LATIN AMERICAN SITUATION SEPTEMBER 29 1982

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R000300630008-7
• Release Decision: RIFPUB
• Original Classification: C
• Document Page Count: 3
• Document Creation Date: December 21, 2016
• Document Release Date: May 12, 2008
• Sequence Number: 8
• Publication Date: September 29, 1982
• Content Type: REPORT

Approved For Release 2008/05/12 : CIA-RDP84B00049R000300630008-7
LutNr Iur,1 IikuL
Latin American Situation
September 29, 1982
Growing international concern about the ability of various
countries to service their debt has increased the difficulty
of a number of Latin American countries to obtain necessary
foreign financing during the remainder of this year and in 1983.
Many Latin American countries are trying to distance themselves
from the financial problems of Argentina, Mexico and Poland,
but general international concern is taking its toll.
ARGENTINA
Argentina is in the midst of a severe short-term liquidity
crisis and requires at least $1 billion in new external finance
to remain liquid over the next 30-60 days. It also needs to
restructure its debt ($39 billion, including $2.3 billion in
arrears) and has begun to talk to an advisory group of banks.
Argentina is negotiating a one-year IMF standby, which will
make it easier for bankers to agree to a refinancing of Argen-
tina's debt in order to lengthen the maturity structure.
Negotiation with the IMF and with the banks may be difficult
and protracted. Argentina's medium-term balance of payments
outlook remains basically sound.
Bolivia failed to make a $10 million payment due on Sep-
tember 10 to a consortium under the terms of its informal
April 1981 rescheduling agreement. Additional payments of
$40 million were missed over the following few days. Bolivia
has had chronic debt problems while it has been negotiating
on-and-off with the IMF for a stabilization program since 1980.
Although Bolivia's debt is large for the size of the country,
it is not a large player on the international debt scene.
Brazilian access to external credit dried up in September,
as creditor anxiety in response to the Mexican situation and a
lack of Brazilian progress in controlling inflation and the
current account deficit took their toll. GOB officials claim
that European, Japanese and regional U.S. banks have halted
all new lending to Brazil. Planning Minister Delfim Netto met
with bankers in New York during the week of September 27 to
try to convince them that Brazil has strengthened its adjust-
ment program and will be reducing its financing needs.
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Brazil must raise about $4 billion in medium and long-
term external credits during the remainder of this year, even
if maturing debts are all rolled over. The current account
deficit in 1982 will exceed $10 billion for the fourth straight
year. Brazil will face serious balance of payments financing
problems in 1983 unless a more realistic exchange rate policy
is adopted in conjunction with sounder fiscal and monetary
policies.
In late 1980 Brazil faced a similar lack of foreign bank
confidence. Brazil took stabilization measures which reversed
the situation. There is general confidence in Brazilian economic
management, and the Brazilians indicate that they will take the
steps needed to strengthen their position.
CHILE
Chile's economic policies are market-oriented and basically
sound. Major adjustments in policies were made at mid-year.
However, Chile has been hit hard by the fall in copper prices. It
also has a rather large amount of debt relative to GDP. External
payment problems are not expected in 1982, but the situation
will worsen in 1983 if world economic recovery is weak. The GOC
is seeking a $500 milllion 2-year IMF standby and a $300 million
Compensatory Financing Facility drawing.
Since late August, Cuban officials have been seeking debt
relief from both private and public creditors holding medium
and long term convertible currency debt. It has proposed the
rescheduling of $1.3 billion in principal repayments falling
due between September 1982 and the end of 1985.
Exposure of U.S. banks is negligible. The U.S.G. carries
$83 million in repudiated debt on its books. Although the
U.S. does not have active credits outstanding it has sought
agreement from Paris Club members for applying standard Paris
Club procedures and limiting the amount of debt relief extended.
The U.S. anticipates being an observer at future talks.
The Mexican financial situation remains precarious, but is
reasonably on track. Mexico needs to agree as quickly as possible
to a sound IMF stabilization program. An IMF team is in Mexico
now. Commercial banks' willingness to roll over debt coming due
beyond the 90-day period ending November 21, to provide new
money (discussions center around $500 million to $1 billion),
and to restructure debt to lengthen maturities depends on
progress toward an IMF program. The bankers are assessing Mexico's
cash needs now. In the meantime, Mexico has access to $1.85
billion (half U.S.) in central bank credit via the BIS, assuming
it continues to make progress on IMF negotiations.
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Peru has had debt problems in the past and still has a
high level of debt, but it has generally managed its debt well.
Low commodity prices have hurt. Notwithstanding economic
deterioration in 1981-82, payments difficulties are not expected
in 1982. Peru already has an IMF program totalling nearly $1
billion from 1982-1985.
Despite high levels of international reserves ($12 billion
excluding gold but including "called in" reserves of state agencies
at mid-September 1982), Venezuela's creditworthiness is eroding.
Venezuela's efforts to restructure its public external debt
(about $25 billion) will be difficult and sharply higher spreads
are probable.
Venezuela's exchange rate has been overvalued for a number
of years, but Venezuela has been helped by oil price rises and
an accumulation of reserves. Nonetheless, it has built up
substantial debt, much of which is short-term. Still, Venezuela
is in little immediate danger of experiencing payments difficul-
ties in the near term.
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