MINUTES OF THE MEETING OF THE IG-IEP ON INTERNATIONAL DEBT FOR JANUARY 24, 1985

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87M00539R000400510018-0
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 34
• Document Creation Date: December 22, 2016
• Document Release Date: December 4, 2009
• Sequence Number: 18
• Publication Date: February 6, 1985
• Content Type: MEMO

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DOCUMENTS CROSS-REFERENCED
ATTACHED:
N(C o70
SSA-~~c
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OFFICE OF THE SECRETARY OF THE TREASURY
WASHINGTON. D.C. 20220
February 6, 1985
UNCLASSIFIED
(with Limited Official Use Attachment)
MEMORANDUM FOR OVP
STATE
DEFENSE
AGRICULTURE
COMMERCE
OMB
I-C`IA
USTR
NSC
OPD
CEA
FED
AID
EXIMBANK
UNCLASSIFIED
(with Limited Official Use Attachment)
Subject Minutes of the meeting of the IG-IEP on
International Debt for January 24, 1985.
Attached are the minutes of the meeting of the IG-IEP
on International Debt for January 24, 1985.
Edward J. Stucky
Acting Executive Secretary
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Attachment // tiLL-~/ECOti
TL
,,AXo ) ..
- MR. G. PHILIP HUGHES
- MR. NICHOLAS PLATT
- COL. R. J. AFFOURTIT
- MR. RAYMOND LETT
- MRS. HELEN ROBBINS
- MR. ALTON G. KEEL
MR. DENNIS WHITFIELD
MR. ROGER ROBINSON
MR. LEHMAN'LI
MR. WILLIAM A. NISKANEN
MR. EDWIN M. TRUMAN
MR. MALCOLM BUTLER
MR. WILLIAM A. DRAPER, III
STAT
don
'C I rr
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Minutes of the IG-Debt Meeting of Janaury 24, 1985
1. Treasury opened the meeting by summarizing the Points
in the - ba ground papers for each agenda topic. With res made
pect the first subject, "A Review of the Overall Debt Situation," to
Treasury's impression was that we had reached a watershed in
evolution of the debt Problem the
made progress toward adjustmentlor atlleastmhavindebtors having g mmit
themselves to the IMF programs that would have thatceffected
implemented properly. The exception was Nigeria. The pro lf i
wink
major debtors would now be one of whether or not they could remain
in compliance with the programs. The outlook for continued
growth in the industrial countries, the level of interest rates
eand inflation was also favorable. d
uneven and we might have Nevertheless sproblems in the future ~wPthgmedium-size
debtors like Chile, Peru and Colombia.
2. STR wondered whether there would be sufficient net new ba
credit to the debtor countries in view of banks' attitudes Sk
we be updating the study made a Should
was ere ate? p year ago in which credit availability
7 In res onse the FRB referred to a study in the
October issue of the FRB Review which indicated that credit could
grow six percent per annum and still be compatible with a reduction
in LDC exposure relative to bank capital. As to the
situation, Mexico and Brazil had done better than expected ?n
still faced general
problems of internal adjustment. but
3. On the second agenda item, Treasurv said that we had aie
some of our objectives of obtaining a more flexible formatcwhichd
would favor dialogue but there was still resistance to our idea
of a simple barebones communique that would not have to be labori-
ously negotiated in advance. Commerce asked whether we were
doing the necessary analytic al wor ori-
Development Committee meetings. ?r the April Interim and
what we are prepared Should not we bePlanni
t would be to now
it
tnd. FRB thought the State felt
principal issue at those meetings?was
medium term adjustment of the LDCs.
liberal view on international trade and We t also
hegreferredttotthee a more
multilateral trade initiative that is being studied by several
agencies. NSC pointed out that in their deliberations issues
were always considered from the point of view of their effect on
the debt strategy.
4. State asked if anything fundamental had changed in our
position and whether we ought to consider some minor concessions.
Treasury replied that we ought to maintain our
which contemplated no concessions. ens.
Treasury sawrthis tmeeting ?as
having no necessary sequel. Naturall
about the need to have a dialogue y' since we were serious
pre-
cooked. There was always a risk inherentsinnthatlsituation that
something would come out that would have to be considered subse-
quently.
t
bse-
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STAT
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5. With respect to the third agenda item "Coordination of Export
Credit and Debt Policy", Treasury said that a number of discussions
in recent months continue to reveal differences in the willingness
of other export credit agencies to cut off credit as debt crises
appear or resume cover when countries were taking appropriate
adjustment measures. We were seeking practical ways to further
our objectives of closer coordination between the debt strategy
and export credit policies.
EXIM pointed out that most export credit agencies had
traditional operating rules as exemplified in the meetings of the
Bern Union. They wanted to avoid criticism and pursued a somewhat
narrow definition of self-interest. Treasury wondered whether
this was not a topic for the spring meetings, something which
would show U.S. policy in a more favorable light. Others noted
that it might be useful to talk to other countries extending
credit before we decided what to do.
