Austerity and sacrifice. These are the key elements in the economic drama now taking place throughout Latin America as the countries of the hemisphere grapple with the burden of huge foreign debts.
Both Brazil and Mexico, the two nations with the largest single debts of more than $80 billion each, have already put massive austerity programs in place. International lending agencies, the United States government, and the world's private banking system have responded with large bailout loan and credit packages to each.
These packages will yield Brazil $10 billion and Mexico $7 billion before the end of the year. The centerpiece of each is a big International Monetary Fund (IMF) loan ($4.9 billion for Brazil, $4.5 billion for Mexico) which carries with it a demand for fiscal austerity, budget cutting, and price and wage restraints.
The new loans are aimed at getting both nations over an immediate financial crunch which includes payment by Dec. 31 of whopping debt servicing on old loans. These new loans also will ease balance of payments deficits in both countries. (On Sunday, Mexico devalued its currency by nearly 40 percent to help cut its deficit, forcing its people to accept higher prices for foreign goods.)
While such loans add to the debt burden, they ease immediate cash shortages and kindle a confidence in the soundness of each nation's economy. This ''confidence factor'' may be just as important as the ability to pay off the loans.
In the view of many economists, bankers, and politicians in Latin America, failure to boost such confidence could prove disastrous. Confidence may be a somewhat amorphous issue, but it is ''essential,'' says Jesus Silva Herzog, the virtual economic czar of Mexico's new government and the architect of Mexico's new austerity program. He adds:
''We have to rebuild confidence in our systems on the part of the lenders and on the part of the people in our countries.''
Whether the confidence, the severe belt-tightening, and the emergency loans and credits will be enough to get Brazil and Mexico over their immediate economic problems, however, remains to be seen. But international financiers say it is essential that these two nations, in particular, be assisted in every way possible. Otherwise the world economic order could unravel.
Latin America as a whole now owes slightly less than $350 billion - a total that represents about half the debt of the third world.
The countries with the biggest challenge are naturally the biggest borrowers: Brazil with $89 billion; Mexico $85 billion; Argentina $42 billion; Venezuela $ 37 billion; Chile $18 billion; Peru $12 billion; and Colombia $10 billion. (Because debt is not static and because methods of reporting vary widely, these figures are only approximate. They are, however, widely accepted. Information comes from reporting made available by the international lending institutions, individual governments, and private banks.)
The debt from these seven countries alone accounts for about $300 billion of the Latin American total.
Just to pay the interest on this debt, much of it contracted in past five years at high interest rates, is proving a stiff challenge.
Debt service alone is staggering. Brazil must pay $18.2 billion this year, Mexico $15.1 billion, Venezuela $7.8 billion. Such payments by third-world countries rose 20 percent during 1982 and promise to increase in 1983, according to the annual review of the Organization for Economic Cooperation and Development.
This crunch alone ''defeats us before we begin,'' says Armando de la Fuente, an Argentine economist and banker.
Argentina is a worrisome case - although its debt is only about half that of either Brazil or Mexico. ''It is dithering without any notion of how to come out of its malaise,'' says an official of a New York City bank to which Argentina owes more than $1 billion.
While Brazil and Mexico have made a virtue of sacrifice to get over the current crunch, Argentina has yet to come to grips with this approach. It has sought IMF assistance. But the Argentine military in their post-Falklands malaise are talking of spending close to $10 billion for new weapons systems - money that Argentina does not have.
Not so Brazil. Despite its much larger size it has eschewed any increase in military budgets.
Mexico is also resisting calls for massive wage increases. With inflation running at an estimated 100 percent, labor officials back in October were demanding a corresponding wage increase Jan. 1. Mexico's new government headed by Miguel de la Madrid Hurtado indicated such a jump was not in the cards and it now appears that labor will get little more than a 25 percent wage boost. Moreover, there is evidence that labor is going along with the aspect of ''sacrifice,'' a word that President de la Madrid and Treasury Minister Silva Herzog use regularly.
Brazil's Planning Minister Antonio Delfim Netto has used that word also - as has his President, Gen. Joao Baptista de Oliveira Figueiredo. They are all trying to impress on their respective populations - Brazil's 125 million, Mexico's 76 million - that the economic crises they face are indeed serious and a threat to the very fabric of life in both lands.