SENIOR INTERDEPARTMENTAL GROUP ON INTERNATIONAL ECONOMIC POLICY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-01156R000200250021-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: September 7, 2010
• Sequence Number: 21
• Publication Date: April 6, 1984
• Content Type: MEMO

 OFFICE OF THE SECRETARY OF THE TREASURY
WASHINGTON, D.C. 20220
April 6, 1984
UNCLASSIFIED
(With~+-~~Attachment)
Execut?oe Registry
84- 9(0 1
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
vDIRECTOR OF CENTRAL INTELLIGENCE
UNITED STATES TRADE REPRESENTATIVE
ASSISTANT TO THE PRESIDENT FOR NATIONAL SECURITY
AFFAIRS
ASSISTANT TO THE PRESIDENT S DEPUTY TO THE CHIEF
OF STAFF
ASSISTANT TO THE PRESIDENT FOR CABINET AFFAIRS
CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS
ASSISTANT TO THE PRESIDENT FOR POLICY DEVELOPMENT
SUBJECT Senior Interdepartmental Group on
International Economic Policy
Attached are the minutes of the SIG-IEP meeting held on
March 14, 1984.
Christopher Hicks
Executive Secretary and
Special Assistant to the Secretary
UNCLASSIFIED
(With ~sere~ Attachment)
 March 14, 1984
11:30 a.m.
Secretary's Conference Room
Department of the Treasury
Treasury
Secretary Regan, Chairman
David C. Mulford
State
Richard McCormack
P1ark Palmer
Defense
William Taft
Donald Goldstein
Agriculture
W. Allen Tracy
Comme r c e
Lionel Olmer
CIA
Maurice Ernst
USTR
Robert E. Lighthizer
William Triplett
NSC
Roger Robinson
David F+ligg
White House
Richard G. Darman
Cabinet Affairs
Larry Herbolsheimer
OMB
Alton G. Keel
CEA
Jeffrey Carliner
Renewal of U.S.-USSR Agreement on Economic, Industrial and
Technical Cooperation
The first item on the agenda was renewal of the U.S.-USSR
agreement on economic, industrial and technical cooperation.
In response to a question from the Chairman regarding the value
of the agreement, the response was that it provides a framework
for U.S.-USSR business as usual.
Chairman Regan then inquired about the total value of trade
outside of food products. Under Secretary Olmer responded that
it has not amounted to more than $750 million in recent years
but that the business community feels strongly about the agree-
ment with respect to its providing an imprimateur vis-a-vis
U.S.-Soviet trade.
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Chairman Regan asked, "what are the political advantages
to the U.S. for renewing the agreement and would the Soviets
want the U.S. to renew it?" The answer provided by State was
yes, they do want the agreement renewed. They have asked
about it several times in recent months. State proferred that
it was a symbolic gesture, that the President said we should
not further disassemble the U.S.-USSR bilateral framework in
his speech on January 14.
Defense commented that the U.S. is not getting much from
this agreement. it has not been "used" in the past five years.
U.S.-USSR trade goes forward without it and to go back to the
Soviets and say we want to continue this agreement would send
the wrong signal.
STR commented that the agreement is "harmless" in their view.
There are minor technical concerns under Article II, but in gen-
eral they believe that cancelling the agreement might hurt U.S.
agricultural exports if the Soviets chose to retaliate. On bal-
ance, STR felt that the agreement should be renewed if the con-
verse would lead to adverse effects on U.S. grain exports.
The Chairman then asked whether we could have trade in
agricultural and chemical products apart from this treaty. The
response was yes, but without it, U.S. businessmen couln be
adversely affected in day-to-day dealings with the Soviets.
Since the Soviets can buy what they import from the United States
elsewhere, raising the difficulty of trade interaction even
slightly could lead to Soviet purchases being redirected away from
the United States.
The Chairman then asked at what level the document should be
renewed. State responded that the level at which the document is
renewed will send a signal to the Soviets regarding broader U.S.
intentions. The Chairman then polled those in attendance and
noted that the majority voted to renew the agreement. He instructed
the Executive Secretary to notify the NSC and to indicate that the
level at which we choose to renew the documents will send an
"appropriate signal" to the Soviets.