STAT
T.TMTTFT) nrFTrTAT. iic
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1
EXECUTIVE SECRETARIAT
ROUTING SLIP
Compt
C/IPD/OIS
NIO/Eoon
xecutive Secretary
2 Jan 85
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STAT
 OFFICE OF THE SECRETARY OF THE TREASURY
January 22, 1985
UNCLASSIFIED
(with Limited Offical Use Attachment)
MEMORANDUM FOR OVP
STATE
DEFENSE
AGRICULTURE
COMMERCE
OMB
CIA
USTR
NSC
OPD
CEA
FED
AID
EXIMBANK
Subject
- MR. G. PHILIP HUGHES
- MR. NICHOLAS PLATT
- COL. R. J. AFFOURTIT
- MR. RAYMOND LETT
- MRS. HELEN ROBBINS
- MR. ALTON G. KEEL
WHITFIELD
- MR. ROGER ROBINSON
- MR. LEHMAN LI
- MR. WILLIAM A. NISKANEN
- MR. EDWIN M. TRUMAN
- MR. MALCOLM BUTLER
- MR. WILLIAM A. DRAPER, III
Papers are attached for the three agenda items of the
meeting that Assistant Secretary David C. Mulford will chair
on Wednesday, January 23, at 2:00 p.m. in room 4426 of the
Main Treasury Building:
1) A review of the overall LDC debt situation
2) Objectives for the Interim and Development
Committee Meetings in April
3) Coordination of export credit and debt policy
Christopher Hicks
Executive Secretary and
Executive Assistant to the Secretary
ON-FILE NSC RELEASE INSTRUCTIONS APPLY
UNCLASSIFIED
(with Limited Official Use Attachment)
STAT
BO 34
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 LiM1'1'r:1J urr11.1HL u r;
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Trends in the Situations of Selected Major Borrowers
The purpose of this note is to examine the LDC debt pro-
blem by summarizing the changes in positions of eleven major
borrowers, nine of whom have had debt restructurings. They have
all relied heavily on bank borrowing. In 1984, there were
widespread but uneven improvements in the group. For almost
all of the problem debtors external balances narrowed and ex-
port revenues accelerated. Most had a much better per capita
growth record compared to 1983. Banks negotiated several im-
portant rescheduling agreements which have or will clear-up
most of their arrearages. Among the most notable were the
agreements with Argentina and the Philippines with their associ-
ated IMF stand-bys and the multi-year reschedulings for Mexico,
Venezuela, and Ecuador that will make basic changes in their
bank debt amortization profiles in the next four to six years.
Looking ahead, the outlook in 1985 is for deceleration in
export growth (reflecting less rapid growth in the OECD countries),
acceleration in import growth (due to more rapid economic growth
in the LDCs), and higher interest payments. Even though average
interest rates are likely to be somewhat lower, the prospects
for significantly lightening debt burdens this year are poor ex-
cept where major reschedulings have taken place. It is perhaps
for that reason that the banks continue to be reluctant to in-
crease LDC exposure.
The improvements in debtor external imbalances are due to
the combination of the strength of the OECD recovery, especially
in the U.S., which fueled LDC exports and of macro-economic ad-
justment policies that restricted imports and encouraged exports.
Problem debtors with a more diversified export base that include
manufactures and which adopted strong adjustment policies ear-
lier, such as Brazil, Mexico and Yugoslavia, enjoyed the most
robust growth in exports and import substitution. While the
rate of increase of exports for both Mexico and Brazil should
decline in the near term, from rates of 24% and 16% in 1984 to
9% and 4% in 1985 respectively, past gains will allow for more
stimulative domestic policies leading to a resumption of signif-
icant increases in per capita GDP after three years of stagnation.
Inflation rates, however, remain stubbornly high in all of these
countries.
Most other problem debtors, however, have not enjoyed such
dramatic and fundamental improvements. Countries such as Chile
and Venezuela whose exports are based narrowly on a few primary
commodities will continue to have slowly growing exports as
long as commodity prices remain weak. Other countries such as
Argentina, Colombia, Morocco, Nigeria, Peru, and the Philippines
have hesitated to adopt adequate adjustment measures. For 1985,
except for Mexico and Brazil, the likely pattern is one of small
or no improvements compared to the previous year.
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Financial trends are also mixed. The six-month LIBOR
for Eurodollars, which serves as the benchmark for most LDC
loans, reached a 1984 high of 12.6% in July but subsequently
declined. The projection is for an average of 10% in 1985
compared to 11% in in 1984 and 9.8% in 1983. Each one percentage
change in LIBOR saves or costs our sample of countries approxi-
mately $2 billion.
Banks remain very reluctant to increase voluntarily their
claims on developing countries except for a few East Asian coun-
tries. Aggregate credit statistics are not very precise, yet
all series indicate that bank credit to non-oil developing coun-
tries will show relatively little increase in 1984, and this
trend should continue. Recent indications from the major money
center banks suggest an increase of only 2% in credits to non-oil
developing countries in the next few years.
Several important financial agreements between debtors and
private creditors were reached during the past year. Argentina
and the Philippines both successfully negotiated IMF agreements.
The Argentine agreement brings the most reluctant of the
large debtors back into an orderly and established financial
relationship. Many observers are sceptical, however, whether
Argentina has the political will to meet the guidelines pre-
scribed in their IMF accord. Nigeria unilaterally issued note
to supplier creditors and will begin payment on them in 1985.
And it is mandatory that these countries conscientiously strive
to meet the conditions spelled out in the IMF agreements, if
they expect the assistance of the creditors in meeting their
obligations.
