It is no secret that current U.S. economic policy has had a devastating effect on the developing nations of the world. However, the real issue is not the current financial debacle in Mexico and the other debtor nations. The real trouble is still a year or two down the road.

The reason is that regardless of how we renegotiate our way out of the current crises, there will be little new money flowing to the hemisphere. To put this into context, the fuel for the development of Latin America in the decade of the '70s was the $200 billion of funds from the private Eurodollar market. That flow of $200 billion in the last decade should have gradually increased over the next decade in order to maintain the levels of private and infrastructure investment, and even normal government activity. Instead, it will now level off. The banks have reached their limits of lending; the countries have reached their limits of borrowing.

Part of the problem is the enormous amount of capital that has been drained out of Latin America by high interest rates and energy costs. Virtually all of the debt is on a floating interest rate. This means that every time the interest rates rise one point, an additional $2 billion of capital annually has to be paid out. A three-point rise in the interest rates drained more capital than all the official flows could possibly replace, more than a half-dozen Caribbean Basin Initiatives or ten Cancun meetings.

The result is that even if the United States succeeds in turning around its own economy, Latin America is now flat. The resulting currency devaluations have decapitalized not only governments. Every major business that had dollar obligations is approaching insolvency. Two other critical factors complete the bleak picture. The prices of Latin American exports are down, and are projected to remain low with reduced demand from the industrialized countries' slow economic recovery. More worrisome, capital flight, always a problem, is increasing in frightening proportions. What happened in Mexico is history. Recent flows from Venezuela and Central America are reaching intolerable proportions.

These four factors, two on the income side and two on the outgo side, delineate the magnitude of the current crisis. Add them up, and the result is nearly unmanageable.

Given the population growth of Latin America, the implications are plain: increasing unemployment and enormous pressures that governments will be unable to satisfy. The expectations aroused in the last two decades of rapid development could well explode in the frustration of millions of young people whom we have gone to great lengths to educate. The more the gap between needed and available capital widens, the more the needed investment, infrastructure and public works are reduced and the closer we come to massive and unmanageable unemployment.

While Latin America is a major problem because of the size of its debt, the issue affects the entire world. The other side of the coin is that the policies of recent years have created major pools of ungoverned money: Eurodollars, petrodollars, and other funds that are beyond the control of any government. They flow in fads: first gold, then real estate, then certificates of deposit, now the stock market. Whenever they move they leave devastation in their path. These dollars, governed neither by the U.S. Federal Reserve because they are expatriated nor by the European governments because they are foreign currency, are enormously volatile. No audits, no reserves, no rules on where or what to finance. They must be brought under control and provided incentives to serve world development.

Because the private banks and the public sector, price structures, debt moratoriums, interest rate freezes, and other measures must be considered, everyone and everything is involved. Anything short of a comprehensive settlement will be only patchwork. While we seem to have bumbled through many crises with patchwork before, this one is rougher than any we have had in recent times.

The only solution may be a comprehensive world conference on the order of Bretton Woods in the 1940s involving both the public and private sectors in order to mobilize all resources to turn the situation around. Such a meeting has been called for in the past, but the industrialized countries have been chary. They feel it may become a platform for invective. Their masochistic drives do not extend that far.

If we want to meet the challenge, the developing countries have as great a responsibility to exercise good judgment as do the developed countries. Serious, constructive joint efforts, are essential, and the clock is ticking. If we do not act, we may find that our recent zeal to correct in one year the inflationary excess of many years may have brought the stark choices of social revolution or repression to the developing world faster than anyone might have imagined.