policies adopted on the one hand

of these f u n d a e n t a l ~atterns: (a) primary oriented, (b) balanced and I I I I

I I

(c) industry oriented. One overall conclusion of direct r e l e v a m e

to our concerns is that excessive protection, or its slanted appli-

catios for the purpose of pursuing a strongly oriented import-sub-

stitution strategy, always proves very costly in the end in terms

af a reduced rate of growth of the economy.. . . -

Lstir: American leaders and policy makers are very much aware

of these realities. In this context, there are three other related

considerations regarding the nature ,of the development process about

which there is very little dispute nowadays and which serve to further

narrow the area of divergence over the choice of strategy.

The first, directly tied to the notion of dynamic comparative

a e v z n t a g e , reinforces a coordinated drive to bring about import sub-

stitution, along with the enlargement of the domestic market f-or the

sake cf exploiting econom_les of scale, and a simultaneous promotior.

of nanufactured exports, without detriment to the cost structure of

traditional exports.

The second point has to do with schemes of economic integration

and regional trade. It is obvious that a sound and minimally balanced

development process has to make use of the great internal possibilities

of larger integration areas for real external economies of many differ- .- , ..&

ent kinds. Not only would regional integration .and cooperation serve

t o g r e e t l y r a t i o n a l i z e resourcie allocation patterns, b u t would also . ,

help to decrease the risks attlendant on s t r i c t l y subscr ib ing t o t h e .

i n t e r n a t i o n a l division of labqr model. Latin America i s large and I I I

diverse enough to fruitfully take advantage in peeking optimal p a t t e r n s

of r e s ione l and sub-regional qpecialization. 8 ' '

T h e t h ~ r d i s s u e deals with the need to maintain socio-political I '

s t a k i l i t y . I t i s i n this convection, t h a t p i t must be insisted that

azy successful development sttategy in Latin America 'must not lose

s i g k t of the necessity to pay heed to the basic needs approach. In

the effort t o ~ e e t short-run difficulties, one - .st not be oblivious

tc t h c fur?darner,tal requirements for stabil;+-T and continuity, an9 of ' I

the true long tern interests of t h e area. I

I L s t i n -W.erica does n o t need any radical revision of its develop-

.a

r e r . t a l s t r a t e g y . kt this point, there are no longer any great t he00 ( r e t i t z l debates on this topic. What is required is the necessary

u c l e r s t a n d i n g and support to 6uccess fv l ly negotiate short-term ob- I s t a c l e s , imbalances and maladoustments which will inevitably take

place both i n t h e world and regional economy in the normal course

of e v e n t s .

PUBLIC INTERNATIONAL FINANCINq

One of the major strands of the scenario that dawned upon t h e

. .> ~ - -7 , . --. 'a: ' A. : . . . .

-11-

uarld ecoroay in the 1970s was the decline in the participatioc of

o f f ~ c ; a l sources ic supplying the financial needs of the developing

world. The effcrts devoted to aid and concessional lending by the

a2var.ccZ catio~s, as part of thei r C . N . P . , began to drop noticeably

t c~z ;Cs the end cf the development decade of -the 1960s. The .decaEe

zf t h e E e w international economic order that followed was one of

:zcreesiKS confrontations at the North/South dialogues an6 t-he UKCTAD

r . The s t a g e was set for a substantial vacuum to develop re-

g:rCiag the f i n a ~ c i a l needs of the developing world.

i z t i n A z e r i c ~ , elready ascribed as the middle class of the world,

As the scffere2 r ;ore from the ebbing of development lending and aid.

i E s 3 L e of g r a z u a t i o n emerged in'the mid 1970s, to complement the in-

creasirg cozcentration of development funding on low income countries,

* t P . e pDor segxents of the population, and'the basic needs approach, the

c x k t r i e s of Latin k ~ e r i f a were forced to search for new sources of

The first oil shock added a new dimension to international lend-

i n s . Recycling provided new sources of funds, but a new borrowing

need arose for the developing world over and above the long-standing

capital formation requirements. O i l being perhaps thespmduct of 'intemdiate

and finel demand par excellence, it was esseqtial to ensure a certain

level of oil imports to keep the wheels turning, transportation running

2 - 5 hsusiq supplied with ppder for cooking and lighting. Agair. sf- * I

iectee the nost were the L a t i r i American nations, which had greater 1 1r.terr;e2late an5 fins1 c o n s ~ p t i o n uses for what has been adroitly

t e rned "black gold".

Khcn international private banking began to increasingly utilize

t h e liqcldity avsilable in $he world money centers to recycle t h e

. - EE .Jk - I

..ce cf trade surpluses c$f the oil exporters, developing nations,

-c- =.., es;e;ially the Latin Amqrican countries, welcomed the move.

