INTERNATIONAL FINANCIAL SITUATION REPORT #29

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R001200200001-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 18
• Document Creation Date: December 22, 2016
• Document Release Date: April 4, 2011
• Sequence Number: 1
• Publication Date: June 21, 1984
• Content Type: REPORT

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Central Intelligence Agency
Washington. D. C. 20505
DIRECTORATE OF INTELLIGENCE
International Financial Situation Report #29
21 June 1984
Summary
Recent statements by bankers regarding the consideration of a multi-year rescheduling for
Mexico at favorable terms - in view of Mexico's substantial progress in adjustment - mark a
new stage in bank debt negotiations. Bankers have been reluctant to offer such concessions for
fear of setting precedents for other countries. In addition, debtors likely will appeal to official
creditors to take steps to ease the debt burden and share some of the costs. Other developments
in recent weeks include:
o Latin American foreign and finance ministers are meeting on 21-22 June in Cartagena,
Colombia to discuss debt and trade problems facing the region. The conference is
unlikely to result in any form of debtors' cartel but likely will produce a joint statement
calling for the industrial countries to take action to ease the debt burden.
o Mexican financial authorities are seeking more favorable repayment terms from
creditors and soon will open formal discussion on a financial package of over $60 billion
of public sector debt. We expect the new round of debt rescheduling negotiations to be
difficult and see little chance for a quick agreement.
o Brazil plans to pursue two initiatives in its debt strategy
Foreign Minister Guerreiro will lead a Brazilian delegation to the Cartagena conference
to emphasize the need for political action by the industrialized country governments,
and the government's economic team is preparing to negotiate separately its own debt
rescheduling and new money needs with foreign bankers.
o In early June, while negotiations were still under way with an IMF technical team,
Buenos Aires sent the Fund's Managing Director an outline of an adjustment program,
widely touted in the press as a letter of intent. The document was described by the US
Embassy as a political statement outlining the broad parameters of adjustment and not
an economic program designed to obtain Fund approval.
o The Philippines appears to be moving decisively in anticipation of concluding an
agreement with the IMF as evidenced by a series of executive orders and presidential
decrees dated 5 June.
This situation report was prepared by analysts of the Intelligence Directorate. Comments are
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welcome and may be addressed to the Situation Report Coordinator 125X1
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KEY ISSUE
A New Stage in Debt Negotiations
Recent statements by bankers regarding the consideration of a multi-year
rescheduling for Mexico at favorable terms - in view of Mexico's substantial progress in
adjustment - mark a new stage in creditor negotiations on debt. However, this is only
one example of the banks' evolving positions. A recent $15 million loan to Paraguay, co-
financed by the World Bank and commercial banks, contains a capping provision whereby
the loan's maturity would be extended if LIBOR exceeds 12 percent in the last five years
of the ten-year credit. In addition, a growing number of
bankers are willing to reschedule Venezuela's debt - as long as no new money is required
- without a formal IMF-supported program in place, a reversal of their position held for
more than a year.
Banks have been reluctant to offer such concessions for fear of setting precedents
for other debtors. For example, the terms of last year's Mexican rescheduling with a
lower interest spread and longer repayment period have been the benchmark by which
other debtors have set their demands this year. Moreover, the outcome of Argentina's
debt negotiations will have major implications for upcoming restructuring efforts.
Countries outside of Latin America - including Yugoslavia and the Philippines - also are
closely watching the situations involving Latin debtors.
Debtors will continue to press creditors for additional concessions in debt
negotiations. Nevertheless, major debtors do not want to jeopardize relations with
creditors, and they continue to prefer a case-by-case approach to debt negotiations based
on their individual merits. For example, the Latin debtors conference in Cartagena
probably will not produce any joint debt negotiation stances. Participants are likely,
however, to appeal to official creditors to take steps to ease the debt burden and share
some of the costs.
DEVELOPMENTS IN MAJOR COUNTRIES
Mexico
Mexican financial authorities are seeking more favorable repayment terms from
creditors and soon will open formal discussion on a financial package of over $60 billion
of public sector debt. Earlier this month Mexico's 11-bank steering committee agreed to
listen to Mexican proposals in New York during the last week of June. The move follows
several months of informal consultations with international bankers and Western
monetary authorities.
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According to (Embassy reporting, Mexico probably
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will request:
o Multi-year rescheduling of up to $26 billion in principal on loans not
already rescheduled and coming due between 1985 and 1990, with 12-15
years to repay including 7-8 years of grace;
o Interest rate concessions, including a cap on increases, lower spreads
above LIBOR, and dropping of the banks' US prime rate option; and
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o Securing of better repayment terms for $26 billion in debt already
rescheduled, and for $8.8 billion in new loans made in 1983-84 in
conjunction with debt reschedulings.