Argentina
Chairman Regan asked Assistant Secretary f4ulford to update
the Argentine situation, characterizing it as a major crisis which
could lead to a possible domino effect in Latin America. Assistant
Secretary Mulford began by characterizing Argentine dealings with
the IMF as very slow with a lack of focus at the Presidential level,
stating that "either they don't care or they don't understand the
importance of making progress."
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If Argentine interest arrearages are not cleared up by
March 31, it will mean total losses to the U.S. banking community
of $300-350 million. The impact on major U.S. banks varies, but
for the majority it would mean a hit on first quarter 1984
earnings" of between 6 and 19 percent. He characterized this
possibility as important because it hasn't happened before. In
order to discourage Argentina from allowing this situation to
develop, Treasury has tried to anticipate this adverse event by
sending a letter from Secretary Regan to Argentine Economics
Minister Grinspun to inform them of the U.S. position. Treasury
believes other Latin American debtors, e.g.,Brazil, might misread
this defiance and emulate it. The long-term effect could spread
beyond the U.S. banking community with unpredictable results.
Under Secretary Olmer asked if it is a law that interest
overdue over 90 days must be written off or if it is at the dis-
cretion of the bank. Chairman Regan responded that it is the
latter, but, if the bank is wrong, regulators will mark down the
quality of the bank's assets, which will reflect on bank manage-
ment. In his opinion, the banks have very little judgment
latitude if the amounts are sizable and they have to take a hit on
earnings, or worse if they need to reserve against future losses
at the end of June.
Chairman Regan indicated that in his letter he told the
Argentines that failure to pay would be viewed as flouting
traditional banking practices and the banks may retaliate,
leading to a cessation of trade financing. Treasury made clear
to Grinspun that not paying will precipitate a string of events
that will work to their disadvantage.
Assistant Secretary McCormack mentioned that in his conver-
sations with Grinspun it was clear that the Economic Minister did
not have much talent on his staff because the bureaucracy is
unable to pay anywhere close to private sector wages for qualified
professionals. He was under the impression that Argentina was
prepared to go to the mats for two years if necessary on the debt
crisis, and that other Latin American countries were looking to
Argentina to be the phalanx vis-a-vis the creditor banks.
Assistant Secretary Mulford made the point that the Argentines
will either slide through the March 31 deadline or they will do it
consciously. The Treasury letter was meant to make clear that
non-payment will be a conscious act. He further commented that
Treasury is concerned about the potential for a split in the
banking community as a result of the Argentine situation. He
stated that no U.S. banks are gravely at risk at this time but,
if a domino effect were to occur, they could be.
Chairman Regan commented that a trade cut-off vis-a-vis
Latin America would hurt the U.S. more than our Latin trading
partners, and thus we need to strike the best deal we can, but
to have the IMF hang-in as tough as possible.
 State commented that Argentina is potentially the wealthiest
of the major debtors in Latin America and will have the most
leverage. Treasury added that Argentine borrowing was in part to
finance capital outflows as opposed to development projects and thus
is on less firm financial grounds for a stretch-out.
NSC raised the question of possible cross default suits and
the need for loan loss provisions. Treasury responded that the
cross default problem was not serious at this time.
Treasury commented that the foreign banks see the U.S. over-
regulating and creating problems for ourselves. U.S. respondents
can use the argument of the potential for spreading financial
instability abroad in response to this argument.
State queried whether we can get other Latin American
countries to pressure Argentina. Chairman Regan responded that
this was a useful suggestion an3 that perhaps we can use the IDB
meeting to accomplish that.
Venezuela
Treasury commented that Mexico and Brazil represent one
pattern: a willingness to cooperate. Argentina is in a
different category, along with Venezuela which has substantial
arrears as well. The Venezuelans are trying to force the banks
to lend new money and they are watching the Argentine situation.
The difference is that Venezuela is lagging in payments to the
U.S. Government, but U.S. agencies are continuing to lend. At
present, Venezuela is in arrears to the U.S. Government in the
amount of 5115 million in direct credits and guarantees.
Treasury does not believe we can justify continued provision of
new U.S. public credits.