The carter administration supported a $65.6 million Internation Monetary Fund loan in May to the government of embattled Nicaraguan President Anastasio Somoza.
Since then, U.S. support of the loan has been sharply criticized by labor groups and House Banking Committee Chairman Henry S. Reuss [D-Wis.] Reuss warned in a May 23 letter to treasury Secretary W. Michael Blumenthal that "people will die as a result of this decision."
However, the administration has continued to support the loan.
Blumenthal informed Reuss on June 11 that "U.S. dissent would have violated the spirit and letter of IMF procedures." On June 22, Blumenthal reiterated this position when he met with representatives of the United Auto Workers, the Americans for Democratic Action and the Coalition for New Foreign and Domestic Policy.
IMF internal documents made available yesterday indicated that there was strong support for the loan on the part of the bank's staff.
A confidential memorandum dated April 27 declared that is is "recognized that the rebuilding of confidence which has been badly damaged over the past year and a half is crucial to the achievement of the objective of the [IFM's] program" in Nicaragua.
The 21-member board of directors approved the loan May 21 by "unanimous consensus." A bank official said unanimous consensus meant no vote was taken because there was no opposition.
Of the $65.6 million, $43.3 million was in the form of a standby credit to be available through 1980, $21.6 million was compensation for a decline in exports that occurred for reasons "beyond its (Nicaragua') control" and $740,000 was to cover Nicaragua's contribution to a new internation sugar stockpile.
A team of IMF officials that visited Nicaragua in March recommended a tough new fiscal program that would include reducing international debts, cutting "unproductive" spending and putting public spending on a sounder footing.
Both IMF and U. S. officals have contended that Nicaragua qualified for balance-of-payments help because of a decline in its cotton and sugar earnings due to low world prices.
However, other IMF documents indicated that an underlying concern about Nicaragua's financial system was the massive withdrawal of private capital from the country -- an amount estimated at $280 million in 1978.
The controversy over the Nicaraguan loan comes at a time when the IMF is under fire for its policies of giving aid to authoritarian regimes. Some critics have charged that the IMF sometimes has imposed severe conditions that have resulted in curtailment of social programs and have been used to justify repressive political meassures.
In his May 23 letter to Blumenthal, Reuss said that "there is no doubt that the recent loan will greatly strengthen the Somoza government at the expense of its new adversaries, just as IMF intervention strengthened the newly installed Argentinian junta and the beleaguered Chilean dictatorship in 1976 . . . . These loans have inescapable political consequences, for which the IMF cannot evade or disclaim responsibility."
Reuss went on to say that "the IMF's reputation for impartiality is not served by loans that are the functional equivalent of military assistance."
Imf spokesman Ruben Azocar said yesterday that Nicaragua has drawn $10.8 million of its $43.3 million in standby credits. The bank will determine at a meeting in September whether the country qualifies for a second drawing, based on progress in implementing the IMF's recommendations. Azocar said it was "unlikely," in light of the civil war, that the Somoza government has complied.
Azocar said that of the $21.6 million loaned as compensation for export sportfalls, the central bank has retained only $1.6 millon, with the rest having gone to repay a loan by the Central American Monetary Council.
In backing the IMF loan, the Carter adminstration went against the advice of auto workers president Douglas A. Fraser.
Fraser wrote to President Carter on May 11 that the Somoza regime had been "condemned for its nine-month reign of brutality and terror" and the loan would "go to the personal enrichment and perpetuation of a dictator who could probably not continue to subjugate his people without it."
A Treasury Department memo drafted last month noted, however, that the IMF staff had concluded "after studying data by product and country of destination that any interruption of exports due to civil discorders was temporary and of minimal effect."