Sen. Bill Bradley (D-N.J.) today called for creditor nations and commercial banks to provide debt relief to Latin American borrowers that would wipe out about two-thirds of their $30 billion annual debt burden.
The Third World nations receiving this debt relief would have to agree to liberalize their trade barriers, promote domestic economic growth and strengthen the international financial system, Bradley said in a speech today to a privately sponsored international monetary conference here. The conference is addressing ways to improve coordination of international monetary policies.
Bradley's plan would replace the widely heralded "Baker initiative" offered as a solution to the debt problem last October by Treasury Secretary James A. Baker III. Baker's plan, delivered in a speech in Seoul, calls on commercial banks to advance an extra $20 billion in new loans in exchange for economic reforms among the borrowers.
In contrast, Bradley's proposal would reduce the current annual debt burden on the 15 nations included in Baker's initiative from $30 billion to about $8 billion.
To do this, Bradley proposed today that banks give $42 billion and governments $15 billion in debt relief over a three-year period. They would do this by cutting the interest rate on loans to the debtor nations by 3 percentage points annually and by writing off 3 percent of the principal on current loans.
His plan also calls for an additional $9 billion from the World Bank and other multilateral development banks, which is also part of Baker's plan.
Bradley estimated that most American banks would lose no more than 3 percent of their capital under his plan, and that even the biggest money center banks would lose no more capital over three years "than they have earned on average in any one of the last three years."
"The precise numbers are not important," the New Jersey senator said, "but the idea is. The Baker plan's only answer is to pour in new money that adds to the debt."
Rep. Jack Kemp (R-N.Y.), who cohosted the conference with Bradley and cooperated with him in a successful tax reform initiative now moving through Congress, was caught off guard by Bradley's debt proposal and immediately defended the Baker plan.
"I was very surprised," Kemp told a reporter. "I had no idea he was going to do that." He suggested such measures be taken to help American farmers, not just Third World countries.
Bradley's plan met with lukewarm support among bankers attending the conference. The general thrust, however, was endorsed by members of the British, Italian and West German parliaments.
According to a European central banker: "It's a nice idea, but not very realistic." A major New York bank representative who asked that his name not be used said bluntly: "We would not like the idea of canceling all those loans."
Bradley contended that Baker's plan would only add to existing debt. "The Baker plan prolongs the policies that created the debt crisis in the first place," Bradley said. He argued that debt will pile up "and capital flight will continue."
He said easing the debt burden on borrowing countries would actually improve their creditworthiness by bolstering the financial position of the debtors CAPTION: Picture, Bill Bradley. . . would cut repayments to $8 billion