Latin America's debt crisis has worsened America's record merchandise trade deficit as nations in the region try to export more and import less, Commerce Undersecretary Lionel H. Olmer said yesterday.
The U.S. trade balance with the eight high-debt Latin nations has switched from a $377 million surplus in the first half of 1982 to a whopping $6.3 billion deficit during the same period this year, he said.
The United States ran up a record $14.8 billion second quarter merchandise trade deficit, bringing the deficit for the first half of 1983 to $47.2 billion. That is higher than the $36.4 billion deficit for all of 1982, and Commerce Secretary Malcolm Baldrige has estimated that the 1983 deficit will total at least $60 billion. At the same time the Latin nations were buying fewer goods from the United States, they tried to increase their exports here to earn dollars to pay the interest on their $300 billion debt. That annual interest amounts to about $35 billion a year.
Brazil and Mexico, the world's two biggest borrowers with about $90 billion in accumulated debt each, both have sharply cut their purchases from the United States.
In Mexico's case, Olmer said the United States lost $3 billion in sales in the first half of this year on top of lost sales of $6.2 billion in 1982.
He said this translates into "almost a quarter of a million lost jobs for American workers."
Brazil increased its sales to the United States by 13 percent in the first half of 1983 while its exports to the entire world jumped by 5 percent. At the same time, its non-oil imports declined 29 percent in the first half of this year over the same period in 1982.
"At some point, this decline in imports has to stop if Brazil is to maintain its capability to export," said Olmer.
Moreover, he told an international banking summer school run by the American Bankers Association, these efforts by Latin nations "to export at all cost" and to cut down on their own imports "will fuel protectionist pressures in this country."
Olmer said U.S. exports to the eight high-debt Latin nations--Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru and Venezuela--dropped from $14.4 billion in the first half 1982 to $9.1 billion in the same period this year, a 37 percent decrease. The drop so far this year came on top of a $9 billion decrease in U.S. sales south of the border in 1982, he said.
He said the decreases came in U.S. exports of wood and paper, down 32 percent; textiles, down 40 percent; chemicals, down 36 percent; nonmetalic minerals and products, down 47 percent, and metals, machinery and transport equipment, down 47 percent.
As a result of their heavy debts, the Latin nations are having trouble financing their trade, Olmer said. He added that the United States is especially concerned that trade with Latin America is either on a cash basis or through cumbersome letters of credit backed by collateral such as cash deposits, real estate or title to goods. This hurts trade even when all the parties involved have good credit ratings, he said.
Some potential customers who can't meet the cash requirements, even though they have good records of paying debts, are being turned away by banks, exporters and multinational corporations, he said.
As a result, private companies in Latin America are having greater difficulty importing goods than public sector firms. He cited Mexico, where private sector imports dropped 76 percent while public sector imports went down far less--30 percent--in the first half of 1983.
"The lack of trade finance has undoubtedly complicated attempts by Mexico and Brazil to adjust to their debt burdens and reorder they economies," said Olmer. Their imports by July had dropped even lower than expected as a result of IMF and domestic austerity programs, he said.