A series of top-level meetings on the prospects of global economic recovery which began in Paris on July 7 has been overshadowed by the problems of Latin American countries' debt crisis.
BRASILIA AND SAO PAULO: MARCH 1982 (REUTERS - BRIAN SEWELL)
SCU ZOOM INTO CU World Bank President Tom Clausen. SCU Brazil's Finance Minister Delfim Neto. GV Meeting in progress. GV EXTERIOR Sugar plantation with workers (6 shots)
Background: A series of top-level meetings on the prospects of global economic recovery which began in Paris on July 7 has been overshadowed by the problems of Latin American countries' debt crisis. The group of ten leading industrialised nations (G-10) seems almost bound to agree to lend the International Monetary Fund (IMF) more money, financial sources said. The money will help countries like Brazil, Mexico and Venezuela surmount their immediate critical cash shortages but the ling-term problems remain creating instability in the countries concerned and problems for the developed countries hoping to promote global economic recovery. The Latin American region's seven largest borrowers now owe nearly 300 billion dollars abroad.
SYNOPSIS: This is becoming a common sight in Sao Paulo -- Brazil's miracle city of the economic boom. Workers take to the streets after the latest austerity measures which Brazil's President Baptista Figueiredo has been forced to bring in to repay some of the country's 90 billion dollar foreign debt. The measures are aimed at satisfying the IMF and Brazil's private creditors for more loans.
World Bank President Tom Clausen meets top Brazilian ministers to discuss finances. The World Bank has lent Brazil millions for a number of projects. The country is the world's largest debtor nation and is struggling with a 127 per cent inflation rate and loan interest payments running into tens of millions a day. Projects like this sugar plantation have yet to be paid for.
Brazil is a country of stark contrasts. To meet the IMF conditions the government has raised taxes, devalued the cruzeiro for the 26th time this year and slashed subsides on such items as wheat and gasoline. The price of bread immediately jumped 60 per cent and gasoline prices rose 45 per cent hitting the poor in the shanty towns the hardest.
Demonstrations have erupted in all the major cities. In June, these bankers protested about the latest austerity measures. A total of 50,000 protestors marched through Rio chanting "out with the IMF". The country's latest crisis arose out of the IMF's refusal to release a 4.9 billion dollar loan because Brazil has failed to meet agreed conditions. Commercial banks also delayed loans further compounding the country's problems. An IMF delegation is currently in Brazil trying to solve the situation.
Oil-- and Mexico, as the world's fourth largest oil producer, saw its economic dreams founder when the oil bonanza of the 70's turned to the glut of the 80's. During the bonanza Mexico added 48 billion dollars to its foreign debt for a total of 85.5 billion dollars at present. The weakening oil market has prolonged the country's shortage of hard currency.
Last summer, the country tottered on the brink of national bankruptcy. The new president Miguel de la Madrid began the belt-tightening immediately he came into office. The peso was devalued and strict economy measures were brought in. The goal was an annual inflation rate of 55 per cent compared with 116 per cent at the height of the boom.
Before the crisis last year Mexico's agricultural officials said the nation was starting a new era in self-sufficiency but squeezed by the foreign exchange shortage it has had to pay hard currency for food imports. Some 20 million people are suffering from malnutrition and Mexicans with low incomes are finding it difficult to satisfy their basic needs.
Last August, after a meeting at the Federal Reserve Bank in New York, a group of international bankers gave Mexico more time to pay back its massive debts. Finance Minister Jesus Silva-Herzog pleaded for his country to be given a retrieve. Thanks to more loans from Washington Mexico was able to survive and now, despite all its problems, there are signs that the economy may be starting to pick up. At the stock exchange the mood is improving. While bankers and economists feverishly work to try and pay interest on the debts politicians and businessmen nervously hope that the present political calm will last. Since the crisis days almost every Latin American country has had to renegotiate its debts and seek stop-gap financing.
In Chile, the economic crisis is deep-rotated and long-running. A wave of closures and strikes in the copper mines has caused great hardships to workers and their families. General Pinochet's experiment in freemarket economics has led to 30 per cent unemployment and massive foreign loans. Inflation has rocketed by 25 per cent and some basic food prices have increased by fifty per cent. Young beggars are seen on the streets.
In 1976 the first extraordinary meeting of the Latin American Economic System (SELA) was held in Caracas, Venezuela. Opened by President Carlos Andres Perez its aim was to strengthen national economies and introduce a kind of common market among Latin American countries. But the attempt was almost bound to fail because of world recession. In a familiar story Venezuela itself, hit by the slump in oil prices, is battling with its creditor banks over tough economic measures they want to introduce for rescheduling some 16 billion dollars in debts.
Argentina has long been an example of a country living on credit. Like so many Latin American debtors it is a country of vast economic potential but borrowing and government mismanagement has led to soaring inflation. More than 2,000 people were arrested in these demonstrations against the government's austerity measures. In the past 12 months retail prices have risen by just under 300 per cent and a new currency has had to be introduced dividing the old peso by 10,000.
At the height of the Falklands crisis last year the country's largest finance house went into liquidation. It followed a run on deposited savings following the invasion of the Falklands. The Stock Exchange was in a state of emergency as brokers switched investment to firms which made military equipment. But at the heart of these seemingly endless panic scenes in Latin American countries is the longer-term problem of world finance and stability. It also calls into question the relationship between the developed countries and those countries which are still embarking on development programmes.