BAKER WARNS AGAINST FORGIVENESS OF LATIN DEBT
U.S. Treasury Secretary James Baker said
any attempt to declare blanket debt forgiveness for major Latin
American debtor nations might damage the world economy.
    In an article in Monday's edition of the Miami Herald,
Baker also criticised the concept of short-term debt relief,
calling it a "dramatic, overnight solution."
    "While these ideas may be well-intentioned and have some
political appeal, they are impractical and counterproductive in
the long run," he said.
    The article was published to coincide with a three-day
meeting here of the Inter-American Development Bank (IADB).
    Baker is the chief architect of the U.S. Strategy on Third
World debt.
    Brazil, the Third World's largest debtor, last month
declared a moratorium on interest repayments. It has given no
indication of when it may resume interest payments, prompting
fears that some large U.S. Banks may be forced into substantial
debt writedowns and calling into question the viability of the
U.S. Strategy.
    Baker, defending the strategy, said private commercial
banks have rescheduled nearly 70 billion dlrs in debt since
October 1985 at longer maturities and lower interest rates.
    "Together with expected progress in commercial bank
discussions with Argentina and, we hope, Brazil, this should
add up to substantial new lending for the major Latin debtors
in 1987," Baker wrote.
    He estimated that debt-equity conversion plans accounted
for 2.5 billion dlrs last year in four of the region's major
debtor states. Such plans allow foreign bank creditors to sell
Third World debt at a discount to investors who then become
stockholders in firms in these countries. "These swaps aren't a
panacea, but they do demonstrate how a creative free market can
make progress in reducing the debt burden," he said.
 REUTER
