This summer, over 2000 activist, politicians and policymakers
gathered in Caracas with the aim of reinserting the debt back in the
debate if Latin American development.
Back in the 1980s, in the wake
of Mexico’s six-month debt
moratorium of 1982-1983
and the subsequent rescheduling of
most of the region’s foreign debt,
all discussions of Latin American The Diabolical Debt, development required some consid- conference on “The
eration of the “debt crisis.” The seri- End of the Milleniun
ous possibilities that several major this summer.
Latin American countries might soon be unable to ser-
vice their foreign debts exposed the extreme fragility of
international debt structures and hung a dark cloud over
the futures of North and South alike. For developed-
country creditor institutions-those who counted on
timely debt-service payments for at least a part of their
livelihood-a massive Third World default, or even a
significant interruption of payments, would have c 9 n-
stituted a major hardship, and perhaps even called the
viability of the international financial system into ques-
tion. For the debtors, servicing the debt had become an
insurmountable obstacle to growth and development.
From everyone’s point of view, the unsustainability of
the debt constituted a “crisis.”
With the resolve and celerity that fears of financial
collapse can generate, creditor governments and multi-
lateral institutions offered loan guarantees, debt-equity
swaps and debt reschedulings to countries willing to
rapidly privatize, deregulate and
open their economies to First World
trade and investment. After these
and other measures-like bestowing
pariah status on Alan Garcia’s Peru,
offical logo of the which tried unilaterally to reduce its
foreign Debt and the debt-service payments-got the
” held in Caracas creditors off the hook, the “crisis”
was downgraded to a “problem” and
quickly disappeared from view. Once the debt became
serviceable again, it was no longer a “crisis” for the
world-only for the debtors who could not pay and
develop at the same time. As the subsequent articles in
this report illustrate, the continuing debt obligations of
Latin American countries have come to be regarded
simply as data-necessary facts of life for debt-driven,
transnational, (neo)liberalized economies.
Curiously, when the debt disappeared from the polit-
ical agenda of creditor countries, it disappeared from
the debtors’ agenda as well, illustrating the degree to
which the creditors came to define and thus dominate
the terms of discussion. Putting the debt on the agenda,
of course, would have meant calling the very relation-
ship between North and South into question-espe-
cially the relationship between Northern finance and
Southern investment opportunities. The reluctance to
do so may very well reflect the disappearance-for the
time being–of an effective radical opposition within
Latin America.
This summer, in a sign that this reluctance may have
been just a temporary quiescence, a group of Latin
This summer, over 2000 activists, politicians and policymakers gathered
in Caracas with the aim of reinserting the dept back in the debate on Latin American development
21
Fred Rosen is NACLA’s editor He is co-editor, with Deidre
McFadyen, of Free Trade and Economic Restructuring in Latin
America (Monthly Review Press, 1995).REPORT ON THE DEBT
American parliamentarians gathered some 2,000 people
together in Caracas, Venezuela with the aim of reinsert-
ing the debt in the debate about Latin American devel-
opment. “The character of most of our economies,”
they judiciously declared, “is today determined by
debts incurred through the errors and economic mis-
judgements of [our] governments, as well as through
creditor countries’ abuse of the conditions of negotia-
tion.” The political problem, they added, is that the debt
“limits the ability of the indebted governments to make
their own decisions.”
The gathering, billed as “The Foreign Debt and the
End of the Millenium,”
was co-sponsored by the
Latin American Par-
liament (PARLATINO)
and the Congress of
Venezuela, and held this
past July 10-12 in the
very trans-national Cara-
cas Hilton-a hotel in
which every directional
sign, room-service in-
struction and four-star
restaurant menu is trilin-
gual: Spanish, English
and Japanese (with sup-
plemental help available
in German and French). PARLATINO organizers at one of t
In this free-trading left, Pablo Medina of Venezuela, J Rolando Gonzilez of Costa Rica. atmosphere, activist
priests and nuns, trade unionists, leftist politicians, par-
liamentarians of a variety of political colors, European
development activists, a few sympathetic development-
bank functionaries and local students and activists
attended five concurrent workshops and three plenary
sessions over three days.