Given Mexico's good austerity record and growing pressures from other debtors for
collective debtor action, we believe Mexican officials see themselves in a strong
bargaining position and will press hard for all points. These officials also want to offset
criticism from within their government and from opposition politicians - who continue
to call for a debt moratorium or repudiation - that they have been too soft with foreign
bankers. The pressure of higher world interest rates on Mexico's hard hit economy and
the strong endorsement of its tough economic adjustments by major US banks and
Western governments have further emboldened Mexico.
We expect the new round of debt rescheduling negotiations to be difficult and see
little chance for a quick agreement. many bankers - in
particular those from US regionals and European banks - are fundamentally opposed to
generous concessions on interest and to reconsideration of financial packages set during
the past two years.
incentives
from both sides to compromise should lead to an agreement by yearend.
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Even though government policy remains tough, economic and financial pressures
to ease up on austerity are mounting.
Mexico met its first quarter
limits - are proving more difficult to attain. Inflation continues
substantially above the target.
performance criteria, the targets - including public sector deficit
Preliminary industrial statistics indicate that the economy may have
bottomed out, but 'there is still no sign of an economic recovery.
Imports remain depressed, and capital flight has continued at a high
level.
o The small wage hike announced this month, however, will help efforts
to maintain tough austerity and strengthen Mexico's position with
international bankers in debt rescheduling talks. The June mid-year
agreement allowed minimum wages to go up only 20 percent, less than
half of what union leaders had demanded. This assures the third
consecutive year of sharply falling real wages.
Underscoring President de la Madrid's emphasis on finding pragmatic, collective
solutions to regional problems, Mexico is playing an increasingly active but moderating
role in Latin American debt negotiations. Although Mexico City believes that
cooperation and consultations among Latin American debtor countries provide greater
leverage in talks with creditors, de la Madrid supports country-by-country settlements
rather than a debtors' cartel or other collective action. Indeed, Mexico has announced
publicly that it would oppose any form of debtor cartel that might be discussed at the
Cartagena conference. According to Embassy reporting, Mexican officials believe that
their relative success in implementing austerity will allow them to secure better
bilateral deals than by acting in concert with other Latin American debtors.
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Brazil
Brazil plans to pursue two initiatives in its debt strategy, one involving the foreign
ministry and the other the economic team. President Figueiredo has asked Foreign
Minister Guerreiro to lead a Brazilian
delegation to the Cartagena conference to emphasize the need for political action by the
industrialized country governments to join in a search for a solution to the Latin debt
crisis. the Brazilian government felt prompted
to participate in the debtor conference because of two principal- concerns: domestic
political discontent with rising US interest rates and the risk that worsening financial
crises in neighboring debtors could lead to serious national security risks for Brazil.
Although Brasilia would like the Latin debtors to produce specific constructive proposals
for dealing with the debt crisis, it has emphasized that it is
opposed to a debtors' cartel, a debt moratorium, confrontations with creditors, or even
development of a joint negotiating position.
Meanwhile, the government's economic team is preparing to negotiate debt
rescheduling and new money needs with foreign bankers.
central Bank
President Pastore recently stated to the press that Brazil will need no additional bank
financing in 1984 and will not begin discussion regarding 1985 until this fall when the
interest rate picture and next year's financial needs become clearer.
Argentina
In early June, while negotiations were still under way with an IMF technical team,
Buenos Aires sent the Fund's Managing Director an outline of an adjustment program,
widely touted in the press as a letter of intent.
The document was described by the US Embassy as a political
statement outlining the broad parameters of adjustment and not an economic program
designed to obtain Fund approval. The letter emphasized Argentina's insistence on real
wage hikes of 6-8 percent this year and its unwillingness to institute further spending
cutbacks. The Embassy reported, however, that specifics of the monetary accounts,
exchange rate policy, and trade issues were omitted, providing room for continued
discussion. According to the US Embassy, the letter reflects the economic adjustments
President Alfonsin believes he can take at this time, especially in view of mounting labor
pressures. We also believe that the wide exposure that the letter received in Buenos
Aires will make it increasingly difficult for Alfonsin to gain support from the Congress or
opposition for austerity measures in the future.
Argentina. has reacted with restraint to the US decision not to extend its $300
million loan guarantee associated with the 30 March rescue loan, and probably hopes to
minimize the effect of the US action on ongoing bank negotiations, according to Embassy
reporting. We expect the Argentines to ain request US financial help once a tentative
Fund accord has been reached.
