BAKER EXPECTED TO DEFEND DEBT STRATEGY
Treasury Secretary James Baker, facing
the toughest challenge to his Third World debt plan so far, is
expected today to stoutly defend the strategy.
     At an opening address to the annual meeting of the
Inter-American Development Bank here Baker is likely once again
to bluntly reject alternative approaches like wholesale debt
relief.
     The speech comes after Washington delayed its bid to wrest
control of IADB lending from Latin nations.
     The Treasury Secretary is also expected, U.S. officials
say, to portray that attempt as a crucial element in his plan
to promote inflation-free economic growth, open markets, and a
much-reduced government role in the economies of Latin America.
     "We have already seen substantial progress," Baker said in
a Miami Herald article and argued the plan was never meant to
be a "quick fix".
     But Brazil, Ecuador, Peru, Nicaragua and Bolivia have all
ceased servicing some or all of their debt. Brazil's interest
payments moratorium, announced last month, is being seen as a
major challenge to the Baker plan.
     Owing foreigners 109 billion dlrs, Brazil called an
indefinite interest payments moratorium on 68 billion dlrs of
commercial bank debt.
     Brazilian Central Banker Francisco Gros met bankers last
night to begin what U.S. officials predict will be months of
extremely tough negotiations.
     The scale of the problem is immense. Owing some 382
billion dlrs of foreign debt, Latin nations have since the
start of the decade paid out some  200 billion dlrs in interest
and principal and received about 28 billion dlrs in new loans.
     In addition, upwards of 100 billion dlrs in capital flight
is estimated to have left the region during that time.
     The Baker plan, unveiled in October, 1985, calls on
commercial and multilateral banks to increase lending by about
29 billion dlrs in the three subsequent years to the 15 major
debtors engaging in fundamental economic reform.
     The theory runs that once a debtor nation has reformed its
economy, it can service its debt comfortably and without an
atmosphere of crisis.
     U.S. officials emphasize some 8.5 billion dlrs has been
paid out in the first 14 months of the plan, payments of over
70 billion dlrs of debt has been stretched out into the future 
and Washington  is embracing new and innovative ideas to keep
debtor-creditor negotiations afloat.
     Baker is expected to underscore these points in his
address today.
 Reuter
