Whatever Happened to Latin American Debt

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Whatever Happened to Latin American Debt???
Jean Somers, of the Debt and Development Coalition, reports.

The Latin American debt crisis which shook the financial world in the 1980s was considered over once the banks were bailed out and insulated against responsibility for their role. The crisis is not over, however, for the people of Latin American countries who continue to carry the debt burden and who struggle to survive under harsh economic adjustment programmes.

Heavily Indebted Poor Countries Initiative

The focus of debt campaigning has shifted in recent years to heavily indebted poor countries. A new debt initiative, the Heavily Indebted Poor Countries Initiative (HIPC) was adopted last year. There are 41 potentially eligible countries, four of them in Latin America - Nicaragua, Bolivia, Honduras and Guyana. The aim of the scheme is to reduce debts to a "sustainable" level, a level which a country can repay without undermining economic growth. A major shortcoming of the scheme is that most countries will have to fulfil 6 years adjustment to become eligible. As a result very few countries will benefit before the year 2000. Even Bolivia with an 11 year adjustment track record must wait until next year at the earliest.

Debt and Democracy

Negotiations on debt relief take place behind closed doors, either in international institutions like the IMF and World Bank or with indebted government’s Ministries of Finance. Very little information filters down to the grassroots either on the terms of debt schemes, or indeed about government borrowing. To counter this, a number of conferences are being held around the glove to enable local organizations to monitor how the HIPC initiative is applied in their country.

The first conference took place this July in Honduras, jointly organised by ASONOG (Honduras), CRIES (Nicaragua) and the European Network on Debt and Development, with over 200 participants. The majority were from local organizations but also included representatives of governments and the Central Banks of the four Latin American HIPC countries. There were a number of interesting outcomes:

NGOs, academics and government officials in Honduras agreed to a joint study of the country’s need for debt relief. The aim is to challenge the World Bank/IMF assessment that Honduras does not need special debt relief. This is an interesting initiative, civil society coming together with the government in an alliance to challenge the international institutions where the power ultimately lies.
The President of the Honduran Central Bank invited local organizations to assist monitoring past and future loans made to the Honduran Government. Again an interesting move. Campaigning groups in heavily indebted countries have two concerns - one is debt cancellation, the other is how to ensure the crisis does not recur, to ensure loans are not taken on by their governments which merely add to the debt burden without contributing to positive development.
An Inter-American debt network has been established among NGOs from the four HIPC countries together with Mexico, Peru and El Salvador.

No, the Latin American debt crisis is not over yet.

Debt and Development Coalition Ireland are participating in a global ‘Jubilee 2000’ campaign calling for the debts of the poorest countries to be cancelled by the year 2000. Further information from: DDC, All Hallows, Grace Park Road, Dublin 9. Phone and fax: 01-857 1828.