Most Latin American nations have been mired in an economic and debt crisis for more than three years and the long-term prospects for the region look little better today than they did in 1982.
The region's massive foreign debt -- about $360 billion -- may grab most of the headlines in both the northern and southern hemispheres. But the need to pay the interest on the debt is but one, and perhaps not the most important, threat to Latin America's economic and social progress, according to top officials of both the foreign and finance ministries of the major debtor countries. The officials gathered here last week to take yet another look at their plight.
The obstacles the debtor nations face are daunting:
*World demand for the agricultural and mineral commodities that the region long has relied upon for foreign income is declining both on short- and long-term bases. Grain prices, Argentina's mainstay, for example, have fallen 20 percent this year alone.
*With the exception of Brazil, the countries have made only halting progress in developing new export-oriented industries that could fill the void left by waning demand for traditional exports.
*Rising protectionism in Europe, and to a lesser extent in the United States, threatens Latin America's ability to increase those nontraditional exports like shoes and steel. In some cases, even traditional exports are hit by trade barriers in the west.
*The vast amount of debt accumulated in the late 1970s and early 1980s too often was squandered or used to finance long-term internal projects that produced none of the dollars the countries need to service their borrowings.
But the need to repay that debt, or even the interest on it, places a long-term constraint on the region's economic growth unless new sources of foreign funds can be found. Most Latin American countries need to import many products, such as machine tools, to strengthen exporting industries. And the countries also must import many of the components for products that they build and sell domestically. But their debt burden limits their ability to import. Chile, for example, had to abort an economic recovery last year because imports were rising too fast and eating up vitally needed export earnings that had to be used to pay interest on the country's loans.
*The 1982 and 1983 recessions that were triggered by the need to divert domestic savings to pay foreign interest bills have wiped out most of the economic progress the nations made between 1975 and 1981. In Peru -- where bungling military and democratic governments never achieved the rates of economic growth of Peru's neighbors -- living standards today are not much higher than they were in 1964.
*Hefty inflation rates in all but a handful of countries pose a major threat to domestically funded investments. With prices rising at 100 percent, 200 percent or more a year, making investment decisions is difficult.
*Economic policies in many of the countries have yet to come to grips with the substantial decline in foreign resources, primarily bank loans, that were so readily available in the late 1960s and early 1970s.
Bloated public sector enterprises drained resources from national governments. As a result, many countries still are running large budget deficits. Since they can no longer easily tap foreign banks to balance their budget, they have been runnning the printing presses to cover their spending.
This summer, however, both Argentina and Peru announced stiff programs to reduce inflation.
Although the litany of dark problems seems unending, there are some bright spots:
*The debt crisis has been managed so far, even if it hasn't been solved. In countries like Peru and Bolivia, where repayment of interests has been a fiction, banks and multilateral lending institutions have been lenient.
In Chile, where the will but not the means to repay is there, the same groups have come up with enough fresh money to enable the country to stay current in its interest payments without sliding back into a major recession. Other debtors are managing to pay interest without strangling themselves, so far.
*The decline in the dollar since January means that Latin American exports will be more price competitive in Europe and Japan. The countries have keyed their exchange rates to the dollar because the United States is by far Latin America's biggest market.
*Argentina has taken harsh steps to reduce its inflation rate, which approached 1,300 percent per year, and promises measures to shrink its state sector. Brazil is making the same sort of noises about selling off the government's money-losing enterprises, but the advisors to new President Jose Sarney seem less worried about the need to reduce the country's 220 percent inflation rate.
*The countries have large amounts of idle industrial capacity -- the result of earlier investments and the severe decline and demand during the recessions of 1982 and 1983. That idle capacity will reduce the need for big investments in new plant and equipment for a while. The countries will be able to grow and create jobs for a while without using vital foreign exchange to expand their industries.
However, because countries must hold down imports of other goods, many industries that rely heavily on foreign components and spare parts may still find it difficult to expand.
"When an economy is growing, the population sees some hope," according to Luis Paulo Rosenberg, a key economic advisor to Sarney.
Most Latin American countries are growing, giving at least temporary hope to the people. But unless there is a sudden shift in the world's demand for Latin American products or a sudden, miraculous availabilty of foreign funds, the economic condition of most Latin American countries will remain perilous.