Ecuador, Mexico, and Venezuela reached multi-year resched-
uling agreements on their public sector debts to banks in 1984,
while Brazil and Yugoslavia are expected to negotiate similar
agreements in 1985. Mexico had $48 billion in principal falling
due over the next six years rescheduled, of which about half
had been previously rescheduled in 1983. Ecuador and Venezuela
rescheduled $4.5 billion falling due over five years and $20.75
billion falling due over six years, respectively. Repayment
periods of the restructured principal for each country varies
from 12 years for Ecuador and Venezuela to 14 years for Mexico.
LIBOR remains the benchmark interest rate for the Ecua-
dorian and Venezuelian debt and replaces the prime rate as the
benchmark for most of the rescheduled Mexican debt. This will
provide interesr savings to Ecuador and Mexico because the
spreads over LIBOR they must pay on the rescheduled debt were
narrowed. In Ecuador's case, the spread will be 1 3/8 percent
over LIBOR in comparison to the 1984 refinancing with 1 3/4
percent over LIBOR; Ecuador expects to save $200 million in
interest payments over the next five years. About half of the
$300-500 million Mexico expects to save in interest each year
through 1989 is due to the switch in benchmark from prime to
LIBOR. Under its rescheduling, the spread over LIBOR Venezuela
must pay is generally higher than its past experience has shown.
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Even with the savings mentioned, however, total interest pay-
ments will remain heavy. For example, Mexico's interest pay-
ments will remain in the range of $10 - $12 billion annually.
Over the next five years, principal repayments on Mexico's
total public debt will drop 80 percent and only 40 percent of
Venezuela's debt will be repaid compared with three-quarters due
prior to the rescheduling. Consequently, the cash flow for these
countries will improve since principal obligations for each
country will be more favorably distributed and extended into
the future. In terms of cash flow, Mexico, with its obligation
to repay 12 percent of the restructured principal over the next
five years faired better than Ecuardor and Venezuela, who must
repay 22 percent and 23 percent, respectively, over the same
period. Mexico also established the lowest interest spread,
averaging 1 1/8 percent, for a series of reschedulings. It was
equalled by Venezuela, but Ecuador had to pay 1 3/8 percent.
To conclude: The crisis element in the debt situation
has clearly receded in the course of 1984. The immediate
prospects of further improvement are modest, given the moder-
ate trend of exports in the OECD area and the continuing high
level of real interest rates. The LDCs will need, therefore, to
continue to persevere in their economic adjustment efforts.
Three of the major debtors, Brazil, Mexico and Venezuela, have
consolidated the improvement of the past 18 months. However,
improvements to date have been largely in their external
positions. If this improvement is to be sustained, it needs to
be buttressed by greater efforts to deal with domestic economic
problems, e.g., inflation and budget deficits. Others such as
Argentina and the Philippines have just begun while Peru,
Nigeria and Colombia are groping towards acceptable measures
for internal adjustment.
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External and Domestic Economic Indicators
for Selected Privately Financed Important Debtors
Per Capita Real GDP Exports of Goods and Services
1983
1984(e)1985(f) 1983
1984(e)1985(f)
(Annual Percentage Increase)
Argentina
1
1
-2
0
9
10
Brazil
-5
0
3
4
24
9
Chile
-2
4
1
-6
-3
5
Columbia
-1
0
0
-19
7
13
Mexico
-8
0
2
-5
16
4
Peru
-14
1
-1
-8
1
4
Venezuela
-8
-5
-1
-9
6
5
Korea
8
6
5
7
12
7
Philippines
-1
-8
-2
5
-5
11
Yugoslavia
-2
0
3
14
12
n.a.
Nigeria
-8
-1
n.a.
-19
8
6
Morocco
-2
1
0
-1
10
9
(e) estimate
(f) forcast
n.a. not available
Source: "Economic Outlook", IDN/OASIA
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PROFILES OF MULTI-YEAR RESCHEDULING AGREEMENTS (MXKHS)
Ecuador Mexico
(in billions of dollars)
Amount Re-
scheduled
Number of years
consolidated 5
Type Debt
Date of
Agreement
Payback
Period
Grace
Period
12 years 14 years 12 1/2 years
3 years
48.5 of
which:
20 not pre-
viously re-
scheduled
23 rescheduled
in 1983
5 jumbo loan
made in 1983
1 year on n.a.
$20 billion
rescheduled
in 1983
% Repaid in
First 5 yrs. 22%
Interest
Rate Bench-
mark
Spread
Over Bench-
mark
Reschedul ing
and Other Fees
Effective
Date
12% 23%
LIBOR LIBOR
1 3/8 1985-86 7/8 1 1/8
1987-91 1 1/8
1992-98 1 1/4
1985 1985
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Public sector Public Sector Public Sector
December 1984 September 1984 September 1984
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Spring Meetings of the Interim and Development Committees
Discussion
The Interim and Development Committees will meet in April
to discuss prospects for adjustment, growth and development in
the medium-term. The U.S. views the meetings as an opportunity
for a frank exchange of views on the issues, not as negotiations
aimed at generalized solutions to the debt problem. Attention
thus far has focused on the format of the meetings, in parti-
cular U.S. proposals to maximize open discussion of the issues.
Arrangements that meet some U.S. objectives should be finalized
in the near future.
On matters of content, preliminary discussions of work pro-
grams and agendas promise ample opportunity for discussion of
the issues raised by the United States. This will include the
likely medium-term world economic and financial environment
and the policy options available to both developed and developing
countries to promote economic growth and development.