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REGIONAL SITUATIONS
Latin America
In Latin America, Chile experienced a strained payments position prior to signing
its $780 million loan, Venezuela has made slow progress on paying private sector interest
arrearages, the Banco de Colombia initiated refinancing discussions, and Bolivia
temporarily suspended all debt service.
Finance Minister Escobar signed Chile's $780 million loan on 14 June in New York,
according to press reports. He overcame bankers' initial resistance to participation in
the credit by agreeing to comply with the existing IMF-supported program and reassuring
creditors that Santiago would continue its cautious reflationary policies. The new loan
carries a nine-year repayment term, including a five-year grace period, with an interest
spread of 1.5 percentage points above the US prime - a sharp reduction from the 2.25
spread on last year's credit. According to Embassy reports, Escobar will seek
disbursement of the first two tranches - totaling $390 million - by the end of June.
The delay of the syndication - Santiago expected disbursement of the first $195
million tranche in April - coupled with scheduled debt repayments has strained Chile's
cash position. To conserve reserves, Escobar drew down the remaining $250 million of
the $550 million BIS credit for 1983-84, according to Embassy reports. Chilean banks and
government agencies also have tried tapping unutilized trade credits, but banks have
refused. Although these moves could be interpreted as temporary expedients until the
new money loan is disbursed, we believe they also portend mounting payments problems.
According to the Embassy, Chile's trade surplus was down 12 percent to $372 million for
the first four months of 1984 over the same period last year, mainly because of depressed
copper prices. Foreign investment inflows probably are declining - the government has
recently scaled down its 1984 estimate from $160 million to $100 million - because of
political and economic uncertainty. We believe payments pressures will intensify in the
second half of 1984 - even with disbursement of the $780 million loan - because of the
rise in world interest rates and the threat of restrictions on copper exports.
The Embassy reports that President Pinochet - angered by
rising world interest rates and restrictions on copper - is becoming more willing to adopt
radical positions on the debt, such as joining and helping to form a debtors club. In view
of this changing political position, we believe Escobar may be building up foreign
exchange to finance a politically expedient reactivation program that could push Chile
out of compliance with the IMF and shut off further bank credit.
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Venezuela
/According to
Embassy reporting, Financial Minister Azpurua announced that 140 million will soon be
made available for payment at preferential exchange rates toward the nearly $1 billion in
outstanding private interest arrearages. Under a new decree law, Caracas is attempting
to accelerate the approval process by authorizing foreign exchange for interest payments
even before debt registration is completed with RECADI, the agency responsible for
providing preferential dollars. Azpurua insists $400 million will be approved under the
new decree by the end of June, but bankers remain skeptical. According to Embassy
reporting, RECADI currently is approving only $20 million in advance payments at its
weekly meeting -- one-sixth the rate necessary to meet the $400 million goal. In
addition, recent efforts to collect interest approved under the decree were rejected by
RECADI.
Meanwhile, Caracas is continuing other steps to resolve its financial stalemate
with bankers. The government has paid almost $2 billion in public sector principal and
interest, including $713 million to official creditors, since the Lusinchi administration
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hopes that these efforts will persuade banks to refinance the public debt without an IMF-
supported program, but we believe any progress realized will be contingent upon
settlement of overdue private sector payments.
Venzuela needs to demonstrate progress on private sector interest payments before the
end of July to persuade banks to extend the moratorium on public sector principal.
An IMF team visited Peru in late May to review its economic program and found
that Lima had met performance criteria for the first quarter, according to Embassy
reporting. We believe the Belaunde administration will have severe difficulties
remaining in compliance with its standby arrangement this year, however, in the face of
mounting social unrest and presidential election campaign spending pressures. On 9 June,
the Peruvian government imposed a 30-day state of emergency to cope with social unrest
caused by worker demands for wage increases to compensate for the rising living costs.
Indeed, Embassy reporting indicates that the IMF team leader believes that Peru will
have to renegotiate targets in August. A review of current data suggests that the public
sector deficit will reach 6.1 percent of GDP, two percentage points above the standby
program limit.
The Paris Club met on 4-5 June to reschedule Peru's official debt, according to
Embassy and press reporting. Western governments agreed to reschedule over $1 billion
of maturities falling due between 1 May 1984 and 31 July 1985. Payments on 90 percent
of the total amount will be made over nine years with five years of grace. Of the
remaining, 10 percent, half will be due as scheduled and the other half due by 31
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Colombia
The bank advisory committee formed to assist Banco de Colombia met with
financial officials in Bogata in late May
The committee proposed that the Colombian government guarantee
repayment of about $363 million of the $610 million that Banco de Colombia requested
be refinanced. Banco de Colombia incurred $160 million in foreign debt for food import
financing on behalf of Idema, a government agency, and about $203 million in
unregistered loans, largely held by Panamanian affiliates. The Central Bank has already
moved, according to Embassy reporting, to refinance Idema, which would reduce the
amount of pressure on the Banco de Colombia refinancing. Embassy
reporting indicate that refinancing negotiations for Banco de Colombia probably will take
six to nine months.
