On the eve of the annual meetings of the World Bank and the International Monetary Fund, increasing firepower is being directed against the Reagan administration's strategy for handling the Latin American debt crisis. The critics' aim is to end a system of continuous negotiations for new bank loans to pay old interest, and replace it with a system involving the deferral of interest payments, or other interest relief, and the controlled write-down of the banks' foreign exposure.
The most prominent recent critic is Franz Lutolf, general manager of Swiss Bank Corporation and co-chairman of the international banks' steering committee for Mexico.
Earlier this month, he publicly recommended that troubled debtor countries be permitted to defer interest payments on their foreign debt to compensate for low prices of their main export commodities, such as oil prices for Mexico. The deferred interest would be added to the debt owed and repaid when export prices recover.
Mr. Lutolf said this would help put the debt problem on an ``economically and politically acceptable basis'' for the debtor countries and eliminate the continuing danger of sudden, unilateral repudiation.
The Lutolf proposal is similar to one recently put before the steering committee by the Mexican negotiator, Jos'e Angel Gurria, and emphatically rejected, banking sources say, by big money-center banks in the United States.
Banking officials concede that there is little difference mathematically between a system of deferring interest and adding it to the capital owed, known as ``interest capitalization,'' and the present system of granting new loans to pay old interest.
What is at issue in the proposal is the freedom it would offer debtor countries from the policy demands that the creditor banks and governments make in the annual negotiations over the new loans.
``That is the basic thing wrong with the idea,'' says one New York banker. ``It would take away the discipline of periodic negotiations over new money. It is a matter of pressure, no question about it.''
The public debate over Mexico started last month when the Wall Street Journal cited unnamed US bankers in an article headlined ``Swiss Bank Jeopardized Mexican Rescue.''
The article reported that Swiss Bank Corporation had been refusing to contribute to a new-money package for Mexico. It cited a US banker as saying the Swiss were being ``very Swiss . . . they like to be mavericks every once in a while.'' Soon the Mexican newspaper Exc'elcior quoted Lutolf as replying to this ``distorted account.''
Lutolf reportedly told Mexican authorities that far from jeopardizing the negotiations, his bank, along with 25 Asian and European banks, had proposed that Mexico be given a three- to five-year respite from interest payments, to compensate for low petroleum prices.
He reportedly described this as something that would be ``a definitive remedy,'' in which the interest savings would permit Mexico to import the capital goods necessary for a serious development program.
Bank officials said Lutolf was not available to comment on the report, but the incident led him to write a detailed defense of the concept of export-price-linked interest capitalization in the Swiss newspaper Neue Z"urcher Zeitung earlier this month.
In the article, and in his earlier reported remarks, Lutolf stressed that the major obstacle to the plan is a regulatory one in the US, having to do with the possibility of triggering unmanageable write-downs.
Norman Bailey, a former special assistant to President Reagan for international economic affairs and now a Washington consultant, says the key obstacle to change isn't any particular regulatory adjustment but is the political position of US Treasury Secretary James Baker III and Federal Reserve chairman Paul Volcker.
Mr. Bailey is one of a small group of US experts who are becoming increasingly vocal in their criticism of the current US strategy.
There is already a provision that allows banks to take slow, controlled write-downs of troubled loans, Bailey says. The problem is that the banks have been encouraged to use this provision to write down domestic energy and agricultural loans but not to write down foreign loans.
``What is required,'' he says, is for Mr. Baker and Mr. Volcker to say: `Go ahead and do it.' It is Baker and Volcker who have to be convinced.
``As we get closer to a recession, I'm fundamentally hopeful they'll come to their senses in the near future. Hope springs eternal and all that.
``Once that type of encouragement occurred, the banks' opposition'' to interest capitalization or other relief ``would evaporate,'' Bailey said.
It might not be that easy, according to a member of another opposition group -- the smaller, US regional banks. A senior official of one such bank notes that ``a few regional bankers are actively in favor of such plans'' involving interest capitalization and controlled write-downs.
``What is much more important is their increasing aversion to making new loans,'' Bailey adds.``We think the system of lending new money to countries who either have no ability or no interest in repaying any loans has got to come to an end sometime.''
This banker says a system of interest capitalization, if it is to be acceptable to the banks, would require some kind of government or multilateral support or guarantee. ``And there just isn't any political consensus out there, in this country, that says: `Let's help the banks.' I just don't know the answer.''