The discussion should highlight the policy choices most
likely to promote prosperity in the developing world over the
medium-term, including continued structural adjustment, steps
to liberalize the trading system, and efforts to improve the
environment for private investment and resource flows. A major
effort will be required to maintain the focus on policy rather
than on short-term financial concessions for the LDCs which would
undermine their commitment to adjustment and exacerbate their
debt servicing problems.
Background
At last September's Interim and Development Committee
meetings, Secretary Regan called for a special session of the
two Committees in the spring of 1985 to permit a dialogue between
developed and developing countries on the conditions necessary
to move beyond adjustment to sustainable payments positions and
and stable growth in the medium term.
The frank policy dialogue the U.S. seeks requires free and
open discussion. Opportunities for such discussion would be
extremely limited within a format of set speeches and long nego-
tiated communiques. Treasury has proposed a new approach inclu-
ding some joint discussions involving both Committees, open
debate led by discussion leaders, and a minimal, descriptive
communique.
Treasury has approached the management of the Fund and Bank
and our G-10 partners seeking support for this new approach.
Secretary Regan met with the Chairmen of the two Committees on
January 14 to elicit their support. There has been only limited
support for a joint session of the Committees (a joint dinner with
some substantive discussions has been proposed as an alternative)
but open discussion has been strongly supported.
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A format that meets some U.S. objectives should be finalized
in the near future. Attention can then turn to the content of
the meetings. A continuing concern will be pressure in the
Development Committee for a detailed and substantive communique
which may include differences of view among participants on key
issues.
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Export credit and insurance policies of many OECD governments
have often been at cross purposes with the accepted debt strategy
by remaining on cover longer than is prudent for economies that
are deteriorating, and by becoming more restrictive or suspending
cover for LDCs that have agreed to adjustment programs with the
IMF and are seeking debt relief through rescheduling. The U.S.
and a few other creditor governments, recognizing that such
policies not only give wrong signals to debtors and private
creditors but also compound the debtor's liquidity squeeze, have
sought to promote a more coordinated response by creditors that
is supportive of the debt strategy. In particular, the United
States objective is to correct the most flagrant counterproductive
practices by getting commitments from other OECD governments to:'
(1) maintain or resume export credit cover in countries
adopting "appropriate" adjustment measures, generally
with IMF support, notwithstanding rescheduling of
outstanding credits and,
(2) achieve better coordination in reducing or restricting
credit to countries who fail to deal promptly with
their debt and payments problems.
The U.S. has also pressed, despite the strong objections
of other governments, to obtain commitments from others to provide
a fair share of financial assistance and fulfill implicit pledges
arising from special multi-year financing packages, like the one
recently adopted for Argentina. These issues have been discussed
in various multilateral fora, most recently at the December
meeting of the OECD's Export Credit Group.
Background
Decisions of export credit and insurance agencies regarding
cover are generally determined case-by-case on the basis of
competitive factors and commercial prudence. Country risk asses-
ment is, therefore, a basic task of these agencies which take into
account important changes in a debtor country's economic perfor-
mance and its debt servicing capabilities and record. Closeness
of political and commercial, ties as well as the degree of exposure
also influence decisions. The net result has been a general
tendency to maintain cover too long during the build-up of debt
problem and then to terminate cover abruptly at least for long-
and medium-term credits when the problem becomes overt through a
request for rescheduling of debts and an approach to the Paris
Club. A resumption of cover has frequently been postponed, at
least until a rescheduling had been completed by signing the
bilateral agreement, and sometimes even longer, e.g., until
financial recovery seemed assured and there was only a remote
risk of a further rescheduling. The existence of these policies
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has now been throughly documented through discussions in the
OECD's Export Credit Group and by a survey conducted by the IMF.
A summary of current policies of other creditors is attached.
When multilateral financial packages were organized for
Mexico it was recognized that prevailing export credit insurance
practices were counterproductive to debt relief efforts. That
became even clearer as the LDC debt crisis unfolded. When it was
realized that the IMF alone could not remedy the LDC debt crisis,
it was concluded that creditor country governments and private
financial institution should cooperate with the IMF in providing
new credits to countries seeking debt relief. The major benefits
of a coordinated and comprehensive extraordinary financing arrange-
ment are that it: (a) assures access to credit for the debtor
country so it can continue to import priority goods, (b) attracts
additional commercial bank financing, and (c) assists successful
implementation of domestic adjustment programs. Annunciation of
the debt strategy in the Williamsburg Declaration following the
1983 Summit helped in fostering more coordinated and supportive
policies by official export credit agencies.
International Discussion
Besides the Summits at Williamsburg and London there have
been several discussions of actual policies and proposals for
coordination in the Paris Club and the OECD. The Export Credit
Group considered that subject in their meetings in 1983 and 1984.
As a result of the Export Credit Group discussions, there will be
an exchange of information on cover policies of members at the
March meeting. Last July the Working Party three discussed the
role of export credit agencies in the current debt situation
basing its discussion on a short paper prepared by the Secretariat
(Export Credit Insurance and Debt Service Problems). Treasury
Under Secretary Sprinkel specifically proposed that WP-3 ask the
Export Credit Group to develop guidelines in this area and to
report back to it.
The IMF, at the suggestion of the U.S. and other G-5 members
(Britain, France, Germany, Japan), undertook a comprehensive
study of export credit cover policies of ten major official
export credit agencies in connection with payments dificulties.
