Latin American debtor nations today demanded a sharp increase in international lending to enable them to rejuvenate their economies in a period of high interest rates and declining prices for their major exports.
The debtors also made a veiled threat to their commercial bank lenders and industrialized nations that, if the "emergency" plan they proposed today is not substantially implemented, they will take unilateral steps to ease their debt burden.
It was the first time the so-called Consensus of Cartagena group of debtors had even hinted at confrontation with banks and industrialized nations, but ministers played down the threat, saying they will give the world plenty of time to consider their proposals.
The debtors said their primary problems are high interest rates and the declining prices of commodities, and they called on the industrialized nations to take steps to reduce interest rates and stimulate their economies in order to boost world trade.
But the ministers said they recognized the steps will take time, and they demanded a substantial increase in foreign funds in the interim for the region to enable them to pay their debts and make crucial investments that their economies need to grow and create jobs.
The foreign and finance ministers of the 11 Latin American debtor nations called on banks to increase their lending at the rate of world inflation, said international institutions such as the World Bank must boost lending to the region by 20 percent a year for the next three years, and said the International Monetary Fund must compensate countries when world interest rates rise and the costs of servicing their $360 billion in debts increase in tandem.
The plan proposed by the debtors would require a far bigger boost in bank lending than envisioned by U.S. Treasury Secretary James A. Baker III in his 10-week-old initiative to help debtor nations move from austerity to economic growth.
The so-called Baker plan calls for a $20 billion increase in commercial bank lending during the next three years and a $9 billion increase in World Bank lending during the same period. In return for the stepped-up lending, Baker wants to require the debtor nations to change economic policies he said contribute to inefficiency and retard growth.
Commercial banks have about $250 billion in loans to Latin American nations. World inflation is running about 5 percent, according to Uruguyan Foreign Minister Enrique Iglesias. At that rate, the debtors would receive $39 billion during the next three years, nearly twice the amount Baker proposed. The Baker plan includes four nations that are not in Latin America. Under the debtors' plan, they would receive far more than twice the amount suggested by Baker.
They also would receive about $4 billion more from international institutions.
The 11-member Cartagena Consensus -- named after the Colombian resort where the debtors first met in June 1984 -- established a five-nation commission to monitor its emergency plan and to suggest "alternative" actions if its plan is not implemented.
Argentina, Mexico, Colombia, Brazil and Venezuela were named to the commission. Peru, which unilaterally reduced its debt payments to about 10 percent of its export earnings and has cut off repayments to the IMF, was not named to the commission, even though it is the region's fifth-biggest debtor.
"We are asking industrial countries to put their house in order, and in the meantime are willing to pay the high interest rates, as long as we get increased assistance in the interim," according to a top official of a Latin American foreign ministry who asked not to be identified. "If rates do not come down, we may have to reduce the amount we can pay banks," the official said.
Argentine Foreign Minister Juan V. Sourrouille said that the debtor nations -- which collectively owe about $360 billion to banks, other governments and multinational institutions -- had set no deadline to determine whether the emergency plan is being met. But another official said it would be a year or more before the debtors would make a determination that stronger measures were needed.
Brazilian Foreign Minister Olavo Setubal said there is a growing sense of despair among nearly all debtor nations because their long-run prospects today appear to be no brighter than in the summer of 1982, when the so-called Latin American debt crisis began.
Brazilian Finance Minister Dilson Funaro said the Baker plan is a welcome effort because it signaled the start of a long-sought political dialogue between debtor nations and industrialized nations.
Until Baker launched his initiative at the IMF and World Bank annual meetings in October, the U.S. position had been that the debt problem was mainly one between banks and debtors.
But Funaro -- whose nation is the developing world's biggest debtor, with nearly $100 billion in foreign loans -- said the Baker plan did not provide enough funds, nor did it address economic policies in industrialized countries that the debtor nations feel are at the root of their problems.
Ministers said the massive U.S. budget deficit is the prime reason that interest rates remain high. They also feel that European nations should take steps to boost their economies in order to stimulate world trade and the sale of commodities and other goods that Latin American nations export.
"A reduction of 1 1/2 percentage points in interest rates would give Brazil all the funds it needs to modernize," Funaro said. For other countries that do not have Brazil's ability to earn export dollars, the same reduction would enable them to pay their foreign bills without resorting to more borrowing.
Brazil's Setubal said the governments in developing countries are coming under pressure from restive populations that have endured three years of recession and slow economic growth to enable the nations to husband the dollars needed to pay their debts.
In their communique, the ministers said their plan would halt the net transfer of financial resources out of their region to developing countries. At the level of lending proposed in the Baker plan, the net transfer of resources to industrialized countries would have been made permanent, one Mexican official said.