Top diplomatic and economic officials of Latin American debtor nations struggled today to develop proposals to ease the burden of their $360 billion of foreign loans and arrest what they say are seriously deteriorating economic conditions in most of the region.
Uruguayan President Julio Maria Sanguinetti said in an address opening the three-day summit conference of Latin American foreign and finance ministers that "emergency conditions" in Latin America must be addressed immediately.
Debtor countries see the debt draining vital resources as the decline in prices for nearly all major Latin American exports makes it difficult for them to earn dollars to pay their lenders.
Officials said they are pleased that the United States finally appears to recognize that industrial countries -- not just commercial banks and multilateral lending institutions -- must play a role in resolving the debt crisis that has paralyzed the region for more than three years.
But there is much skepticism about the plan outlined two months ago by U.S. Treasury Secretary James A. Baker III to stimulate economic growth in the ravaged debtor nations.
Mexican Finance Minister Jesus Silva Herzog called the Baker plan a "positive step forward," but said there are a number of issues that "need to be defined" before countries can embrace it.
Brazilian Finance Minister Dilson Funaro said the Baker plan does not go far enough in addressing the needs of the debtors.
Last October, Baker proposed a $20 billion increase in commercial bank lending and a $9 billion increase in lending by development institutions such as the World Bank to stimulate economic growth in the debtor nations. He said that, in return, developing countries should make changes in their economic policies that would increase the efficiency of their industries and remove obstacles to economic growth, such as reducing state ownership of industries and ending restrictions on foreign investment.
Silva Herzog said a major question mark about the Baker plan is the economic changes that it would require.
"At some points, we are in coincidence with the Baker plan's objectives," said a deputy minister for a major debtor nation. "We all want economies that grow. But not all countries can or want to make the same types of economic changes. If the conditions attached to Baker plan loans are too tough, they will become an obstacle to its use."
This week's summit is the third since Latin American debtor nations gathered in Cartagena, Colombia, in June 1984 to try to hammer out common approaches to the debt load that burdens all their economies.
But the ministers gathered here this week are finding it hard to translate their desire for growth and debt relief into specific proposals they can embrace and make to the industrial countries and their bank lenders.
In three previous communiques, the ministers have called for opening a political dialogue with industrial countries whose anti-inflation programs and protectionist trade policies they feel contribute as much to their economic problems as the debt itself.
High interest rates make paying the debt difficult, while barriers to trade make it hard for them to sell goods abroad.
Among the proposals the ministers are discussing is one that would put any new bank loans into a special category that would guarantee them preferential treatment for repayment. The proposal, contained in a draft communique prepared by deputy ministers, is designed to encourage banks to continue to make loans that debtor nations soon will need to invest in industry and infrastructure projects such as roads and electricity.
Many bankers, especially those with smaller banks, fear that making any new loans to Latin America would be "throwing good money after bad." The draft document -- which was leaked to reporters and which may be changed by the ministers -- also calls for reducing the spread between the cost of funds to banks and the rate at which the money is loaned. It further calls for automatic mechanisms to alleviate the impact of increases in market interest rates and criticizes the loan conditions implied in the Baker plan.
Most Latin American countries have endured three years of drain in their economies, and although many have managed a return to economic growth in the last 18 months, living conditions remain far below those of 1980. Officials worry that the longer their citizens must endure marginal economic growth, the more likely will be a nationalist or populist outburst against paying the debt.
Since the first meeting of the so-called Cartagena Consensus in June 1984, the economic climate in many developing nations has worsened because of a slowdown in U.S. economic growth, continued austerity in Europe and the decline in commodity prices.
"There is no time to waste," said Argentina's foreign minister, Dante Caputo. He said citizens must begin to see some results of the efforts debtor nations have taken to hold down domestic consumption to produce dollars to pay the debts.