Brazil's near-completion of a loan package with its bankers takes some of the edge off the third-world debt crisis. But getting developing nations out of the hole, observers say, will take billions more dollars - dollars that no one wants to put up. Most debtors are stuck in a Catch-22 when it comes to getting the dollars that international development officials say they need to dig themselves out of debt.
Brazil, for instance, which owes $120 billion, exports vigorously to earn money to service its loans. Among its prime exports, a World Bank official says, is steel, which is produced by a state-controlled industry that itself is heavily indebted.
The rub is that earnings from these steel exports get sucked into debt service. And by selling steel overseas, Brazil is left without enough steel for domestic needs. And because of the debt problem, new sources of loans or investment to expand the steel industry are nonexistent.
Exports are crucial to servicing debt, agrees economist Javier Murcio with Data Resources Inc. in Lexington, Mass., ``but with depressed investment, you can't do it.''
Lenders want to minimize risk in countries like Brazil, not increase it. This is why they have built up their loss reserves and why banks have been selling debt on the secondary market and swapping it for equity - to erase debt from their balance sheets.
That hands-off attitude is being faulted by officials concerned about the debt problem. The World Bank calls for another $6 billion to $9 billion from private banks in the next three years. That would produce 5 percent growth a year and help these countries with debt service.
``We get tired of this,'' says John Woodley, deputy managing director of the Institute for International Finance, which represents 164 big international banks involved with the debt crisis. ``Banks are in business to make profits and haven't been doing well on Latin loans for a long time.''
Recognizing this, the International Monetary Fund, in a recent report, said the best source of new money would be from more domestic saving in these debtor nations.
``With a strong investment foundation thus laid,'' the fund's economic report notes, ``international capital markets may then be approached for additional resources to complement rather than substitute for domestic savings.''
Mr. Woodley agrees that banks could help if there is more domestic savings and direct investment from abroad - ``but Brazil hasn't been doing terribly well on this.''
One big sticking point for Brazil - as for many other debtors - is that bankers wanted debtors to agree to an economic austerity plan as part of any deal granting new money. ``Austerity'' is a loaded word in Latin America. It means more privation for an already poor people. That, in turn, could mean political instability in the rather shaky democracies of the region.
``Latin America is being crushed under the burden of these obligations, and it is very dangerously weakening the democratic system,'' Carlos Andr'es Perez, a presidential candidate in Venezuela's elections this December, told the Monitor recently. ``The No. 1 priority for Latin America is to design a system to solve the external debt problem,'' the former Venezuelan President said.
In recent months, antigovernment challenges have increased in Argentina, Peru, and Ecuador, Mr. Andr'es Perez notes, while discontent is growing in Brazil, Mexico, and Venezuela. Unemployment and lower living standards, he says, ``are a product of the intolerable and irrational demands implicit in the terms imposed by the external debt service.''
But after six years of ``debt crisis'' (it was born in the summer of 1982 when Mexico teetered on the brink of default) US banks and third-world debtor nations remain hostage to one another. It is very difficult for either side to walk away from the table.
In recent weeks, there have been some hopeful developments, although they may only be of short-term benefit:
Rapid economic growth in the US, Japan, and Western Europe. Such growth, if it continues, should enable industrial nations to absorb more imports from developing nations. That would boost business in developing nations and make debt servicing less onerous.
Rising commodity prices. Since last summer, prices for metals, oil, wheat, coffee, and other commodities have risen. A somewhat more inflationary world economy is beneficial to commodity-producing nations.
Steady economic policies at home. Mexico has maintained a steady economic-austerity program, despite presidential elections due in July. In past elections, the ruling party has opened the coffers in order to make its candidate more popular with Mexicans.
A decrease in confrontational tactics. Brazil debt renegotiation brings the worst episode in the debt crisis to a close. Scare words like ``debtors cartel'' or ``debt repudiation'' are heard less often today.
Nevertheless, economists and Latin leaders say crises are likely to recur, periodically threatening democracy in Latin America, the solvency of US banks, and the stability of the Western financial system.