Meanwhile, international reserves fell less rapidly in May, according to Embassy
reporting, as coffee earnings increased. Reserve loss was $107 million compared with an
average of $233 million in the first four months of 1984. Gross reserves stood at nearly
$2.2 billion as of 25 May, while liquid reserves amounted to a little over 1.5 months of
imports. Although reserve loss was expected early this year, the actual numbers were
unsettling, according to Embassy reporting, because of the extraordinary measures taken.
late in 1983 to manage the reserves and because of seasonal factors.
Bolivia
The Bolivian government formally announced suspension of all principal and
interest payments to commercial banks, according to Embassy and press reporting. The
decision was part of a response to labor demands made by the powerful Bolivian Workers'
Central group to end weeks of labor unrest. New Finance Minister Bonifaz stated
publicly that Bolivia is continuing to negotiate a restructuring with banks, but it is unable
to make any payments until an agreement is reached. Bolivia is now technically in
default for failure to pay three months of overdue interest. Since March, Bolivia has
owed commercial banks $22.5 million and had agreed to pay $7.5 million every month by
15 June. According to Embassy reporting, this situation will not cause any serious
problems for banks because most banks have placed their Bolivian loans on nonperforming
status.
Ecuador
Ecuador announced publicly on 4 June that it had suspended principal and interest
payments on almost $250 million owed to foreign governments and suppliers, which fall
due between 1 June 1984 and 31 December 1985, and was seeking debt relief. The
announcement makes public Ecuador's 26 April 1984 request to the Paris Club.
Suspension of debt service payments during the consolidation period is usually done by
debtors while requesting a Paris Club rescheduling. In addition, Ecuador has reached an
agreement in principle with the bank advisory committee on a debt relief package for
198 The agreement calls for rescheduling of
$353 million of public sector debt and 240 million of private sector debt originally
falling due this year over eight years with four years of grace, the delaying of about $150
million in public and private debt maturing in 1984 that was part of the 1983 rescheduling
package, and the rollover of $150 million in arrearages on trade-related credits. This
restructuring package is conditional on the final disbursement under Ecuador's current
IMF standby arrangement that expires on 24 July. The banks have also agreed to start
negotiations on a $350 million loan to be disbursed once the newly-elected government of
Leon Febres Cordero - who takes office in August - reaches agreement with the IMF
for a new standby loan.
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Eastern Europe
In Eastern Europe, Yugoslavia rescheduled its 1984 debt repayments owed to banks
and Western governments, and progress has been slow on Poland's Paris Club
negotiations.
Yugoslavia
Yugoslavia signed debt rescheduling agreements with Western governments and
commercial banks in mid-May. The banks agreed to refinance all 1984 maturities -
totaling $1.3 billion - on more favorable terms than those for 1983, including a
repayment period of seven years with four years of grace at 1.6 percentage points above
LIBOR. The 15 Western governments agreed to refinance $800 million and to carry over
nearly $ 400 million of unused credits from last year's package.
The reschedulings were threatened at the last minute by a dispute between
Yugoslavia and the IMF. The Fund suspended disbursement of the first tranche of its
1984 standby program, claiming Yugoslavia violated a requirement to lift its price freeze
on 1 May. The Fund specifically objected to Belgrade's insistance that companies give 30
days' notice before raising prices. Yugoslavia finally agreed to lift the 30-day notice by
the end of August and is now eligible to draw the first tranche of $100 million by the end
of June.
Belgrade also indicated that they would like to avoid further Paris Club
reschedulings Such a move, however, could
upset bankers who are concerned that all creditors should be treated equally. Some
bankers still harbor ill feelings about the 1983 rescue package because they feel the
burden fell too heavily on private banks.
The Yugoslavs apparently are approaching further debt relief with an eye on Latin
American debtors. The Embassy reports that extensive press coverage has been given to
statements of Latin American debtors and that a recent conversation with a Yugoslav
official dealt at some length with Latin American financial problems. We do not believe
Belgrade is interested in a debtors' cartel, but rather would insist on more favorable
terms should this occur in Latin American reschedulings.