-. - -.c -;.,. c ~ s r 5 loan volcnes by the money-center banks in - the C' . S ., Europe Sharply

- - - c I - -..- ;q:r. . savz k i s e to an uqparalleled decade of international pri-

?.lthouah the aew l end ing was a t higher rates of inter-

ezt t h s z the concessional filnancing previously available, all things

c~xsiCered, the cost differehces were not that great, because of the

'flcxiSllity, lac!; of conditibnality and untied nature of t h e p r i v a t e I

-& different world would be upon us nowadays if official assis-

tance'and l ending had complied with the responsibilities that lay

aheed in the decade of the\i70s, rather than shrink away from the

financial needs of the less $eveloped nations. 9 It is true that t i e I

word of t h e day put f o r t h by the advanced countries was that trade,

not ai8, would cure the illsi of the developfng world. Y e t , the

apparent dilemma between traoe and a i d was clearly a moot point.

Kith the mezn relative levels of hiving of the.developing countries

b e i r . ~ ;bout one tenth of those of the developed world, clearly both

sozrces of g r w t h had to conplement each other for some time yet.

. . . . . . !.;?re thtn a o'ecade later the world has come full c i r c l e , and

ncv is l i g h t years away fron t h e f a i l u r e of t h e Oil Facility st the

1;:: after t k e f i r s t o i l shock. The IMF, together with the WorlS

- - ~s:.:; ~ ~ - 5 t h e cad rz of regional banks and special lending agencies, . z r e viczrously expanding their iaternational lending and asserting

- Li.xr l ~ a 5 c r s h i ' ~ in the f i e l d . They are filling the vacuum thzt

J- 'i- --. ,,,:, k? 5 or..^ c o r i t r l t-luted to creste. With international private

. . l e ~ : ~ i 1 1 ; tc Lztir. A-ycrica being mostly of an involuntary nature,

+ - , r ~ s is a welcxie c1:cnge.

'ne ~ 0 ~ 1 5 eCai:cz;r is a non-zero sum game in which the stronger 1

cox-? t r ies probably have the most to gain. It is clear that the

r.c.riber one priority at t h z mament is to ensure the renewed growth

of w o r l d trade and finance. To attain these objectives, the best

prcspects lie in the expansion of the activities of the international

p ~ b l i c lending agencies and official donors. The stability and

growth t h e world economy and the f i n a n c i a l

developing world have become common cause.

requirements t h e

W i t h respect to Latin America however, t h e r e is an especially

treacherous road to traverse. The higher levels of income in the

uestern Henisphere will make the international l ending agencies

hesitant tc provide much increased resource flows to this part of

the Ceveloping world over the longer future. It is here that the

role of regional financial odganizations, lik; the InterAmericar,

DelTe1o2sent B m k , cen become of utmost importance. This i n s t i t u -

t i c . xzs designed for aiding in the developing process of L a t i n

; -.. - C- X c a , '- ? zr,5 will not shy away from such responsibility despite

press-res from the issue o f gsaduati'on. Yet it must attract in-

crezsing sources of finance so as to funnel the capital available

ir t h e w c r l d mar-ket s and the ~dvanced countries towards the niadle-

c l e s s r,ations of Latin America. To better ponder t h e performance

that car: be expecte6 from the InterAmerican Development Bank in

ttr futcre, the recent trajec org of its financial operatio~s

shcz ld LC reviewee. t .

RECENT FINANCIAL ACTIVITIES OF THE INTERAMERICAN DEVELOPMENT BANK - - 9

In 1983, the InterAmerican Development Bank increased its l end - I

i c g to L a t i n America to a total of $3.05 b i l l i o n dollars a year. al-

though this was the authorized volume, loan disbursements were much I

less , amounting to $1.73 billion. This represented a A 4 % increase

over the 1982 disbursements. .b

Cosnizant of the predicament described above, the Bank has j u s t

finishe3 a replenishment operation that would boost its capital

subscription to $30.81 billion in total resources at the e n d of

1983. At the same time, the Bank has increased its borrowings in

the world's capital markets, having borrowed $1.41 billion in 1963,

and has been p l a c i n g s e v e r a l issues, amounting to $1.70 billion dol-. . .

l z r s , i~ 1984.

S i n c e most of the subscriptions constitute callable capital,

uses the paid s u b s c r i p t i o n s , the borrowings, its level .

reserves (which stood at $ 2 . 2 3 billion dollars a t the end of 1983)

However, the nex a c e lsa: repayztnts to c o n d u c t ordinary business.

s u k s c r i ~ t i o ~ s c~zstitute an impressive.backing for the operations cf

t 3 c i C 9 , and represent a very solid leveraging of all the l oans

c'2tF.::1ze2 by tke Bank.

C c r x e n t r e t i n g on the replenishment agreed upon in 1983, it will 4

c x s t ~ t u t e ac irxrease of $15.70 billion dollars i n the Bank's re-

socrcea during the 1983-85 period, or an almost 50:iincrease by 1986.