Its report, with which Treasury and EximBank concur, has now been
issued to the IMF Board and distributed to NAC agencies (SM/84/272,
December 18, 1984). It highlights the importance-of maintaining
financial flows to countries which have undertaken adjustment
efforts and the crucial role of export credit agencies in this
process. It also documents quantitatively the practice of export
credit agencies of maintaining cover during the crisis build-up
phase and going off-cover when debtors agreed to undertake appro-
priate adjustment policies. A subgroup of the G-5 Deputies, the
G-5 Debt Deputies at the Assistant Secretary level, has also been
active in proposing elements for a more coordinated strategy and
procedures for their implementation. The objective is to eliminate
the most flagrant counterproductive practices by a prudent approach
that could be implemented step-by-step and on a case-by-case
basis.
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Treasury Proposal for Coordinating Cover Policies
Specifically, export credit and insurance agencies should
try to reach agreement on the triggers for a resumption of cover.
Those triggers should be:
(1) approval of and compliance with an IMF standby
or EFF which signals country adherence to appropriate
adjustment policies and,
(2) mobilization of a critical mass of commerical
bank and multilateral agency financing.
Approval of an IMF program is a prior condition for a Paris Club
rescheduling of medium- and long-term official credit. There
should be agreement in principle that medium- and long-term cover
will be resumed as soon as the multilateral rescheduling agreement
has been concluded, recognizing that agencies may be somewhat
cautious and proceed step-by-step in granting approvals in the
first few months. When short-term credit has also been suspended,
cover should be restored at an earlier date, at the beginning of
the Paris Club discussions which would be after IMF approval of
an adjustment program, because under established Paris Club
policy short-term credits are not rescheduled. The Export Credit
Group should be the mechanism for coordination because national
delegations are composed both of Treasury and Export Credit
agency delegates representing both points of view in dealing with
the problem.
More coordination is also needed in reducing or restricting
cover during early phases of a crisis situation in order to give
proper signals. However, in implementing this, export credit
agencies must be especially cautious so as to guard against the
possibility of creating even greater financial difficulties by a
sudden joint termination of cover. Agreement on coordination
will be more difficult to achieve because of competitive aspects
of export credit policy. Nevertheless, members of ECG must be
prepared to identify emerging problem situations and discuss the
appropriateness and timeliness of imposing cover conditions or
restrictions step-by-step. They should provide appropriate
signals to problem borrowers at an early date and progressively
reduce cover as deemed necessary. In order to encourage coordina-
tion to the extent possible in each situation, export credit
agencies should be willing to report all changes in their cover
policies for problem countries.
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Export Credit Policies
United Kingdom has recently revised its export cover policies
so as to be supportive of our debt strategy and considers new
cover as the most potent weapon to pressure debtors into adopting
acceptable adjustment programs. However, the U.K. strongly
opposes 'gapology" and credit pledges. In appropriate cases it
will be ready to maintain cover or resume it at an earlier
stage to support credit for goods which would contribute to
economic recovery of the debtor country. This more flexible
attitude will only be considered for countries making strenuous
efforts under a strong IMF adjustment program. Credit will be
directed toward supporting imports if required for: a) mainten-
ance of existing export earnings/import savings industries, or
b) completion of partially completed projects which will contribute
to economic recovery, or c) a limited number of new key captial
projects expected to produce early benefits to the balance of
payments. More difficult, but just as important is to coordinate
restrictive policies towards undeserving countries. On the
appropriate mechanism, the U.K. supports regular, confidential
exchange of information on major problem countries in the ECG
with objectives of achieving a closer alignment of export
credit policies. The G-5 Debt Deputies should continue to act
to provide preliminary informal consultations by telex or as a
"hot wire" in cases of urgency.
France also favors better coordination. Discussion of taking a
country off cover has to be very secret, for which the G-5 Debt
Deputies is suitable mechanism. Resumption of cover need not
be handled so confidentially and might be discussed in the
Paris Club sometime after a multilateral rescheduling had been
concluded.
Japan follows a perverse policy by suspending export cover even
Tor-short-term credits immediately after a Paris Club rescheduling
and waits until there are signs of economic recovery before
reopening credit coverage to a country. Even then there are
often strict limits on the contract value of MITI's cover.
After considerable urging from the U.S., Japan eventually
made satisfactory new export credit commitments for the Brazil
and Mexico packages. Ministry of Finance insists that MITI
acts independently in reaching decisions on export insurance
and is unenthusiastic about coordination. It favors the French
suggestion of consulting first in the Paris Club and later
exchanging views in the ECG.
FRG is also unenthusiastic about coordinated export credit
policy because the government does not control the insurance
agency. While Germany has followed a restrictive policy it
has also continued or promptly reopened short term cover, and
is prepared to resume medium and long-term cover after conclusion
of a Paris Club rescheduling. Germany has also participated
in special export credit packages for Yugoslavia, Mexico and
Brazil.
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Austria: Where a country seeks a rescheduling they sometimes
stop cover but usually continue cautiously when the bilateral
agreement is finalized.
Belgium: Where a problem country approached the Paris Club;
cover for medium and long term credits are suspended and can
include short-term credits if they too are rescheduled. Cover
is resumed if the outlook is promising.
Canada: Practices are similar to those in the U.S. i.e., have
temporarily gone off cover for some countries but have retained
coverage for those whose governments have cooperated in the
IFIs. It would not be useful to align export credit policies
and there are limits on how much such policies can ease balance
of payments difficulties.
