VENICE SUMMIT. Latin nations urge unified debt action. Officials seek lower interest, higher export quotas
Miami — Third-world debt promises to be a major topic at the economic summit of industrial nations in Venice this week. But Latin American nations - which owe the lion's share of the debt - expect little consensus, and thus little action, to emerge.
The Cartagena Group of 11 Latin debtor nations, engaged in some last-minute, pre-summit lobbying in the United States, are seeking immediate lower interest rates and fewer trade restrictions on third-world goods.
Uruguayan Foreign Minister Enrique Iglesias, representing the group last week in Washington, repeated an appeal for a unified international approach to the debt issue. Such a plan would recognize the debt as a ``political'' issue and more directly involve the governments of developed nations in the crisis between commercial bankers and Latin governments.
The general rise in interest rates on lending is undercutting the financial gains achieved in the recently renegotiated debt packages.
``The trend of thinking within the Cartagena Group is toward [fixed] interest rates in real terms of 1 to 2 percent,'' Mr. Iglesias adds.
Iglesias says that if the developed nations maintain protectionist barriers, Latin goods will be unable to compete well enough on world markets to earn the money needed for debt payments. This all contributes to the crunch these governments, many of which are newly democratic, are feeling as they try to make ends meet domestically while paying as much as 5 percent of their gross national product to foreign creditors.
Iglesias says he expects the Venice summit to ``acknowledge'' the points raised by Latin debtor nations as a matter of protocol. But, he says he is less optimistic they will accept the points ``collectively and do anything about them.''
Economic analysts have discussed the possibility of a new ``Marshall Plan'' for debtor countries being raised at the summit. (The US launched the original Marshall Plan 40 years ago for Europe's post-World War II reconstruction.) But most analysts suggest the debt discussion will be dominated by the questions raised by the latest debt activity.
Brazil temporarily suspended interest payments this spring. Several US banks have since increased loan-loss reserves, implying, for the first time, that they expect such losses. These developments could signal new flexibility on the part of commercial banks, say some. Others say it could signal that commercial banks will halt all new lending to Latin America.
``If [a global debt solution is not carried out in 1988-89], there will be a terrible story of doom and gloom such as social violence, recession, and fragmented political structures,'' says F.T. Haner, president of Business Environment Risk Information, a US national consulting firm.