:.lthouch operations will not expand that quickly as long as the paid-

in portion of the cepital expansion remains small, the 1984 contribu-

t i o c s ($1.275 billion) represent important additions to the paid-in

capital of the BanLwhich at the end of 1983 amounted to $2.10 billion

dollars.

The Bank adopted in 1983 a special program of interest rate de-

ductiocs, financed from i t s capital resources. This would mean tha t

c e r t z l z hnrd-presses countries! were charged below normal rates of .

~ n t e r e s t f o r sone loafis. A t the sane time, i t began undertaking a . I

. . q c a := t z t i v c prograz to provide special lending to countries experi-

ezcfc; Sravr balance-of-paymenit problems and debt repayment strin- I

I - 7 . I t s h z u l S be n o t e e tlhat t h e IDB has. been entrusted w i t h

I . . I

- . - : - at the i n t e r n ~ t f i o n e l level, the public and private

I

;:SF.: s t r z c c t ;! C e r t r a l ~ e r i c a , which is carrying an unusua.1 bureer.

r. t c r z . 3 of its p d i t i c a l c r i s i s , o v e r and above the afflictiocs

m - w -.--9 - ~ C . - Z _ L - ~ . : * cf fectir.(j the rest qf ~ a t h America.

- ? -nP. ..:.. aLbc-?lish~ext of the Bank in 1983 was the creat ion of the

r -.: v:--.-T: I.. -. . . - ;e- l c ~ n I n 0 z e s t r ; . ~ n t Corpqrstion, which will a c t like the ti'orld

C .

: i r , t e r r . ~ t i o r . e l Financecorporat ion (IFC). It will operate

\,,-: -i- ., e?uity c~pital seared t o h e l p small and medium-sized enterprises

. _ .$.;t!-, _ _ c a p i t a l i n f u s 1 o r . s that -w@uld help promote private i n v e s t ~ e n t in

This iritiative will complement the co-financing ' that t h e IDB

bas Seer. c o n d u c t i n g f o r some ears without much success. Such comple-. + c.er.tary f i n a n c i n g only raised's30 mill ion in the world 's private

c a p i t a l markets during 1983. In contrast with the usual IDB terms, I

c o - f i a a n c i n g loans charge the) prevailing' rates in the credit markets,

generzlly a fixed spread over LIBOR or the prime rate.. This is in .* - .a

c o n t r a s t wi th " l d a n s extended/ directly by the Bank.. . .which may vary I

fro^ 1% to 4% an concessionarb resources to the 11% rate in effect

will have to provide for Latin America nations a respite of severel

yeer s in making mortization and interest payments on their foreign

debts.

If expor t earnings continue to revive, and if voluntary private

l e r 5 x ~ rcsVc..es, the greatly expanded contribution that international

~:L-l:c 1er .Er . r~ and rich country donors will have to provide (as br id se

I G L - S , erergsncy short-term l e n d i n g , larger quotas in internatiocel

i - c + t i . , increased aid flows, etc. ) in these l o n g - r a n g e re-

.= .ny,em > ? - - L l i n g s ney substantially diminish. Nonetheless, the healthy

rc-xcry ~ c d continued expansion i n t h e world's economy over t h e

. C h r

L X J S acd 1990s. reqcire a c??ar leadership role on the part of the

i n n ? ? ;..Lstrial nations, which must be accompanied by the acceptance of

'their responsibility in groviding ample development financing for

their less fortunate partners in the international economic network.

CONCLUSION

The trade surpluses that have been c r e a t e d in the short-ruc, and

which have resulted in the servicing and repayment of over 30 b i l l i o n

I i- L ~ t i r . $-~~ncricer. debt in 1983, have been sthe result of sharply tig?,t-.

.:IS a result, pro?uctio~ began disintegrating in Latin kmeric

~ i t h sczrc i t i es of basic ioputs providing the spark. Clearly t h e

*- .-. ,: . _ - c t i v a t i o r r of the Latin Lxerican economies has to go hand in hand

:..-;r?. t ? . ~ exp2nsi:n 05 their export earnings. Actually the volu~e of

e::;crtc of L z t i r . kzerica ha5 increased significantly over the past

ty::l or t hsee geers , b u t their value has n o t . In terns of t o t a l I

a c t i l T i t y . the per cspita g ~ c s s national product of these c o u n t r i e s I

s~ffereZ a steep decline slince 1981. -

To allow this positiye-sum-game solution to take ho ld in the

Latin P n e r i c a n economies, i t is essential that rescheduling of their I

external debts be following a long-run general plan of 8

action, agree6 upon betwegn private and public lenders, an5 the borro~

ing nations. Such overall solution would be a p p l i e d to each individ-'

ual country in accordance with the casuistic demand made by the par-

ticular circumstances characterizing t h e m , , I t is obvious such a schex

cr. l i s t n r s e x e n t s made OR new conventional loans in 1983." 10

F x a l l y , a new prosram that should also be hi~hlighted is the

spccial lenZing provided for exports and industrial teactivatio~.