Denmark: Currently they are the first export credit agency to
withdraw cover and among the last to resume, i.e., have waited
1-2 years following a Paris Club rescheduling. Now considering
policy changes to react earlier when rescheduling is imminent
and reopen earlier after it has been concluded.
Italy: Automatic removal of cover when a country requests a
rescheduling and a wait-and-see approach on resumption.
Norway: Normally goes off cover for a rescheduling until the
bilateral agreement is signed.
Switzerland: Suspends at least medium and long term cover
during the rescheduling negotiations and promptly resumes
cover after an IMF Standby Agreement rather than waiting for
conclusion of the rescheduling agreement.
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EXECUTIVE SECRETARIAT
ROUTING SLIP
ACTION
INFO
DATE
INITIAL
1
DCI
2
DDCI
3
EXDIR
4
D/ICS
5
DDI
6
DDA
7
DDO
8
DDS&T
9
Chm/NIC
10
GC
11
IG
12
Compt
13
D/Pers
14
D/OLL
15
D/PAO
16
SA/IA
17
AO/DCI
18
C/IPD/OIS
19
NIO n
X
20
21
122,
204
G. PHILIP HUGHES
NICHOLAS PLATT
? R. J. AFFOURTIT
RAYMOND LETT
? HELEN ROBBINS
ALTON G. KEEL
DENNIS WHITFIELD
ROGER ROBINSON
LEHMAN LI
WILLIAM A. NISKANEN
EDWIN M. TRUMAN
MALCOLM BUTLER
WILLIAM H. DRAPER, III
Debt
till chair a meeting of
lay, January 23, at 2:00
wilding. The agenda will
)evelopment
qcecutive Secretory
1 January 1985
Dote
hd debt policy
'taut Secretary equivalent
Christopher Hicks
Executive Secretary and
Executive Assistant to the Secretary
STAT
STAT
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OFFICE OF THE SECRETARY OF THE TREASURY ; Executiv(.
January 15, 1985
MEMORANDUM FOR OVP
STATE
DEFENSE
AGRICULTURE
COMMERCE
OMB
CIA
USTR
NSC
OPD
CEA
FED
AID
EXIMBANK
- MR. G. PHILIP HUGHES
- MR. NICHOLAS PLATT
- COL. R. J. AFFOURTIT
- MR. RAYMOND LETT
- MRS. HELEN ROBBINS
- MR. ALTON G. KEEL
- MR. DENNIS WHITFIELD
MR. ROGER ROBINSON
MR. LEHMAN LI
- MR. WILLIAM A. NISKANEN
MR. EDWIN M. TRUMAN
MR. MALCOLM BUTLER
MR. WILLIAM H. DRAPER, III
Subject IG-IEP on International Debt
Assistant Secretary David Mulford will chair a meeting of
the International Debt IG-IEP on Wednesday, January 23, at 2:00
p.m. in room 4426 of the Main Treasury Building. The agenda will
be:
1) A review of the overall LDC debt situation
2) Objectives for the Interim and Development
Committee Meetings in April
3) Coordination of export credit and debt policy
Attendance will be principal (Assistant Secretary equivalent
or designee) only.
Christoph'r Hicks
Executive Secretary and
Executive Assistant to the Secretary
ON-FILE NSC RELEASE INSTRUCTIONS APPLY
STAT
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EXECUTIVE SECRETARIAT
ACTION
INFO
DATE
INITIAL
1
DCI
2
DDCI
3
EXDIR
4
D/ICS
5
DDI
6
DDA
7
DDO
8
DDS&T
9
Chm/NIC
10
GC
11
IG
12
Compt
13
D/Pers
14
D/OLL
15
D/PAO
16
SA/IA
17
AO/DCI
18
C/IPD/OIS
19
NIO/Econ
x
20
21
22
SUSPENSE
Treasury, by 1500 rs, 16 Jan 35.
Remarks Please provj. comments r passage to
STAT
Executive Secretary
14 Jan 85
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Execcz-.ive Registry
January 11, 1985
MEMORANDUM FOR OVP
STATE
DEFENSE
JUSTICE
AGRICULTURE
COMMERCE
OMB
CIA
USTR
NSC
JCS
CEA
OPD
WH
DONALD P. GREGG
NICHOLAS PLATT
R. J. AFFOURTIT
J. MICHAEL SHEPHARD
RAYMOND LETT
HELEN ROBBINS
ALTON J. KEEL.
DENNIS WHITFIELD
ROBERT KIMMIT
MASTER SGT ORR
WILLIAM NISKANEN
LEHMANN LI
CRAIG FULLER
85" 188
Subject: Interagency Group on International Economic
Policy (IG-IEP)
Member agencies have reached agreement on a SIG-IEP
report on extraterritorial application of U.S. laws. In
accordance with the procedures agreed to by the SIG-IEP,
Secretary Regan will submit to President Reagan the report
along with letters from the President to Executive Branch
and independent regulatory agencies.
Attached for your review and comment are draft transmittal
letters from the President to relevant agencies. A copy of
the interagency cleared report is also attached. '
Please submit your comments on the draft letters to
Frank Vukmanic at 566-2386 by c.o.b. Wednesday, January 16.
