Controversy erupts in Venezuela over foreign debt. Ruling party leaders seek a better deal from creditors, but finance minister opposes shift

Foreign debt has become a hot political issue here as government finance officials square off against leading members of the ruling party over whether Venezuela should limit its debt payments. The leaders of the ruling Democratic Action Party say Venezuela should demand a better deal from the banks on repaying $33 billion in foreign debt, Latin America's fourth largest.

But Finance Minister Manuel Azpurua wants to maintain the current repayment plan. Under this plan, Venezuela must repay foreign banks $4.3 billion this year, about half of its expected oil revenues. Venezuela, a member of the Organization of Petroleum Exporting Countries, depends on petroleum exports for 90 percent of its foreign earnings.

This latest controversy adds one more element to a simmering stew of discontent boiling up around President Jaime Lusinchi after three generally peaceful years in office.

The President's determined campaign to prevent former President Carlos Andres P'erez from becoming the Democratic Action's next presidential candidate has pushed the party close to a split. And the government's rough treatment of a series of recent student protests has also put the campuses against the President.

Until recently, President Lusinchi enjoyed widespread support for his position that Venezuela must repay its foreign creditors if it hopes to obtain the loans necessary for economic recovery.

That consensus started to crack in February, however, when Venezuela committed itself to a debt-refinancing plan with less-favorable terms than those that Mexico had obtained only four months earlier. The Venezuelan refinancing came only a few days after Brazil declared a moratorium paying $67 billion in foreign debt. Mr. Lusinchi had to defend himself against charges that he was selling out Latin American solidarity.

Debt payments are cutting into the Central Bank's dollar reserves, and nervous investors are moving their money out of the country as a result. That, in turn, has sent the currency to a new low of 28 bolivars to the dollar. Economists are concerned, and some advocate that Venezuela follow Brazil in suspending payments.

``All the parameters exist for a [debt] moratorium,'' said Domingo Maza Zavala, president of the national association of economists.

The Confederation of Venezuelan Workers (CTV), the nation's largest trade union organization, has been advocating a moratorium for months. But late last month, in an unprecedented move, the country's leading business group, Fedecamaras, joined with labor. Fedecamaras, which is worried that the foreign-currency crunch will restrict needed industry inputs, joined the CTV in delivering to Lusinchi a proposal on economic recovery that urged Venezuela to limit debt payments.

Mr. P'erez is trying to swing the ruling party toward the position that Venezuela join a Latin ``debtors' club'' and bargain collectively with the creditor countries.

Analysts say Lusinchi still backs Mr. Azpurua, who wants Venezuela to buy its way out of its cash flow problems by getting more foreign loans. To do that, Venezuela will have to strengthen its ties with overseas banks, not weaken them by declaring a debt moratorium.