From: barnhart@netcom.com (Aaron Barnhart)
Newsgroups: soc.culture.african
Subject: IPS:DEBT: Third World borrowing to repa
Date: 15 Aug 92 15:13:08 GMT
Reply-To: barnhart@netcom.com
Organization: Netcom

Copyright Inter Press Service 1992, all rights reserved.  Permission to re-
print within 7 days of original date only with permission from 'newsdesk'.

Title: DEBT: Third World borrowing to repay/REPEAT/


an inter press service feature

by john tanner

london, aug 11 (ips) -- in 1982, they owed 328 billion dollars to
commercial banks; they have repaid that and more over the last ten
years and still third world nations find themselves even deeper in
debt now than they did in 1982.

''the debt crisis has never been about the third world debtors
ability to repay,'' says ed mayo, director of the independent new
economics foundation. ''it has always been about credit worthiness
so that more loans can be made and another debt crisis happens
five years down the line.''

as a result, credit worthy developing nations have been taking
loan upon loan to repay old debts, and this coupled with the
interest rates, have pushed up the ratchet of what indebted
nations owe.

comparing the 1982 debt figure to the estimated 356 billion
dollars third world countries now owe, mayo said: ''over ten years
third world countries have paid back more than they originally
owed.''

in the first half of 1992, midland bank alone made 38 million
pounds in interest from its third world debtors -- over a third of
total profits.

lloyd's bank with 3.2 billion pounds (6.2 billion dollars), and
midland -- now part of hong kong and shanghai bank -- with 3.3
billion pounds, are major third world creditors; while natwest and
barclays together are owed 1.2 billion pounds (2.3 billion
dollars) by the third world.

all four of these banks have reduced their exposure to debts from
the developing countries over the past ten years, although in
recent times chile, uruguay and mexico have all emerged as
eligible candidates for fresh loans.

ironically, the current debt crisis was triggered in 1982 by
mexico, when that country threatened to default in its debt
repayment to commercial banks. immediately thereafter creditors
have been much more cautious in loan arrangements.

but with latin and south american territories having successfully
adjusted to international monetary fund (imf) programmes, the
outlook is changing. ''latin american countries have made a lot of
progress,'' said david lubin, a sovereign debt expert with midland
bank.(more/ips)

debt: third world borrowing to repay/repeat/(2-e)

debt: third (2)

by swapping mexican bonds for the less valued u.s. bonds,   lloyd's
bank managed to reduce its exposure to mexican debt from 515
million pounds (990 million dollars) last year to only 38 million
pounds (73 million dollars) today -- the deal was brokered by the
imf.

lloyds suffered a notional loss in the exchange -- but the u.s.
taxpayer will also share in a part of that loss down the line at
the time of the predicted fall of u.s. treasury bonds in 2019.

''it's now our intention to walk away from third world debt,''
said a spokesperson for lloyd's bank. ''the only way we are going
to get our money, and for problem countries to improve their
credit rating, is through debt restructuring.''

midland bank too believes in restructuring third world debt and
is not afraid to sell debt on the secondary market. it has also
swapped debt for shares (equity) in third world companies -- so-
called debt/equity swaps.

at the end of last year, midland exchanged part of the
argentinian debt for shares in argentina's privatised telephone
corporation 'entel'. altogether in latin america, the bank has
made 252 million pounds (480 million dollars) of bond for swap
investments.

but natwest, and to a lesser extend barclays, have continued
their policy of getting out of third world debt as quickly as
possible. only 0.2 percent of natwest loans are now owed by the
third world, compared to 6.4 percent for lloyds.

''natwest decided to trash third world debt,'' said lubin. ''but
history may prove lloyd's right.''

commenting on the decision by some banks to dump third world
debt, while others have relied on imf adjustment programmes to
deal with the problem, mayo acknowledged that while structural
adjustment has in some cases been successful, it has come ''at a
cost to the environment and the poor''.

charity organisations in britain have been making exactly that
point in stepping up their campaigns for debt relief. two years
ago, the then british chancellor of the exchequer john major
proposed the canceling, at a stroke of a pen, two-thirds of the
debt owed by the world's poorest countries.

but charity groups like christian aid say that under the
provisions of the trinidad terms -- named after the caribbean
island where major, now the british prime minister, made the
proposal in 1990 -- will in actual fact only wipe off one percent
of developing countries' debt.

overall, it is estimated that the third world owes 1.4 trillion
dollars to international lending institutions and governments.

''debt is a major structural blockage in the world economy. debt
here and in the third world is a by-product of the system, like
pollution,'' mayo observed.(end/ips/ie/jt/cpg/92)


-- 
Aaron (Barnhart@netcom.com) -- posting from Evanston, Illinois