Foreign ministers of major Latin American debtor nations will meet in Washington Sunday to discuss the impact of falling oil prices on the region, the Venezuelan Foreign Ministry announced yesterday in Caracas.
Venezuelan President Jaime Lusinchi and Mexican President Miguel de la Madrid last week called for an emergency summit conference of foreign ministers and finance ministers of the debtor countries to analyze the impact of falling oil prices and make recommendations on how to deal with it.
The debtor group, which calls itself the Consensus of Cartagena, warned at a meeting in Montevideo, Uruguay, in December that unless they get help soon from industrial nations and their bank lenders, they may have to take unilateral steps to ease the burden of repaying the region's $360 billion in foreign debt.
Although the communique did not specify what steps the debtors might take, ministers said privately that the only course available to them would be a unilateral limit on the amount of debt they would repay. Such a move, if undertaken by several major debtor countries, could throw the international banking system into chaos.
The Montevideo meeting occurred before the steep decline in oil prices that hits hard at countries such as Mexico and Venezuela, which rely heavily on oil exports to generate the dollars they need to pay their debts and the domestic income that provides most of their tax revenues.
Mexico is hardest hit by the oil price decline, mainly because of the need to pay about $10 billion to foreign lenders this year to service its massive $97 billion debt. Each dollar decline in oil prices reduces Mexico's foreign earnings by about $550 million.
Before the plunge in oil prices that began two weeks ago, Mexico said it would need to borrow $2.5 billion from its commercial bank lenders this year to enable it to pay its interest and make vital investments in its domestic economy.
Last weekend Mexico slashed its oil price by about $4 a barrel because of falling world prices.
Mexican officials will meet today with the country's major bank lenders in New York. But bankers said that Mexico apparently has not yet calculated its financial predicament in the wake of falling oil prices and is not expected to put forward a formal borrowing request at the meeting.
Venezuela, with about $35 billion in foreign debt and a much smaller population than Mexico, can weather the oil price decline for a while, although it will have to scale back planned investment.
Latin American foreign ministers already were scheduled to be in Washington this coming weekend to meet with Secretary of State George P. Shultz to discuss the peace process in Central America.
"It made sense to talk about the oil situation since they were already going to be here," a diplomatic source said.
But officials of several debtor countries said they do not expect substantive results from the rump session of the Cartagena group, in part because of the sudden scheduling of the meeting and in part because finance ministers are not expected to attend. "What you may get, however, is a response to last week's request from Venezuela and Mexico to hold an emergency meeting of the Cartagena group," a Latin American diplomat said.