Word: debtors
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...delegates avoided even hinting that they might repudiate their debts, realizing that any refusal to repay past borrowings would mean the certain cutoff of future loans. In Washington, William Cline, senior fellow at the Institute for International Economics, said, "No major debtor wants to jeopardize its long-run credit reputation further by joining anything that has the appearance of a cartel for debt moratorium or repudiation purposes...
Although some observers thought that the Caracas delegates might try to form a "debtors cartel" that would renounce foreign financial obligations, the representatives stopped short of that move. "The idea of a debtor cartel was definitely put aside at this conference," said Mailson Nóbrega, secretary-general of Brazil's Finance Ministry, as the meeting came to a close at week...
BRAZIL. Latin America's biggest debtor is also its most troubled (see box). Brazil owes some $90 billion and is in its third year of a deep recession. The country is promising to undertake tough austerity measures so that it can begin paying off its debt, but those steps are intensifying already serious social unrest. Last week food riots broke out in Rio de Janeiro. Says one U.S. Treasury official: "Brazil is the key to the entire Latin American debt problem...
Among those pleased by the predominantly moderate tone of the proceedings was Beryl Sprinkel, Under Secretary of the Treasury for monetary affairs, who represented the U.S. at the session. "It is in our interest that the debtor countries adjust and grow," said he. "But we have not committed ourselves to expending vast increases in resources on their behalf, because we do not have them." Nevertheless, by pressing their interests without raising threats, the delegates may have helped to keep the debt bomb from going...
...bankers fear that without continued IMF support some foreign borrowers would be forced to default. Such moves would depress bank profits by causing the lenders to take losses on the loans. "The big U.S. banks are maintaining the fiction that all their loans to weakened debtor countries are good," says George Soros, president of Soros Fund Management, a New York-based firm that manages $2 billion of financial assets. "But if the IMF quota does not go through, the banks would have to start writing off those loans more aggressively." That could set off a chain reaction that might...