Christ phe) Hicks
Executive Secretary and
Executive Assistant to the Secretary
ON-FILE NSC RELEASE INSTRUCTIONS APPLY
STAT
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STAT
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CONFLICTING REQUIREMENTS ('EXTRATERRITORIALITY')
MANAGING THE PROBLEM
I. INTERNAL COORDINATION
A. Where U.S. actions which impinge upon foreign
jurisdictions are contemplated, comity calls for us to consider
the potentially conflicting sovereign interests, laws or
policies of those jurisdictions in deciding whether and how to
act. This i.s also required by our need to have foreign
cooperation on export, law enforcement, and other international
matters and to avoid unnecessay harm to our bilateral
relations. It is Executive Branch policy to do so.
B. As a general matter, each Executive Branch agency with
regulatory or law enforcement responsibilities which proposes
to take actions with extraterritorial impact has primary
responsibility to assure proper consideration of such foreign
interests, laws or policies.
C. An agency which proposes to take an action which is
directed at conduct abroad and which it has reason to believe
has significant potential for raising concerns over
extraterri.tori.ality on the part of a foreign statel/ will
notify and consult with the Secretary of State or his designee,
subject to the constraints imposed by the relevant
Al As a general rule, this category would not include such
matters as: action taken under established working arrangements
with the competent authorities of foreign governments, whether
in law enforcement generally, or under specific arrangements
such as tax or customs agreements; routine license denials
under clearly established foreign assets, munitions control or
re-export control guidelines where the agency concerned knows
of no factors which indicate special foreign government
concerns; actions taken by officers stationed abroad within
established country-team arrangements with the foreign
government concerned; and actions relating to the requirements
for doing business in the United States, such as quality or
labelling requirements for goods to be sold here.
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legal and operating requirements.2/ This category of action
would include significant statements of official U.S. views on
extraterritoriality or conflicting requirements, the
requirements of international law or comity in such matters, or
foreign government interests or positions regarding them. The
consultation is intended to assist the agency in considering
the foreign interests, laws or policies, alternatives to
unilateral action, and means to minimize difficulties.
D. Notice and consultation procedures should ensure
against undue operational burdens!/ or delays, duplication of
existing arrangements and the introduction of improper
considerations into the administration of the responsibilities
of the respective agencies. The normal minimum time for
notification should be five working days in advance of the
proposed action.
E. Agencies will notify the Secretary of State or his
designee, or the Chief of the U.S. Diplomatic Mission, of
investigative activity proposed to be carried out by U.S.
officials or agents in a foreign jurisdiction for which the
consent of the foreign government has not yet been obtained.
?/ Operating requirements would generally preclude notice of
actions which are both high volume and of largely de minimis
potential for creating extraterritoriality problems, such as
export license pre-clearance inquiries or tax inquiries mailed
to a person abroad. Meaningful coordination may be limited or
precluded, in certain cases, by: grand jury, tax information
and other legal secrecy requirements; concern for human life or
safety; time constraints and the need to avoid disclosures
which might prejudice litigation, investigation, or sensitive
sources and methods.
3/ For operational reasons, the Department of Justice would
not set up procedures to identify for consultation civil or
criminal law enforcement matters handled outside of Department
of Justice Washington headquarters, but would identify for
consultation matters handled or considered in Washington, such
as the Export Administration Act, including its antiboycott
provisions, munitions control, International Emergency Economic
Powers Act, Trading With the Enemy Act, neutrality laws,
anti-trust (under existing procedures), and the enforcement of
off-shore subpoenas for documents in jurisdictions likely to
object to such actions.
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F. Such coordination will not affect the legal
responsibilities and authorities of the notifying agencies.
II. NOTIFICATION OF FOREIGN GOVERNMENTS
A. The United States will implement the understanding on
notice and consultation regarding U.S. actions which impose
conflicting requirements on multinational enterprises, reached
within the O.E.C.D., and will apply the same general
considerations and practical approaches to other governmental
actions which have significant potential for raising concerns
in friendly nations regarding conflicting requirements or
extraterritoriality.
B. The United States, accordingly, is prepared to:
1. Develop mutually beneficial, practical and
appropriately safeguarded bilateral arrangements, formal or
informal, for notification to and consultation with other
friendly governments. Such arrangements would take into
considerati.on the needs and concerns of both countries, as
appropriate.
2. Give prompt and sympathetic consideration to
requests for notification and bilateral consultation on an
ad hoc basis by a country which considers that its
interests may be affected by a United States measure with
extraterritorial effect.
3. Inform the other appropriate concerned countries
as soon as practicable of new legislation or regulations
proposed by the Administration which have significant
potential for conflict with the legal requirements or
established policies of those countries and for giving rise
to conflicting requirements being imposed on persons or
firms in their territory. As appropriate, the United
States will seek consultati.ons to discuss with other
countries mutual interests in such areas as security,
export control, law enforcement and business regulation.
Such consultations could provide a forum for discussing
mutual security, political, legal and other concerns.
4. Give prompt and sympathetic consideration to
requests by friendly countries for consultations under
multilateral arrangements in appropriate cases.
5. Give prompt and full consideration to proposals
which may be made by other countries in bilateral or
multilateral consultations that would lessen or eliminate
conflicts.
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C. Under arrangements for notification or consultation
through the Department of State regarding action of another
agency, the consent of that other agency will be required.
D. Where appropriate, notice and consultation arrangements
would be negotiated in the context of efforts to secure
enhanced cooperation with foreign governments in meeting U.S.
objectives. In particular, it is the policy of the United
States to seek mutual assistance arrangements in law enforcement
and to further that policy through the inclusion of bilateral
arrangements for notice and consultation.