The combined foreign debt owed by Latin American
nations now stands somewhere above $600 billion, up
from $425 billion at the height of the “crisis” in 1987. It
is owed principally to institutions in countries in which
people speak the languages of the Hilton-hence the
intercultural courtesy. It is not, of course, only the
absolute size that hurts, but the size relative to the ability
to pay. The region pays just under 30% of its export earn-
ings to service those debts and owes about 45% of its
combined gross domestic product (GDP) to foreign cred-
itors. It is this drain on resources that feeds the growing
social dislocation of so much of the continent and eats
away at the ability of “sovereign” countries-without
presupposing any uniform, benevolent set of national
priorities-“to make their own decisions” at home.
“On transferring to the population the burden of the
debt,” said the organizers in one of their public docu-
he
ul
ments, “internal demand has been contracted and
poverty and unemployment have grown. The attempts
of individual countries to address this problem by
themselves has weakened them in the face of the united
creditors.” Through PARLATINO, which is composed
of representatives of the parliaments of all the Spanish-
speaking countries of the Americas, along with Brazil
and some of the small former Dutch colonies of the
Caribbean, the organizers were attempting to bring
those individual countries together to create a united
bloc of debtors that might confront the united creditors
on a more equal footing. Founded in 1964 in Lima,
PARLATINO’s “per-
manent and inalter-
able principles” in-
clude Latin American
integration, opposi-
tion to various types
of intervention and
“political and ideo-
logical pluralism as
the basis of a demo-
cratically organized
Latin American com-
munity.”
A PARLATINO
commission meeting
a year before the eir periodic press conferences. From event had resolved an Adolfo Singer of Uruguay and that the debt’s legality
under international
law should be challenged by a unified alliance of
debtors before the International Court of Justice at the
Hague. The possibility of an effective legal challenge
was a major motivating factor behind the event.
Regardless of how the court might rule, the parliamen-
tarians felt that the ability to argue the case before pub-
lic opinion would have a powerful political effect. The
question of legality hinged on two arguments: first, that
many debts were illegally contracted, sometimes by ille-
gally constituted regimes and in some cases “in viola-
tion of the laws of the lending countries,” and second,
that the variable and compounded interest rates have
been exhorbitant and constitute “usury interest.”
It was left to the host Venezuelans, under the leader-
ship of Federal Deputy Pablo Medina, to actually orga-
nize the event. Medina, whose leftist opposition party,
La Causa R (Radical Cause) had fragmented beyond
repair over the preceding months, was in an awkward
position at home, but he used his membership in PAR-
LATINO to put together a broad-based continental
alliance to stage the conference. The conference had
financial support from the Venezuelan Congress, the
formal participation of several prominent mainstream
Venezuelan politicians-mainly from the country’s
strongest party, Democratic Action (AD)-and the
legitimating leadership of the official grouping of the
region’s elected parliaments. The major local participa-
tion and support, however, came from Medina’s rump
faction of La Causa R, now called Patria Para Todos,
Homeland For All. Indeed, while PARLATINO spon-
sored the event, and Pope John Paul II endorsed and
prayed for it, the procedings took place in a decidedly
left-of-center atmosphere.
At its best, the event was a mix of lively debate,
careful analysis and a sharing of situations and data.
The official participants adopted
13 resolutions, all of which urged While the member states to unify to confront
the problem through their own posed new political mechanisms as well as
through PARLATINO, the Ibero- as alternati’
American Summit (in which Spain capitalii and Portugal, but not the United
States participate) and alliances pragmatism
with parliamentary groups from
other countries and regions. the Caracas
Paricipants also endorsed the cre- alternatives ation of a Forum of Debtors as pro-
posed by an Italian group called the this confer
National Council of Economy and
Labor, many of whose members indication, ar
were in attendance. the agenda But radicals like Medina were in
a bind. On the one hand, they
clearly realized that the debt could not be confronted
without the active participation of virtually the entire
region. On the other hand, they knew that participation
could only be obtained on the basis of an explicit agree-
ment not to raise fundamental disagreements. Broad
participation, that is, precluded a radical agenda. That
dilemma pervaded the conference.
