U.S. Treasury Undersecretary Beryl Sprinkel said today the U.S. government would like lower interest rates for Latin American nations that owe foreign lenders $300 billion, but won't "overtly wrestle" with the banks to get them to reduce their interest charges.
Sprinkel, who heads the U.S. delegation to a special conference here on the region's debt, said the only way Latin America will get lower interest rates is if the banks begin to believe that lending there is less risky than they think it is today.
Some Latin American nations had hoped that they could persuade U.S. officials at the conference to put pressure on both the banks and the International Monetary Fund to go easier on them.
Instead, the conference will likely approve a mild statement Friday that recognizes the burdens faced by the Latin countries and says many of their problems are not of their own making and steps must be taken to ensure that funds can continue to flow into the area. But, as one negotiator noted, the tone of the final statement is far softer than the original, mainly at U.S. insistence, and commits the U.S. government to nothing.
The document was approved early this afternoon--with some minor reservations from the United States--by a group of lower-level government officials who then sent it for approval to a "ministerial" session.
Although some delegates said they were disappointed over the failure to obtain commitments from the United States to find new solutions to the debt problem, many said they were pleased that it was willing to participate in a special regional meeting--held under the aegis of the Organization of American States--to discuss the issue.
A top-ranking official of a major country said that he still believes that if the United States continues to listen to Latin American nations, it will become convinced that the debt problem is more than merely an economic difficulty, but has severe political implications as well. "Unless the U.S. helps more, there could be much instability in Latin America," another high-ranking delegate said.
In Washington, Treasury Secretary Donald T. Regan said the financial industry, not budget deficits, is to blame for keeping interest rates high and the "unusually high" rates have contributed to the international debt crisis.
"Internationally, a collection of nonmarket-oriented policies have contributed mightily to the international debt crisis," Regan said. "And the solution is going to require a courageous and sustained return to sound market-oriented economics."
Sprinkel said that the United States remains convinced that the program it has advocated for some months is the best one. The United States has provided emergency assistance but feels the fundamental problems must be solved by the countries themselves through internal belt-tightening, to reduce their borrowing needs. The U.S. plan also calls for the assistance of the International Monetary Fund and continued lending by commercial banks.
Sprinkel said that if the United States pressured the banks, as some Latin countries urge, the banks might cut off new, necessary funds to the debtor countries. Of the roughly $320 billion in foreign debt owed by Latin American nations, the banks are owed $220 billion. Mexico, Brazil, Argentina and Venezuela account for roughly 75 percent of the debt.
Although the banks are key to the bank crisis, delegates here have seldom talked about banks and have ruled out the formation of a so-called debtors' cartel, the very mention of which is disturbing to commercial banks.
But Venezuelan President Luis Herrera Campins, in his welcoming address to the ministers today, said that commercial banks must take responsibility for helping debtor countries, although he did not specifically say what more they should do than rolling over maturing loans and providing new funds, as they are now doing.
Campins obliquely raised the spectre of a debtors' club, saying that "countries prefer dialogue before confrontation," but that at some point, the "weak" find that the only way to gain fair treatment is in the use of force.
Most delegates to the conference, however, said Campins' statements were aimed at a domestic audience and should not be taken too seriously.