Poland
Progress with the Paris Club has been slowed by Warsaw's delays in meeting the
creditors' conditions for resuming debt relief negotiations. Last month, Warsaw agreed
to pay all creditors by the end of May 20 percent of the arrearages under the 1981 Paris
Club rescheduling agreement as well as all of the unrescheduled debt due the United
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States in 1981. At a 6 June Paris Club meeting most creditors reported receiving only
partial payments, according to Embassy reporting. In addition, Warsaw maintains that it
will pay only 20 percent of $34 million in unrescheduled principal and interest due under
the 1981 bilateral agreement with the United States. A rambling statement delivered by
Poland to the Paris Club creditors on 18 June added to the confusion by reviving earlier
Polish requests for new credits and IMF membership, according to Embassy reporting. A
Polish official added, however, that Warsaw did not mean to imply that covering the 1981
payments is contingent on fulfillment of these requests. The US Embassy in Paris reports
that the French, who chair the Paris Club, support the US position and will not proceed
with the scheduled 19 July meeting to begin negotiations for debt relief for 1982 and
1983 unless Warsaw meets its obligations by the week of 9 July.
East Germany
East Germany's financial position is improving; last month, the East German
foreign trade bank raised a $75 million credit in the Euromarkets. While not large, the
credit is East Germany's first medium-term untied loan since late 1981. A second major
intra-German loan within a year would further strengthen East Germany's credit
prospects.
Hungary
Budapest continues to have success in raising commercial loans and should easily
cover its 1984 borrowing target of $1.1 billion. A planned $150 million bankers'
acceptance facility eventually reached $210 million when signed in April. In addition,
Hungary's effort to arrange a $385 million World Bank co-financing package is
progressing well, and the loan is tentatively scheduled for completion by mid-July.
Budapest probably will reenter the ?-x1
international capital markets this falI in an effort to raise another $200-300 million. 0 25X1
n Asia, the Philippines is progressing towards an agreement with the IMF
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Philippines
President Marcos appears to be moving decisively in anticipation of concluding an
agreement with the IMF. In a series of executive orders and presidential decrees dated 5
June, Marcos announced a float of the peso, a rise in the import surcharge from 8 to 10
percent, a five-percent cut of government budgets, imposition of an excise tax of 10
percent on some foreign exchange sales, and a "windfall" profits tax on export earnings,
and prior Presidential approval of future borrowings by government owned or controlled
corporations. According to Embassy reporting, the local IMF representative initially was
not impressed by the new measures and would adopt a wait-and-see attitude, particularly
towards the currency float. In addition to concerns that the Central Bank may be
intervening to hold the peso at 18 to the dollar - an effective devaluation of 22 percent
- we believe the controls on allocation of foreign exchange for import and export
transactions and the import surcharge conflict with the Fund's recent recommendations
to reduce dependence on international trade taxes and adopt a flexible exchange rate
policy.
Embassy traffic indicates that the Philippines did not have a prior understanding
with the IMF that these measures would seal an agreement.
the IMF had proposed that a float take place only after all necessary monetary
and fiscal measures had been implemented. Earlier efforts to conclude an agreement
failed after money growth soared by over 47 percent prior to the May elections.
According to Embassy reporting, the Fund will take 6-8 few weeks to assess
implementation of the latest series of measures before completing an agreement.
According to press reports, the IMF is looking for a cut in imports to $5.5 billion, about
20 percent below last year's level, a 10-percent increase in exports to $5.5 billion, and a
limit on the budget deficit to below 1.5 percent of GNP. The Philippines' Paris Club
creditors were informed by the IMF that, assuming successful implementation of these
measures, the Fund's executive board could meet in early August.
The slow pace of discussions with the Fund has forced the Philippines to request' a
fourth extension of the 90-day moratorium on principal repayments to the country's
estimated 450 commercial creditors.
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Africa/Middle East
Nigeria
The Nigerians continue to adhere to their strategy of delaying agreement with the
IMF pending favorable developments in the oil markets.
_ The Embassy notes there is little
popular support for the adoption of a Fund program. While a handful of senior Nigerian
officials are still going through the motions with the IMF, the preponderance of evidence
from the local press suggests that Lagos and the Fund are
actually drifting apart
Press and Embassy reporting confirms that many Nigerian officials consider 25X1
increased oil production through the remainder of the year as a realistic alternative.
