Debt relief in Latin America
A good-news story out of Latin America that the Inter-American Development Bank is forgiving the debts of five extremely poor countries, including Bolivia and Nicaragua. Debt relief under the IMF/World Bank Heavily Indebted Poor Countries (HIPC) program only relieved a portion of their debts (and they had to go through major structural adjustment program hoops to get that).
The devil may still be in the details. For example, it does seem strange that the US is supporting this move that will benefit the new left-wing governments in Bolivia and Nicaragua. In Bolivia, Morales’ efforts to nationalize the oil and gas industry has been much noted. As for Nicaragua’s, its debt was incurred by the Somoza dictatorship, ousted by the Sandinistas in the 1979 revolution. Their debt was still held over them, even after the Sandinistas were ousted in 1990 and the whole time through several US-friendly governments.
WASHINGTON – The Inter-American Development Bank on Friday accepted a U.S.-promoted proposal to pardon between $2.1 billion and $3.5 billion for five poor Latin American nations including Bolivia, a nation that opposes U.S. policies.
The Bush administration has been pushing for the relief since March, when it proposed the operation despite resistance from several Latin American countries because of concerns that the write-off would weaken the IDB’s ability to provide subsidized loans in the future, officials said.
The Latin American nations wanted the U.S. and other wealthy countries to help pay for the operation, but Washington argued that the IDB was strong enough to take the hit.
The delay meant that the IDB did not join the World Bank, the International Monetary Fund and the African Development Bank in announcing last year a similar debt relief operation for poor countries from other regions. The IDB is the biggest official lender in Latin America.
“This is great news for the more than 30 million people in these five countries,” said IDB President Luis Alberto Moreno.
… The deal left some significant details to be worked out later, U.S. and bank officials say.The IDB board of governors did not decide on the critical matter of when the debt relief will kick in – something that could add or subtract hundreds of millions of dollars from the package. The Bush administration wants a more generous Dec. 31, 2004 cut-off, which would work out to the $3.5 billion relief.
This would mean Bolivia will obtain $768 million in debt relief, Guyana $365 million, Haiti $468 million, Honduras $1.1 billion and Nicaragua $808 million.
IDB’s managers and other countries have suggested earlier dates, potentially reducing the package to $2.1 billion, according to numbers provided by Jubilee USA Network, a non-partisan group that advocates for poor-country relief.
Top IDB officials will meet again in January, in Amsterdam, to finalize the agreement. A signing ceremony is expected in March.
Under the terms of the debt relief program, nations must first obtain the IMF’s seal of approval for their economic program, something Haiti still lacks. But U.S. officials expect this to happen soon.
You write: “The devil may still be in the details.” Yes, indeed.
“Under the terms of Friday’s agreement, Haiti will not benefit from IDB [Inter-American Development Bank] debt cancellation until it implements a series of harmful economic reforms mandated by international financial institutions, led by the International Monetary Fund (IMF) and World Bank. Given that more than half of Haiti’s $1.3 billion in debt was contracted by the brutal dictatorships of Francois and Jean-Claude Duvalier, it is unjust that Haiti is being asked to comply with economic policies such as privatization of basic services or increased trade liberalization before obtaining full debt cancellation.”