Latin American debt and adjustment

Abstract

This essay desribes the current impasse on Latin American debt and outlines some of the policy responses by major creditors and debtors to try to get the parties off deadcenter. It finds these wanting in a number of respects and proceeds to suggest one possible approach for dealing with the problem. The achievement of ‘adjustment with growth and equity’ requires, it is felt, the establishment of a new modality to which all the major players, i.e., the individual debtor, the IMF, the World Bank, the commercial banks, the Club of Paris and the major bilateral donors agree to adhere. It requires debtor initiative for an independent assessment of a five year structural adjustment program complete with both specific required policy changes and the accompanying required resource flows. While ‘business as usual’ continues elsewhere, success with one or two such country packages can also be expected to loosen creditor purse strings over time.