III. LEGAL EFFECT
This statement of policy, including the provisions
regarding internal consultations and notification of and
consultation with foreign governments, is intended solely for
the guidance of the departments and agencies of the United
States Government with regulatory or law enforcement
responsibilities. It is not intended to, does not, and may not
be relied upon to create any substantive or procedural rights
enforceable by law by any party in any civil or criminal
proceeding.
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EXECUTIVE SECRETARIAT
ROUTING SLIP
Remarks
15
20
19
3637 (10.9,)
Compt
SA/IA
eccetarv
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OFFICE OF THE SECRETARY OF THE TREASURY r(eCUtW. Registry
MEMORANDUM FOR
1 [84- 617
August 30,
1984
OVP -
MR.
G. PHILIP HUGHES
STATE -
MR.
CHARLES HILL
DEFENSE -
COL.
JOHN STANFORD
AGRICULTURE -
MR.
RAYMOND LETT
COMMERCE -
MRS.
HELEN ROBBINS
OMB -
MR.
ALTON G. KEEL
CIA -
MR.
THOMAS B. CORMACK
USTR -
MR.
DENNIS WHITFIELD
NSC -
MR.
ROBERT KIMMITT
OPD -
MR.
LEHMAN LI
CEA -
MR.
WILLIAM A. NISKANEN
FED -
MR.
EDWIN M. TRUMAN
AID -
MR.
MARK L. EDELMAN
EXIMBANK -
MR.
WILLIAM H. DRAPER, III
Subject Interagency Group on International Economic
Policy (IG-IEP)
Assistant Secretary David Mulford will chair a meeting of
the International Debt IG-IEP on Thursday, September 6, 3:30
p.m., in room 4426 of the Main Treasury Building. A discussion
paper and agenda for this meeting will be distributed shortly.
Attendance will be principal (Assistant Secretary equiva-
lent or designee) only.
Christophe Hicks
Executive Secretary and
Executive Assistant to the Secretary
ON-FILE NSC RELEASE INSTRUCTIONS APPLY
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19
20
122
DCI
Compt -
D/OLL
SUSPENSE
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STAT
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OFFICE OF THE SECRETARY OF THE TREASURY Executive F'e;istry
WASHINGTON. D.C. 20220
August 15, 1984
UNCLASSIFIED
(with Secret Attachment)
MEMORANDUM FOR THE VICE PRESIDENT
THE SECRETARY OF STATE
THE SECRETARY OF DEFENSE
THE SECRETARY OF AGRICULTURE
THE SECRETARY OF COMMERCE
THE DIRECTOR, OFFICE OF MANAGEMENT
AND BUDGET
CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS
DIRECTOR OF CENTRAL INTELLIGENCE
UNITED STATES TRADE REPRESENTATIVE
ASSISTANT TO THE PRESIDENT FOR NATIONAL
SECURITY AFFAIRS
ASSISTANT TO THE PRESIDENT FOR POLICY
DEVELOPMENT
CHAIRMAN, FEDERAL RESERVE BOARD
PRESIDENT, EXPORT-IMPORT BANK
ADMINISTRATOR, AGENCY FOR INTERNATIONAL DEVELOPMENT
Subject: IG-IEP on International Debt
Attached are papers for discussion at the meeting of the
IG-IEP on International Debt on Friday, August 17. The material
on Argentina must be closely held.
Ch stophet Hicks
Executive Secretary and Executive
Assistant to the Secretary
ON-FILE NSC RELEASE INSTRUCTIONS APPLY
UNCLASSIFIED
(with Secret Attachment)
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EXECUTIVE SECRETARIAT
ROUTINGSLIP
STAT
3637 (10.81)
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MEMORANDUM FOR
August 14,
1984
THE
VICE PRESIDENT
THE
SECRETARY
OF
STATE
THE
SECRETARY
OF
DEFENSE
THE
SECRETARY
OF
AGRICULTURE
THE
SECRETARY
OF
COMMERCE
THE
DIRECTOR,
OFFICE OF MANAGEMENT
AND BUDGET
CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS
L ? ECTOR OF CENTRAL INTELLIGENCE
UNITED STATES TRADE REPRESENTATIVE
ASSISTANT TO THE PRESIDENT FOR NATIONAL
SECURITY AFFAIRS
ASSISTANT TO THE PRESIDENT FOR POLICY
DEVELOPMENT
CHAIRMAN, FEDERAL RESERVE BOARD
PRESIDENT, EXPORT-IMPORT BANK
ADMINISTRATOR, AGENCY FOR INTERNATIONAL DEVELOPMENT
Subject: IG-IEP on International Debt
Assistant Secretary David Mulford will chair a meeting of
the International Debt IG-IEP on Friday, August 17, 3:00 p.m.,
in Room 4426 of the Main Treasury Building. Discussion papers
for this meeting will be distributed shortly. The agenda will
be:
1) Review of progress under the international debt
strategy;
2) Individual country developments -- Argentina,
Mexico and Brazil;
3) Future IG work program.
Attendance will be principal (Assistant Secretary
or equivalent) only.
Christopher Hicks
Executive Secretary and Executive
Assistant to the Secretary
ON-FILE NSC RELEASE INSTRUCTIONS APPLY
P)
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