Proponents of this view note that the revenue generated by increased oil sales will
exceed any likely IMF credits. Nigeria has been seeking up to $2.7 billion under a three- 25X1
year extended fund facility and probably will be allowed to draw no more than $800
million annually. We estimate, however, that every additional 100,000 barrels per day
Lagos pumps on an annual basis earns in excess of $1 billion. Given the normal seasonal
increase in demand for oil over the second half of the year, we believe Lagos could pump
an additional 200,000 barrels per day through December without raising the ire of other
OPEC members. We believe that the FMG would not provoke what they perceive to be
the domestic consequences of devaluation, an end to petroleum subsidies, and trade
liberalization as long as a production increase alternative remains open. 25X1
The FMG still has almost $3 billion in arrearages on officially guaranteed trade
credits, and almost certainly is coming under increased pressure from various European
export credit agencies to move forward in discussions with the IMF. 25X1
The Nigerians will be careful to avoid the appearance of a
breakdown in discussions because of concern that trade finance lines could dry up.
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The Cartagena Debt Conference
Latin American foreign and finance ministers will meet on 21-22 Jul
Colombia to discuss debt and trade problems facing the region.
Cartagena
,
Argentina, and Venezuela - do not advocate a debtors' cartel, and recognize that such
action would jeopardize debt renegotiations and access to funds.
Instead, the conference probably will issue a joint statement aimed at dramatizing
the Latins' plight and calling on the industrial countries to take concrete steps to ease
their repayment burden. It also seems likely to represent a turning point for the Latin
countries, who may increasingly use political pressure to obtain repayment concessions
from lenders, a move that could pose dangers for current financial rescue programs.=
Debtor Positions
Argentine President Alfonsin issued the call for the conference in reaction to
rising US interest rates. Although initially viewed as a technical meeting of the major
debtors, foreign ministers as well as economic officials will attend the meetings.
o Brazil's acting Foreign Minister recently told US officials that support for the
conclave reflects growing Latin criticism of rising interest rates and their
threat to stabilization pro rams but that Brazilia would not join a debtors'
cartel, according to Embassy reporting.
o Mexico's President de' la Madrid has downplayed radical approaches to the
debt crisis, according to the US Embassy, in favor of seeking constructive
solutions.
o Argentine Foreign Minister Caputo told the US Embassy that Argentina would
not do anything irresponsible or excessive at the meeting.
o Colombian officials favor a low-key approach to persuade the US to lower
o Chile will not play an active role, according to Finance Minister Escobar,
although there is growing support in some Chilean government circles for joint
action to improve repayment terms, according to Embassy reporting.
Some of the smaller debtors - such as Bolivia and the Dominican Republic - may push
for more radical solutions but they lack influence with the major debtors.
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A Formal Cartel Unlikely
Although Western bankers are apprehensive about the potential for joint action,
all the major debtor countries recognize such an action would only jeopardize their
future access to world money markets and their individual bank renegotiations.
Participation by the large debtors is crucial to a cartel because they hold some 60
percent of Latin America's $350 billion external debt. Nonetheless, the conference will
i
ons.
put pressure on Latin officials to get tough with bankers in bilateral debt negotiat
Latin American political leaders - spurred on by the Argentines - will emphasize
the need for a political solution to the debt problem. In our judgement, their joint
communique probably will criticize growing protectionism in addition to dissatisfaction
over rising intrest rates that are undermining their stabilization programs. They are also
likely to call for more flexible IMF conditions and propose measures to ease the
repayment burden, such as a ceiling on interest rates.
Beyond Cartagena
For the longer term, debt management probably will increasingly become a
political issue. Latin American leaders will exert more pressure on the industrial
countries to take a more active role in easing the repayment burden. Their demands will
likely center on the need for official intercession with the IMF to ease austerity
measures, and with private banks to extend multi-year debt restructuring packages on
easier terms.
As debt management takes on a greater political dimension, debtor countries will
have to carefully weigh the possible impact on new lending flows. Any relaxation of IMF
conditions will reduce the willingness of bankers to lend because their financial support is
contingent on economic adjustment. At the same time bankers' reluctance to reduce
interest rates to levels sought by some debtors is likely to put increased pressure on
creditor countries - particularly the United States - to find a solution.
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`25X1
Trade Trends in Key Dabt Troubled Countries
Million US Dollars at a Seasonally Adjusted Annual Rate
Quarterly
1984
8311
83111
831V
841
Jan
Feb
Mar Ccmwnt
Argentina
Exports
7,600
7,940
-7,720
7,340
7,590
9,100
7,860
7,880
7,690
8,020
Imports
5,390
4,510
4,350
4,870
4,750
4,080
3,720
3,640
3,740
3,770
Balance
2,210
3,430
3,370
2,470
2,840
5,020
4,140
4,240
3,950
4,250
Brazil
Exports
20,200
21,850
20,590
23,070
22,320
21,420
25,010
22,780
26,380
25,880 Embassy reports first quarter exports
Imports
21,080
16,840
17,660
16,360
16,250
17,110
14,950
15,120
15,030
14,700 of manufactured goods up 40 percent
Balance
-880
5,010
2,930
6,710
6,070
4,310
10,060
7,660
11,350
11,180 over same period year earlier.
