IT MAY WELL be the uneasiest international meeting of the summer. The Organization of American States is conferring in Caracas on the Latin countries' $300 billion of foreign debts. The question is how to carry them without choking off all hope of economic growth in the region.
The delegations have all brought plenty of anxieties and grievances but not, apparently, any new ideas. The debtor countries' positions differ so greatly that it would be difficult to work out a common position among them, which means that--for the present, at least--the likelihood of a debtors' cartel is low. As for the United States, its delegates only say, cautiously, that they are there to listen.
The dilemma of these debts is real, and it has proved, so far, intractable. The debtor countries desperately need two things. They need agreements with the banks that will lower their current costs of servicing past loans. But they also need further loans, now and into the future, to finance the trade that will enable them to grow. That's where the dilemma lies. Anything that promises to reduce current debt service is likely to frighten the banks and make them more reluctant than ever to keep lending to Third World borrowers. Conversely, anything that promises to keep the banks reassured and lending also seems likely to keep interest costs high. Perhaps there is a way out of the dilemma, but no one seems to have found it. 2 Much of the discussion proceeds as though the banks were only the several dozen very large ones, most them in New York. A solution would be much simpler if that were true. But the list includes hundreds of smaller regional American banks, with little experience in international lending and a strong urge to pull out of it. In addition, there are the European and Japanese banks. The American banking authorities alone cannot impose a solution.
This dilemma will doubtless dominate the annual meeting here in Washington, at the end of this month, of the International Monetary Fund. That meeting has become the world's greatest convocation of people who lend and borrow. It would be a great pity if the IMF and the United States let the occasion pass without offering any direction toward a resolution.
What's needed is a formula that bankers can voluntarily accept and yet would substantially reduce interest burdens. What would the bankers voluntarily accept? They might usefully reflect that the Caracas meeting this week marks an important stage in the transformation of the debts from a financial issue to a political one. The farther that process goes, the less influence the bankers will have in the outcome. That's another reason for banks, as well as governments, to think carefully about the opportunities that the IMF meeting presents.