Z : l s p r o g r z z , iritiate2 in 15.82, is p r e d i ~ a t ~ d upon the nee:! of the

L z t i r . . ~ . E T ~ c ~ T . co?ir.tries to increase exports, so as to generate the

t r i . 5 ~ surpluses required to service their external debt. Such ef-

f c r t s caccot Lc expected to succeed unless their interne1 e c 0 n o r . i ~

ertivity rebounds fro3 the cyclical troughs experienced in 1963. In-

~::.tr:;l 1aar.s h a w beer. earmarked for countries where capsc i ty util-

- e - .-,-L:- h i s bee:. qnite low, mainly as a result of scarcities of ic-

terz.=.E; ~ t e ir.pq2ts i n c r t e d fror. abroad.

P n r i the above it 1 s clear that the IDB, even with the recent

*rcpler.isbL?er.t, cannot be expected to soon attract the resources re-

qtire-5 to cone close t c serving the annual loan requirements of

L L e i c a . In the next f e w years, the Bank will at best be

d~sbursicq strear.s of funds that may approach the $3 billion a

y e a r ~ s r k . However, if the rich donor countries and internationel

lending institutions would expand their activities at rates of growth

sinilar to those of the InterAmerican Development Bank (about 15% a

year) an important dent will be made in t h e overall problems of fi-

nancing investment and economic development Latin' America.

REFERENCES

The n e x t two sections a r e p a r t l y based on portions of a paper by Xrtczio Jorgc ead Jorgc Salazar-Carrillo entitled " D e v e l o p ~ ~ ~ c t S t r s t . eg ies , Trade and External Debt in Latin America: Ar. Overviewu, presznted t o t h e confetenee on The Debt Crisis and Developr,er;t Str~teqies i n Latin A n k r i c a - e t Miemi, Florida on Februzry 9th an5 IOth, 1954. . - .

C\

I 4

&. "Fror. 1953-54 to 1979-60, impor t s of goods and s e r v i c e s 6 s a s k r r cf GN? rose froa 4.3 percent to 10.6 p e r c e n t i n the Ucitcii S t a t e s : e n everage of 15.8 pertent to 2 2 . 2 percent in England, Frcnce, ~ 2 5

Cerna-y: ar.8 11.8 percynt to 14.9 percent in Japan", ' I n t t m a t i o r . a l .\:ozetery Fu-5, International Financial Statistics, Mziy 1976 and

107-L I .. LroZacticn ar.d Sltxx&ryl' by '~illiam R. Cline, ed., Trade ~olicb :c the- 19635, Institute for International Economics, 1981. -.- -- I These results are fromregression analysis contained in C'. Frec .. . ~srjsten and William R f Cline, "Trade Policy in the 1980s: An Ovzrview," in William R . Cline, ed., Trade Policy in the 19SOs, OF. c i t . , Ch. 2. I -L

The statisticel information is from Economic Commission For L ~ t i c ;=;.erica ( A , "Balance Preliminar de la Economia Latino Ameri- ce5a er, 1983", 198.4. I See E C L ;I.., "La Crisis Mundisl y America Latina", 1984.

4 I I

See Artoriio Jorge, Jorqe Salazar-Carrillo, and Enrique Sacches, ed., C ~ r a E e , Debt and Growth in L a t i n A~nerica, Pergamon Press, 1984.

Refcr to Antocio Jorge and Jorge Salazar-Carrillo, I n t e q r a c i o n y Cooperation en America batina, University Press of Florida, 1962, for a &tailed examinatkon of this and related questions.

In another sense, the dbveloping world was let down by the persi- rrtony of t h e advanced na'tions in the 70s and early 80s. Since the 1950s these countries had been chided (particularly the L a t i n Aneri- c a n ones) by the industtial nations for closing up their ecofiomies, undertaking infant indubtry protection and using scarce resources on "white elephant" pro"ects. They were asked to convert to the w o ~ d e r s of internationa f trade 'and neo-classical resource alloca- t i o n , to r ecogn ize the hontributions of foreign investment, etc. Yet, as s o o n as many de$eloping nations, and finally even the ,

h e r e t i c L a t i c >.nericans, d e c i d e d to adopt t h i s dogma and establish outward l o o k i n g po l i c i e s , the advanced world pulled away from the evec t 3ec n o t fulfilling levels of aid of the 1950s and 1360s.

10. Inter-Averican Dnvelopment Benk, Annual Report, 1983,- 1984, p . 2 2 .

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I

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