The United States has lost about 800,000 jobs as a direct result of the Latin American economic and debt crisis, economist F. Gerard Adams of Wharton Economic Forecasting Associates Inc. told Congress yesterday.
In testimony before the congressional Joint Economic Committee, Adams said that Latin American countries have had to cut back their imports severely and boost their exports to earn foreign exchange to pay their massive debts.
As the region's major trading partner, the United States has borne the brunt of the so-called adjustment effort by Latin America -- which collectively has foreign debts of about $340 billion, of which $90 billion is owed to U.S. commercial banks.
Adams, who also is a professor at the University of Pennsylvania, said that U.S. exports to Latin America "deteriorated from $39 billion in 1981 to $26.3 billion in 1984," as the countries restricted imports to husband their dollars and recessions cut demand for foreign goods.
"In turn, U.S. imports [from Latin America] have increased sharply from $32 billion in 1981 to $42.3 billion in 1984. The trade balance has swung from a surplus of $7 billion to a deficit of $16 billion, a change which is concentrated for the most part in manufactures," Adams testified.
He said Wharton forecasters estimated that the deterioration in U.S. trade with Latin America has reduced national output by about 1 percent -- $65 billion in current dollars or $18.5 billion in inflation-adjusted, so-called real 1972 dollars. He said each percentage-point decline in economic production called gross national product costs the United States 800,000 jobs.
The industries hardest hit by the bad times in Latin America were primary metals such as steel, motor vehicles and other manufacturing industries.
Rep. David Obey (D-Wis.), chairman of the Joint Economic Committee, said his panel is holding hearings to outline the "heavy price the United States has paid in recent years because of the debt problem's effect on growth and jobs."
Latin American countries borrowed heavily from commercial banks -- especially from 1979 to 1981 -- to invest in development projects and to pay their high oil import bills.
By 1982, however, a worldwide recession, coupled with sky-high interest rates, made it impossible for most debtor nations to repay their loans on schedule.
Most debtor nations have undertaken austerity programs -- with varying degrees of success -- designed to reduce their need to borrow and to amass the dollars they need to pay their debts.
John R. Petty, president of Marine Midland Banks Inc., estimated yesterday that the debtor nations had to pay $37 billion in interest last year. The total cost of servicing their debts was about 39 percent of the value of their exports of goods and services.
Petty told the panel that, in addition to the clear loss of jobs, U.S. investors in South American banks and business have been hurt, the number of Latin American tourists in the United States has declined and businesses along the Rio Grande have been hit hard.