The press, which is tired of the debt, treated the
conference and its pronouncements rather skepti-
cally. The coverage was sparse and the attitude
decidedly non-reverential: “What force will the conclu-
sions have if none of the governments are paying atten-
tion?” a Venezuelan reporter asks Medina at one of the
gathering’s intermittent press conferences. “Many gov-
ernments sent some sort of communications,” responds
the patient congressman, “and that is an important first
step.” The reporter is not impressed. “Which of the rec-
ommendations are most likely to be adopted?” she
probes. “What’s most important is that we begin dis-
cussion,” he sidesteps. “A Uruguayan paper has edito-
rialized that not all points of view have been respected
here,” calls out a Uruguayan. “This is a pluralistic gath-
ering,” ripostes Medina, “and I respect that point of
view.”
Indeed, the word “plural” is used quite a bit. The
Pope’s call for a jubilee forgiveness of debt in the year
2000 is widely applauded, as are calls for a continent-
wide response to the debt burden. Juan Adolfo Singer,
the president of PARLATINO and a member of
Uruguay’s centrist Colorado Party, calls the conference
“an important effort to deal with a very complex, deli-
cate and complicated issue.” Choosing his words care-
fully, Singer makes it clear that he is not speaking as a
colorado, but as president of the Latin American Parli-
:hurch people
‘moral” systems
ves to “savage
;m,” it was
that reigned at
Hilton. Secular
to capitalism, if
3rence is any
e simply not on
of the 1990s.
ament, and tells reporters that
“the situation is different in every
country, and therefore our
approaches here have necessarily
been pluralistic.” The plurality of
ideas, he says, does not prevent a
unanimity of purpose, which is to
raise the profile of the debt.
Despite the lack of ideological
cohesion, there is general agree-
ment among activists in the halls
and nearby areperias that the
event will be looked back upon as
a success if it a) creates a reawak-
ening of the debt as a political
issue; b) creates the beginnings of
a movement around the issue; c)
stimulates creative debate of the
questions raised by the issue (the
global role of finance capital, the neoliberal vision,
etc.); d) inserts the question of the debt into the larger
debates around development and underdevelopment;
and e) creates a public awareness of the “social” and
“ecological” debts owed by governments to their peo-
ple and natural surroundings.
The notion of “social debt”-what a society owes to
its members-is introduced to the gathering by
Bernardo Klinsman, Director of the Institute for Social
Development of the Inter-American Development Bank
(IDB). This debt, Klinsman details, is very large:
poverty 50% and growing; malnutrition 40% and grow-
ing; children increasingly recruited into the drug trade
and prostitution; long-term unemployment and its cor-
rosive social effects; the weakening of local communi-
ties and networks of mutual support; the growth of
crime and an epidemic of homicide. Indeed, it is this
great social debt, the consequent weakening of legiti-
mate social and political structures and the inability of
national governments to deal with it all that has brought
such a broad spectrum of politicians to the conference.
The idea of “coresponsibility” for the debt is raised
from the floor more than once, as is the idea that the
problem goes beyond a North-South or Rich-Poor con-
flict to the lack of effective democracy and participa-
tion in the South itself. Moreover, those gathered con-
sistently use the issue to deal with much broader
concerns, leaving behind the debt as an issue of techni-
cal macroeconomics. The debt is discussed again and
again as a human rights issue, a human development
issue, a question of class, an entree into an understand-
ing of the genesis of the informal economy, a barrier
preventing the full flowering of civil society.
