The Venezuelan Finance Minister Arturo Sosa said today that heavily indebted Latin American nations need easier treatment from lenders, in much the same way banks ease loan terms for troubled companies.
Sosa, speaking to the opening session of a special conference on Latin American debt, said high interest rates and the heavy debt load could push many countries into political and social turmoil.
Already, several officials here said, the burdens imposed on these countries by the heavy debt payments are impeding economic development.
The special conference, held under the aegis of the Organization of American States, is designed to try to find some way of enabling the financially troubled nations to handle their debt payments while resuming economic growth.
To cope with their problems, countries have slashed imports and government spending in order to lessen their need to borrow. But those actions have triggered strong recessions and increased unemployment and poverty in a region that already is heavily impoverished.
Sosa and other Latin American officials, both publicly and privately, said that there would be no effort to form a debtors' cartel to try to dictate repayment terms to the banks. Latin American nations owe about $300 billion to private banks and official government agencies.
Latin American officials here said privately that the problems of the nations differ so much that even if there were sentiment to form a cartel, there would be no chance of developing a common repayment strategy.
About 30 nations are attending the five-day conference, including the United States, the biggest member of the OAS. Treasury Undersecretary Beryl Sprinkel will head the U.S. delegation to the "ministerial" portion of the conference, which begins Thursday.
A U.S. delegate to the three-day "technical" session that began today said the United States is unlikely to have any proposal for the conference.
"We're here to listen," the U.S. official said. He also said he thought that the debt problems were best addressed through institutions such as the International Monetary Fund or the Inter-American Development Bank, rather than in open forums like the OAS conference.
There were no concrete proposals during the opening session of the meeting. But one Venezuelan official said privately that his nation could be expected to push for a new facility designed to assist countries whose exports and export prices have declined sharply.
The IMF already operates such a "compensatory financing facility" that has made payments to Mexico and Brazil, among others. But the Venezuelan official said his nation might call for the creation of such a facility in the hemispheric Inter-American Development Bank.
The host country, probably the richest nation in Latin America, is having difficulties paying interest on its $25 billion to $30 billion debt load, but so far has refused to go to the IMF for assistance because of the stiff terms the IMF imposes when it agrees to give loans to troubled countries.
Other debtor nations--such as Brazil and Mexico, each with between $80 billion and $90 billion of foreign debt--has gone to the IMF. But Brazil, which signed its loan agreement with the international financial rescue agency last February, promptly fell out of compliance with targets for both inflation and public spending. As a result, both the IMF and the private banks stopped lending to Brazil May 31.
Brazil and the IMF are expected to sign a new agreement this week. But its targets are considered by some to be at best unrealistic and at worse damaging to the already recession-plagued country.