Officials of major Latin American debtor nations declared today that foreign lenders will have to ease the repayment terms for countries such as Mexico that are being hurt by lower oil prices.
The finance and foreign ministers, meeting here to discuss the impact of the recent plunge in oil prices on the region's $370 billion debt, issued their strongest demands yet to their creditors. Some officials said the declaration means the group will support debtor countries that take unilateral actions to reduce their repayment burdens, although negotiations will be tried first.
Enrique V. Iglesias, foreign minister of Uruguay, said that debtor countries might need to pay rates of interest on their bank loans below the cost of funds to the banks themselves. If that happens, it would cause havoc to the loan portfolios of many major banks and could trigger losses at some of the world's biggest banking institutions.
Iglesias said that the debtor group, the so-called Consensus of Cartagena, did not endorse any specific debt-reduction programs, but agreed to requests from Mexico and Venezuela, the hemisphere's biggest oil exporters, for support.
Any debt-reduction plan, whether negotiated with lenders or imposed unilaterally, would be the responsibility of the individual nation, he said.
Many Third World debtor countries import oil and thus are benefiting from the sharp drop in its price in the last two months. But Mexico may find itself as much as $9 billion short of its external funding needs this year because of the oil-price decline. Mexican crude oil is selling for as much as $10 a barrel less than it was in December.
Mexico relies upon oil for about 70 percent of its export revenues and 45 percent of domestic taxes.
Mexican Finance Minister Jesus Silva Herzog spent three days in Washington earlier this week to plead his country's case. But he came away without any hint of emergency help from the Reagan administration.
Mexico also has been negotiating with its bank lenders, although so far no specific proposals have been put on the table for either reducing the yearly payments on its $97 billion in outstanding debt or obtaining new loans to help it through its crisis.
Last week, Mexican President Miguel de la Madrid Hurtado said in a television addresss that Mexico could not afford to pay its debts in full this year and that lenders would have to bear some of the costs.
Iglesias said that the key area in which the hard-pressed debtors need immediate relief is interest rates. He said there needs to be a reduction in the level of world interest rates, something that can be achieved only by industrial governments, and in the spreads, or markup, banks tack on to their cost of funds when making loans.
Not all nations are hurt by the decline in oil prices. But oil importers such as Brazil, Chile and Uruguay benefit far less than Mexico and Venezuela are hurt.
Although Venezuela is even more dependent on oil than Mexico, it is in far better economic shape and can weather the decline in prices for a longer period of time.
Mexico is a major borrower from U.S. banks, and the country's economic regression after three years of improvement has been a setback for the debt strategy of major industrial governments, led by the United States, and the key bank lenders to the region.
Private banks account for about $220 billion of the region's total debt and have loaned Mexico about $70 billion.