Suddenly, you need a scorecard to keep track of all the entries in The Race to Solve the Debt Crisis. Once a month or so, a great man sets forth a major new proposal for dealing with much of the $1.2 trillion of third-world debt.
All of these proposals are complex. A common theme, however, is that banks would discount their third-world loans in a big way. Bankers call this a ``haircut.'' Economists call it ``partial debt forgiveness.'' Debtors call it ``relief.''
It sounds radical, but it isn't such an unusual idea. In fact, in many other debt crises throughout the 20th century, partial debt forgiveness for developing nations has been ``the norm, not the exception,'' according to a recent study produced for the National Bureau of Economic Research in Cambridge, Mass.
Grand plans have their problems, however. Howard Wiarda, a political science professor at the University of Massachusetts and author of the 1986 book ``Latin America at the Crossroads,'' says that who foots the bill is usually not mentioned.
``All the grandiose plans,'' he says, ``end up with the American taxpayer bailing out the banks, the Latin American governments, and the international financial system.''
More than 70 ideas are on the table. Some of the chief ones:
James Robinson III, chairman of American Express, last week set forth a plan to create an Institute of International Debt and Development (somewhat whimsically abbreviated as I2D2). Banks would sell loans to the institute for, say, 40 percent less than their face value, getting long-term I2D2 securities in exchange.
Debtor nations would then pay I2D2 - at lower than current costs - to service the loans. The institute would be funded by the United States, Japan, and Western Europe. It would be linked with the International Monetary Fund and the World Bank.
In exchange for the big break on debt service, the poor country would agree to tough conditions that might include currency devaluation, a more open door to foreign trade and investment, and denationalization of money-losing state industries. Mr. Robinson's plan is somewhat similar to ones proposed by Rep. John LaFalce (D) of New York, Sen. Paul Sarbanes (D) of Maryland, and New York financier Felix Rohatyn.
Arjun Sengupta, one of the 22 executive directors of the IMF, last week suggested that the IMF set up a special fund financed by taxpayers in wealthy nations, in particular by newly rich Japan. The fund would buy a portion of a poor nation's debt at a discount that is determined in negotiations among debtor, creditors, and the IMF. Banks would get IMF bonds in return.
Like the Robinson plan, the debtor would have to reorganize its economy to be more open and productive.
IMF chief Michel Camdessus, by the way, has called for ``imaginative'' new ideas, so more will be on the way.
Sen. Bill Bradley (D) of New Jersey proposes that banks shave three percentage points off of interest rates and write off 3 percent of principal over a three-year period. A debtor nation would have to adjust its economy.
Alfred Herrhausen of the Deutsche Bank suggests creation of an interest compensation fund to stabilize and limit interest payments. The ICF could be financed jointly by governments, international financial institutions, and banks, and managed by the IMF. Frans Lutolf of the Swiss Bank Corporation proposes a variation in which poorer commodity exporters would defer interest payments and add them to outstanding debt.
Jeffrey Sachs, a professor at Harvard University, has proposed debt relief for the countries with the biggest drops in per capita income. He has also put forth a way that old debt would be subordinated to new lending, making both more marketable and thus stimulating new lending.
Mr. Sachs says he supports ideas such as Robinson's and Mr. Sengupta's as ``feasible, workable, and doable.'' He is currently campaigning for Congress to instruct the World Bank to use a new $75 billion capital increase ``to stimulate debt relief.''
Finally, Treasury Secretary James Baker III is at the center of what is the most important plan - by virtue of its author and the fact that it is already in progress. Its basic approach: Roll the loans over, try out some new ideas, promote economic growth, and hope for the best.
Under the ``Baker Plan,'' commercial banks are to advance new money to leading debtors. The World Bank and other official creditors are to do likewise. Debtors are required to reorganize their economies along more open, capitalistic lines. This very expandable plan includes new wrinkles such as debt-equity swaps and the recent complex attempt to extinguish some of Mexico's debt.
Professor Wiarda of the University of Massachusetts thinks the Baker Plan has done a good job in reducing the dimensions of the debt problem to a more manageable size.
He does think, however, that ``forces are building'' that will bring about a more generalized, comprehensive solution by the 1990s.
But until then, the Baker Plan is the one to beat in the race to solve the debt crisis.