One of the interesting “pragmatic” proposals comes
from Congresswoman Ifigenia Martinez of Mexico. To
say that a debt is unpayable, proposes Martinez, is to
say that one cannot pay and continue to generate the
income necessary to make further payments. This is
now the case in Latin America, she asserts to no one’s
disagreement, where in 1982, the chief goal of eco-
nomic policy ceased to be long-term growth and instead
became payment of the debt. What, then, is the real
value of the debt? It is that value, she says, that permits
a country to grow and continue paying. The debt, pro-
poses the Mexican deputy, should be adjusted precisely
to that real value. If not, the North will continue col-
lecting tribute from the South rather than earning a
return on its investment.
The Vatican proposal for an end-of-millenium,
worldwide forgiveness of debt-Jubilee 2000-is a
topic of discussion at each workshop and generally wel-
comed for the legitimacy it seems to bring to the goals
of the conference. But Father Gregorio Iriarte, a mis-
sionary-economist working in Bolivia, points out that
even if the debt were to be forgiven tomorrow, it would
reappear the following day if its causes were not
addressed. Like the debt peonage in the countryside and
mines of Bolivia, he says, the problem lies in the sys-
tem itself.
Just what that system is, is a subject of center-left
debate throughout the event, though given the tenor of
the times, the system is seldom labeled “capitalist”
(except by church people quoting the Pope’s reference
to “savage capitalism”), much less “imperialist.” More
often, it is argued that “models of development” are at
issue. The debt-driven model has forced a framework
of social exclusion, argues the IDB’s Klinsman. This
exclusion can only be overcome by an alternative
model: a consistent policy of development based on
social investment. Public investment in health, educa-
tion and nutrition, he says, must accompany private
economic growth to make that growth sustainable.
This debt-driven model, it is reiterated by one leftist
or another in all the workshops, is linked to the world
view extolling the rationality of markets and the global
system dominated by finance capital; the primacy of
financial over real investment. This is an idea that takes
hold. “The public debt has become the most powerful
mechanism of sustaining the growth of speculative
finance capital,” reads the event’s (presumably consen-
sual) final document. Portfolio investors, the document
continues, reap rewards throughout the Americas
“while providing no support for indebted economies
and without, we must add, running any risk whatso-
ever.” The debt, in this view, is the mechanism that
guarantees the
dependence of
the South upon
the North.
Not all par-
ticipants agree
that coherent
models or ide-
ologies are at
play. For the
last few years,
argues Brazil-
ian social scientist Theotonio Dos Santos, the United
States has been under pressure to reduce its own trade
deficit. It has therefore been pressuring Latin American
countries to import U.S. goods and to pay for their own
trade deficits by bringing in “hot money” with the high
interest rates that strangle their own producers. And it
has the power to do so. Neoliberal ideology has nothing
to say here, argues Dos Santos. There is a rather “bru-
tal pragmatism” at work.
There are some political stakes in the workshops’
analytical disagreements. If the Latin American poor
are the victims of a “brutal pragmatism” from the
North, then the political response called for is an effec-
tive counterpragmatism. If the guilty party, on the other
hand, is “savage capitalism” (allowing that individual
investors are always “pragmatic”), then a more sys-
temic, far-reaching and ideological response is in order.
While the ecclesiastics pose the Church and new “moral” systems as alternatives, it is pragmatism that
reigns at the Caracas Hilton. It is perhaps the current
lack of such alternatives among secular leftists that
makes the pragmatic responses-which do, however,
stay well to the left of the technical fixes of the 1980s
and the structural adjustments of the 1990s-attractive.
One can, after all, propose alternatives to “models of
development,” and then mobilize constituencies behind
those proposals. Alternatives to capitalism, if this end-
of-millenium conference is an indication, are simply
not on the secular agenda of the 1990s. Nonetheless,
gatherings like these may be slowly laying the ground-
work for a pan-American anti-neoliberal movement, as
well as building the ideas and alliances that might begin
to effectively challenge the romance of the region’s
elites, with Washington’s current “consensus.”
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