Mexico City — As world trade begins to slacken, Latin American countries are wondering how to pay off their enormous foreign debts. A conference under way in Havana is focusing on the Latin American debt and on possibilities of the Latin debtor nations declaring a moratorium on repayment and forming a debtors' cartel.
The conference, sponsored by Cuban President Fidel Castro, is not likely to lead to any great confrontation between the main Latin debtor countries -- Brazil, Mexico, Argentina, Peru, and Ecuador -- and their lenders -- the United States and Western European banks.
While the major debtor countries will probably announce in the coming year they are unable to maintain debt repayment at the present rate without some outside assistance, economic observers here believe that an official debt cartel or debt moratorium is unlikely.
The meeting has stirred public opinion throughout the region and focused attention on one of the world economy's most serious problems.
The Latin countries together owe a staggering amount -- some $360 billion. If they defaulted on their interest payments many of the West's largest banks could go under. This year, each Latin debtor country will export between 5 and 7 percent of its annual gross domestic product in interest payments.
Prospects that Latin American countries can keep to their repayment schedule look dim.
Albert Fishlow of the University of California, Berkeley -- an expert on Brazil and Latin American economics -- says the difficulties are a result of a general slackening of international trade. This means developed countries are buying less goods from the debtor countries.
This is bad news for the debtor countries who depend on their exports to help pay back the interest on their debts. In order for the debtor countries to continue ``making progress'' in paying back the debts, industrial countries must grow by at least 2 percent gross national product a year, according to William Klein, a senior fellow at the Institute for International Economics in Washington.
Some economic observers stress the progress which the debtor countries have made in implementing austerity plans.
Mr. Klein defends the position that the debtor countries will be able to work within the present system and pay back their debts.
Klein stresses that the debtor countries have made major progress in the first stage of economic adjustments: cutting back imports, stepping up exports, and reducing the value of their national currencies.
The second stage of adjustments consists of controlling inflation. Argentina, more than any other Latin American nation, has made considerable progress in that area. But inflation remains a serious problem for Argentina with the inflation rate for the year ending June 1985, at roughly 1,000 percent, says Klein.
In the last few months, Argentina has adopted a wage freeze. It also replaced its old currency, the peso, with a new one, the austral. (One austral is worth roughly a thousand old pesos.)
Brazil has made less progress than other nations in controlling inflation which remains at roughly 200 percent a year.
The weakening US economy probably signals a general weakening in international growth, adds Klein. In the long run, he says, the debtor countries must receive assistance from private US and Western European banks in order to continue making their payments.
Mr. Fishlow of Berkeley and other economic analysts in Mexico and the US also believe that this will be necessary. However, they say that the banks will not move on their own to bail out the debtor countries. He says it will be necessary for the US government or other international financial organizations to act as guarantors of the loans.
The US is unlikely to make such a move at present, according to one Western diplomat. The Reagan administration believes the debtor countries have made good progress in their payments and the matter should be settled by negotiations between the countries and the banks themselves. In the long run, said the diplomat, if the US has to help finance the repayment of the debt, the US economy could feel serious inflationary strains which the Reagan administration would find politically embarrassing. Fishlow is
skeptical that most Latin countries will be able to continue exporting between 5 to 7 percent of their annual GDP to pay off interest on the debt.
He states that annual interest payments represent between one-fourth and one-third of all domestic savings generated that year in the debtor countries.
To keep up interest payments at this rate, according to Fishlow, puts intolerable political pressures on the governments involved because of severe austerity measures. And it deprives the countries of any possibility of future growth because it does not leave them any money to invest in modern machinery and training. In this case, their production will continue to fall and they will have even greater problems paying the debt.
Fishlow stressed that political pressures are growing intolerable. Brazil will only have a trade surplus because of large cuts in often necessary imports. Brazilian exports themselves will fall 7 percent this year. At the time when the new government has taken power this is politically dangerous. These sentiments were echoed by Bolivian Planning Minister Freddy Justiniano.
Speaking of his country's debts at the Havana conference, he said, ``It's not that we don't want to pay the debt. We're simply unable to.''
The debt burden is so high that any number of shocks either worsening the international economic situation or political strains or a fall in commodity prices can make the debt unpayable, economic analysts say.