COMING off a week in which unilateral action once again seems to characterize the affairs of nations, the World Bank's interest in providing a hefty infusion of new loans to Latin America comes as a reminder that global problems are best resolved by international cooperation. The billion-dollar-plus bank action -- expected to be approved during the next month -- is particularly timely, given the mixed signals in the global economic picture. It is also an achievement for US Treasury Secretary James Baker III, who has urged the bank to increase its lending to third-world nations.
Capital infusions are absolutely essential to third-world nations. The economic recovery is still on track. But a slowdown of consumer spending in industrial nations, as is now taking place in the United States, has an adverse impact on export-oriented developing nations. Moreover, the downturn in the value of the dollar against other currencies makes imports more expensive for Western consumers.
Granted, it would take time for the World Bank to actually disburse new loan funds for Latin America, assuming they are quickly approved. But the awarding of the loans would be a signal to private lending agencies -- commercial banks that have already extended credit to the region -- that they should consider new loan packages as needed.
Latin America, unfortunately, is one of the trouble spots in the world economic setting. The economies of the region vary widely, but in far too many nations there is high unemployment, and underemployment; continuing high inflation, despite improvements; overdependence on revenues from low-priced export commodities, including oil; and national practices based in large measure on corruption. Moreover, of the total third-world debt, over one-third, some $380 billion, is owed by Latin American nations.
The overriding economic priority for Latin America -- as, indeed, for the world economy -- remains growth. New loans earmarked to Latin American job creation and trade are essential to reach that objective.