CEPAL Review - Volume 1985, Issue 27, 1985

The background, development and prospects of the concerted effort being made by the Latin American countries as expressed in the Cartagena Consensus and Mexico’s role in this effort are discussed in this article from a foreign policy perspective. It is neither a quantitative technical analysis of the debt problem nor a systematic review of the renegotiations of recent years and those currently in progress, Instead, an attempt is made to explore those elements of international economic performance, trade and finance which led the Latin American countries to meet at Cartagena. It goes on to analyse the basic content of the proposals made at that meeting and at Mar del Plata and Santo Domingo, to discuss how the other parties to the negotiations (governments of developed countries, international banking authorities and multilateral financial bodies) have reacted to these proposals, and, finally, to describe what the outlook for the overall Cartagena process appears to be as of mid-1985.

In spite of the occasional give and take, agreements and temporary advantages for some, the present balance of power and the deterrent effect of the debt trap in which the Latin American countries are confined involve extremely high costs for them. Nevertheless, the unpasses which are the consequence of continuing to pull on a rope which is strangling all of us correspond to a powerful logic which it is extremely difficult to break and replace with another more compatible with the essential interests of our countries. The author maintains, however, that this is not impossible: a prerequisite for achieving it involves facing up to the situation in which we find ourselves, as well as to the logic behind it and the strategies which derive from it for debtors and creditors. All the rest could depend on nothing more than the vision and audacity of our countries’ political leadership and their capacity to set out the real choices before their people, as well as the costs and risks involved in each of them. It is a highly significant fact that in the present extremely harsh economic and social crisis most political leaderships, be they in government or in the opposition, are democratic. Among other things this provides a hitherto inexistent capacity for dialogue. Such a dialogue, based on the patriotic and carefully considered search for a way out of the dilemma in which we are all trapped, would represent an important first step.

This article presents a general view of the reschedulings of Latin American debts with the private banking system during the period 1982-1985. The marked worsening of the conditions of indebtedness experienced by the debtors in the first round of negotiations in 1982-1983 has gradually given way to more favourable terms, above all in the most recent rescheduling (1984-1985). The creditors use market concepts to explain this phenomenon: the better terms represent a reward for good behaviour and the consequent lessening of risk.

Until a short time ago, the view was frequently held that the worst was over in relation to the external debt of the developing countries: interest rates would fall and a revival of trade was just around the corner.

While it is true that some of the causes of the present situation in Latin America are of external origin and that there is little possibility that Latin America will be able to change them, it is no less true that, if the region is to grow it must determine what action its members are ready to take together in order to increase their independence. This article’s main argument is that Latin America must strengthen its arrangements for regional co-operation and integration and make better use of its own resources; ideas, projects and processes have been set in motion for this purpose and must be given real political support.

The Latin American economic crisis, basically caused by the adjustment of the external sector with a view to generating surpluses to service the debt with the international financial system, has had a powerful adverse effect on the trade flows of the ALADI countries. Nevertheless, an effective co-operation among them is now more necessary than ever in order to overcome the external bottleneck and restore the levels of intra-zonal trade. The reactivation of zonal trade should, moreover, generate additional trade on a relatively more balanced and stable basis than in the past, through the multilateral linkages within the zone.

The developing countries’ payment crisis has reached dramatic proportions, and cannot be overcome without large-scale action compassing the two variables that determine payments capacity: the capacity to possess or create liquid assets and the capacity to generate foreign exchange income, especially by means of external trade. The measures proposed in the present article relate to the establishment of an international currency based on primary products, which could be administered by the International Monetary Fund, and to the adoption by the developing countries of a more persuasive strategy in negotiations on access to markets. To implement the measures in question the developing countries would need to assume an active role, inasmuch as they would have to turn their own natural resources and import markets to account, manipulating them as bases for negotiations. The payments problems of the developing countries are too acute to be resolved through mere international cooperation commitments or through the adoption of world programmes, which by themselves will never improve the developing countries’ bargaining power. This two-front attack would, however, improve the power of the developing countries to negotiate debt maturities and terms of payment and would also considerably lighten the burden of the adjustment programmes which the said countries are adopting.

The classical theory of capital is based on an ideal functioning of markets and assumes that economies have a great capacity for adjustment, goods being easily substitutable, supplies relatively elastic, prices flexible and markets composed of a large number of individuals. Nevertheless, most underdeveloped economies exhibit traits far removed from such assumptions. Are these traits important enough to modify the results of the classical model and explain the imperfections of the capital market? The author answers this question on the basis of a number of central concepts and the experience of the Colombian economy.

The task of presenting a general picture of Latin American agriculture is complicated by the diversity of national situations, which is reflected in major agricultural differences among countries. However, some important aspects of the structure of agriculture and changes in recent decades are common to almost all the countries; it is thus possible to compose an overall picture which, without oven-generalizing, throws light on the situation and the prospects for the region’s agriculture.

This article focuses on the structure of the production system and on policies for improving it, with particular reference to medium-sized and small enterprises. Information and specific examples are provided based on Italy’s experience in this respect and on the role which such enterprises have played in that country. It is suggested that, from this standpoint, Italy’s experience may be of much greater interest to many developing nations than that of other industrialized countries, both as a model to be followed and in terms of the errors that should be avoided.

From 1974, under pressure from the new trends in the world economy, international public financing began gradually to lose its relative importance for the Latin American countries. The growth of international monetary liquidity gave the international banking system an unfamiliar weight in absolute and relative terms. However, the world recession persisted, and it became evident that our countries must again seek a response to their needs in bodies such as the InterAmerican Development Bank.