Chile
Exports
3,810
3,840
3,640
4,170
3,860
3,680
3,820
3,770
4,080
3,600
Imports
3,560
2,750
2,780
2,700
2,660
2,880
3,460
3,370
3,660
3,350
Balance
250
1,090
860
1,470
1,200
800
360
400
420
250
Colombia
Exports
3,030
3,000
2,990
2,850
3,030
3,120
2,830
2,860
2,710
2,920
Inports
5,480
4,980
5,270
5,220
4,660
4,750
4,390
4,260
4,220
4,690
Balance
-2,450
-1,980
-2,280
-2,370
-1,630
-1,630
-1,560
-1,400
-1,510
-1,770
Ecuador
Exports
2,150
2,200
2,240
2,310
2,080
2,170
2,230
2,190
2,430
2,080
Imports
1,990
1,470
1,530
1,420
1,320
1,620
1,880
1,670
2,010
1,980
Balance
160
730
710
890
760
550
350
520
420
100
Egypt
Exports
3,140
3,220
2,820
2,780
4,060
3,230
3,340
3,890
3,180
2,940
Imports
8,870
10,740
10,760
11,210
11,680
9,310
12,160
11,230
12,190
13,070
Balance
-5,730
-7,520
-7,940
-8,430
-7,620
-6,080
-8,820
-7,340
-9,010
-10,130
Indonesia
Exports
22,140
22,070
19,250
20,940
23,360
24,740
21,370
20,410
21,380
22,310
Imports
17,280
13,700
15,240
13,750
13,640
12,160
11,450
10,630
12,060
11,670
Balance
4,860
8,370
4,010
7,190
9,720
12,580
9,920
9,780
9,320
10,640
Ivory Coast
Exports
2,310
2,240
2,380
1,790
2,370
2,420
2,210
2,080
2,340
2,210
Imports
2,180
1,860
2,020
1,740
1,970
1,720
1,960
2,050
1,830
2,010
Balance
130
380
360
50
400
700
250
30
510
200
Mexico
Exports
21,580
21,170
20,320
20,980
21,510
21,870
24,980
24,510
25,140
25,300 Preliminary first quarter data show a
Imports
15,400
8,180
6,570
8,960
8,720
8,490
9,520
8,220
10,650
9,680 45 percent increase of imports over
Balance
6,180
12,990
13,750
12,020
12,790
13,380
15,460
16,290
14,490
15,620 year earlier.
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Trade Trends in Key Debt Troubled Countries - (continued)
Million US Dollars at a Seasonally Adjusted Annual Rate
1982
1983
831
8311
83111
831V
841
Jan
Feb
Mar
Morocco
Exports 2,060
2,200
2,040
2,020
2,080
2,670
2,460
2,470
2,580
2,340
Imports 4,310
, 3,550
3,700
3,420
3,750
3,320
3,900
3,830
3,940
3,920
Balance -2,250
-1,350
-1,660
-1,400
-1,670
-650
-1,440
-1,360
-1,360
-1,580
Nigeria
Exports 16,480
11,600
8,590
12,580
13,600
11,630
16,650
14,380
17,470
18,100
Imports 13,230
7,860
8,790
7,110
7,660
7,880
7,280
8,210
6,640
7,010
Balance 3,250
3,740
-200
5,470
5,940
3,750
9,370
6,170
10,830
11,090
Peru
.Exports 3,270
3,000
2,750
3,250
3,300
2,700
2,960
2,860
3,000
3,030
Imports 3,610
2,510
2,540
2,420
2,420
2,670
2,040
2,040
2,130
1,950
Balance -340
490
210
830
880
30
920
820
870
1,080
Philippines
Exports 4,960
4,880
4,700
4,780
4,950
5,090
4,540
4,580
4,450
4,580
Imports 8,300
7,940
8,330
8,180
7,720
7,540
6,100
6,870
5,970
5,470
Balance- -3,340
-3,060
-3,630
-3,400
-2,770
-2,450
-1,560
-2,290
-1,520
-890
South Korea
Exports 21,810
24,300
21,170
24,320
24,850
26,840
27,980
29,020
27,400
27,530
Imports 24,280
26,180
25,160
23,740
25,600
30,200
30,170
32,280
28,940
29,300
Balance ` -2,470
-1,880
-3,990
580
-750
-3,360
-2,190
-3,260
-1,540
-1,770
Venezuela
Exports 17,480
14,910
14,920
15,920
14,660
14,150
14,670
14,610
15,330
14,060
Imports 12,710
6,310
8,270
5,090
5,190
6,680
8,100
7,470
8,480
8,340
Balance 4,770
8,600
6,650
10,830
9,470
7,470
6,570
7,140
6,850
5,720
Total
Exports 152,020
148,420
136,120
149,100
153,620
154,830
162,910
158,290
165,560
164,900
Imports 147,670
119,380
122,970
116,190
117,990
120,410
121,080
120,890
121,490
120,910
Balance 4,350
29,040
13,150
32,910
35,630
34,420
41,830
37,400
44,160
43,990
Note: Exports f.o.b. and imports c.i.f. are on a customs basis and are derived from
IMF International Financial Statistics and other sources.
