A year ago, when international financiers gathered in Toronto for the annual meeting of the International Monetary Fund, most of them had Mexico on their minds.
The Latin American debt crisis then was barely a month old, touched off in late August when Mexico told its lenders gathered in the dining room of the New York Federal Reserve Bank that it no longer could pay any principal on its outstanding debts.
Today, Mexico, although barely out of the economic intensive-care unit, looks like one of the healthiest nations in Latin America. Today, it is Brazil, once hailed as the economic miracle, that is at death's door, while other South American countries from Venezuela to Argentina are in severe financial distress.
While the crisis will be the subject of much discussion at the annual meeting, the delegates are not expected to take any significant action on the debt crisis.
Latin America owes foreign lenders more than $300 billion. Most of that debt is accounted for by Mexico ($85 billion), Brazil ($90 billion), Argentina ($39 billion) and Venezuela ($35 billion).
Last winter there were serious worries that the burden of Latin American debt could trigger an international financial crisis or even a collapse of the world banking system.
But crisis managers at the world's major banks, as well as the International Monetary Fund, rushed from one nation to another, pumping in enough money to enable them to keep going. In return, the IMF demanded that the nations take severe austerity measures to enable them to reduce their borrowing needs and set the stage for renewed economic growth.
The specter of a worldwide financial collapse has receded in recent months. There has been no unilateral repudiation of debt--although many countries are behind in their interest payments--and no country has gone into default.
Nevertheless, it will be some time before bankers and debtors breathe easily. Many worry that Brazil will find itself pushed by its domestic political turmoil to take a unilateral step such as declaring a moratorium on all debt repayment, which would hurt the country in the long run and hurt the international financial system almost immediately.
Bankers also are becoming increasingly annoyed with Venezuela, probably the richest nation in Latin America, which has chosen to put off dealing with its debt problems until after the presidential elections in December.
No one is quite sure how long most of Latin America--which is used to growing quickly merely to keep pace with its burgeoning population--can contain internal political and social pressures in a period in which the economic pie is shrinking.
Even Mexico, which seems to be steadily recovering from the depths of its economic distress, still could not pay its bills without continued lending from the banks and the IMF.
A return to strong growth and lowered interest rates in the industrialized world will help. It was the severe recession and inflation of 1980 through 1982 that dealt the Third World a double whammy. The prices of commodities these nations export to the industrialized world fell sharply, as did the quantity of those exports. As industrialized countries fought inflation, they also drove interest rates to record levels, adding billions of dollars to the already overburdened debtor nations.
But Latin American nations would not be in such severe trouble had they not borrowed excessively, with the eager cooperation of multinational banks in the United States, Europe and Japan. Whether the loans went to finance industrial projects or consumption (governments borrowed to keep subsidizing commodities), by 1982 the accumulated borrowings had become onerous.
For the nations and the banks, it is a terrific balancing act. The nations need more time to pay off their maturing debts and enough new loans to enable them to pay their interest and keep afloat until they can adjust their economies to the realities of the 1980s.
Many of the adjustments required by the IMF are painful. The countries eventually would have to take most of them on their own. Nevertheless, the internal resistance to IMF "conditions" is fierce in many countries.
That resistance is probably stiffest in Brazil, Latin America's biggest debtor.
Brazil is in the third year of a severe recession. Inflation is raging. Long before its debt problems were apparent, poverty was growing in a nation once hailed as an economic miracle.
Brazil originally borrowed to finance new industries. But without competition, many of these industries had become inefficient and were being heavily subsidized by the government. When the worldwide recession depressed demand for Brazil's commodity and industrial exports, the nation continued to borrow--by the middle of 1982 mainly to finance its budget deficit and its imports.
After Mexico cut off its borrowers in August 1982, lenders cut off all of the region, including Brazil, already shakey from recession. In February, in return for IMF and bank loans, Brazil agreed to take steps to reduce its deficit (like most Latin American countries, it had to cut back consumer and business subsidies) and its inflation rate.
When by May Brazil had fallen off the economic path it had promised to take only three months earlier, the IMF and the banks cut off lending. After a painful summer of negotiation, Brazil last week agreed to take steps to lower its inflation rate and end its public sector deficits.
But one of the anti-inflation steps--a requirement that wages can rise at only 80 percent of the inflation rate--has spawned widespread opposition and may challenge the ability of the Brazilian military leadership to put the IMF program into place. That could spell disaster for Brazil, which not only needs the loans that have been cut off but probably needs another $10 billion through 1984 to stay afloat.
Even some bankers feel the IMF is being too harsh on Brazil, that the country needs more time to "adjust"--as well as easier loan terms--than, say, Mexico, whose bubble burst only with the decline of oil prices in 1982.
Venezuela, on the other hand, may not need even an IMF loan, although bankers are so suspect of Venezuela that they may demand an IMF program for safety's sake.
Argentina, like Brazil, remains a question mark. Its finances were ravaged by the Falklands-Malvinas war and its tired military rulers--like those in Brazil--are preparing to hand over the government to elected representatives.
But the biggest question mark of all in the coming months may be the International Monetary Fund itself. It is running short of money with which to come to the rescue. The commitments it has made already will be fulfilled, but other nations now negotiating for loans, such as Nigeria, may not get all the money the IMF agrees they need.
Although major nations have agreed to boost their contributions to the IMF by nearly 50 percent to give the agency enough resources for the future, Congress still may disapprove the $8.4 billion U.S. share of that increase.
Both the Senate, by a wide margin, and the House, by six votes, have approved wildly different versions of an IMF increase. A curious coalition of isolationist right-wing groups and consumer groups, contending the bill is a bailout of the banks, opposes the increase. The coalition hopes to scuttle the measure either in conference when the House and Senate meet to iron out the differences in the bills or when the conference bill comes to a vote on the House floor.
If the United States does not fulfill its share of the quota, other nations may balk, too. With no other multinational agency in place to police the international finance arena, bankers and government officials alike worry that the international financial crisis that was averted in 1982 may come to pass in 1984.