Imports for Indonesia, Nigeria, and Venezuela are estimated from trade partner data.
Numbers in bold are CIA estimates
Ccament
`25X1
The Philippines increased import tariff
surcharge from 8 to 10 percent and
returned peso to controlled float.
Embassy reports annual trade plan
effective July will probably lift import
restrictions on several hundred items.
Embassy reports preferential dollar
import list shortened in late May.
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25X1
SUBJECT: International Financial Situation Report #29 (U) 21 June 1984
Copy No. 1 Sec. D. T. Regan Treasury 51
Ch/DDO/NE
h
DD
2 R. T. McNamar 52
/
C
O/SE
3 Beryl Sprinkel 53
IAD/OGC/ENO/PE
54
D/ALA
4 David Chew
25X1
5 Robert Cornell 55
D/OEA
6 Thomas Dawson 56
D/EURA
7 Charles Dallara 57
Ch/EURA/EE/EW
8 Charles Schotta 58
D/SOVA
9 Stephen Canner 59
D/NESA
10 Doug Mulholland 60
DD/OGI, D/OGI
61
Ch/OGI/SRD
11 Manuel Johnson
62
Ch/OGI/ISID
12 George Hoguet
13 David Mulford if 63
Ch/OGI/GD
14 Sec. George Shultz State 64 ,
Ch/OGI/ECD
65-66
Ch/OGI/ECD/IF
15 Kenneth Dam
67
Ch/OGI/ECD/IT
16 Hugh Montgomery
17 Michael Armacost 68
OGI/CO 25X1
18 Ralph Lindstrom 69
Chief, CPAS/ISS/SA/DA
19 W. Allen Wallis 70
Ch/OGI/Pub 25X1
20 Langhorne Motley 71-78
OGI/Pub
21 Richard Burt
22 Richard McCormack
23 Chester Crocker
24 Paul Wolfowitz
1- Edwin
Truman, Federal Reserve Board
25 Richard Murphy 1 - Henry
Wallich, Federal Reserve Board
Kornblum
C
26 J
.
.
27 Byron Jackson Commerce 1 -Antho
ny Solomon, President, Federal
k
Y
f N
k
B
or
ew
o
an
it Reserve
28 Lionel Olmer
New York
Federal Reserve
1 - David Roberts
29
,
,
NSA
1 - Leo Cherne, PFIAB, New York
30
1 - Alan Greenspan, PFIAB, New York
31 Roger Robinson NSC
Treasury
Mulholland
2- Dou
,
g
32 Douglas McMinn it
33 Randall Fort PFIAB 1 - John Davis, State
34 Leo Cherne PFIAB 1 - Paul McGonagle, State
1 Peter W. Rodman, State
35 DCI
1 - J.D.Bindenagel, State, (for pass to
36 ExDir
Ambassador Arthur Burns)
37 SA/DDCI
1 - Martin Feldstein, CEA
38 DDI
1 - David Wigg, CEA
39 ADDI
5- Byron Jackson, Commerce
40 Ch/PES/DDI
1 - Warren E. Farb, Commerce
NIO at Lar
e
41 David Low
g
,
1 - IA 25X1
42 NIO Economics
F
OMB
St
arrar,
eve
1-
43 NIC/AG 25X1
1- William Isaac, Federal Deposit
44 DDO
Insurance Corporation
45 Ch/DD
25X1,
46 Ch/DDO
225X1
47 Ch/DDO
1 - Ch/ECD
48 Ch/DDO/EA
1 - Ch/ECD/IF
49 Ch/DDO/EUR
1 - Ch/ECD/TW
50 Ch/DDO/LA
1 - Ch/ECD/EA
1 - Ch/ECD/CM
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