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Brady and the
Pope are worried
The US government is worried Last year the underbelly of US imperialism was threatened when, amid a growing economic crisis, the Mexican people nearly elected a left-wing radical party pledged to measures of nationalisation and to default on Mexico's huge foreign debt. Only fraud and intimidation ensured a sham victory for the friends of US imperialism. The US government was so shocked it immediately granted an unprecedented government-to-government loan to its newly elected friendly IRP government.
A few months later there were riots in Venezuela over price rises and wage cuts imposed by international bankers trying to obtain payments for their loans to the Venezuelan government. Venezuela was regarded as Latin America's most stable regime.
The riots drove the Bush regime into action. The US government realised that the wholesale rape of the resources and labour of peoples of the Third World could not be allowed to continue at the same rate without threatening the overthrow of capitalism and imperialism in what it likes to think of as its own 'backyard'.
One of the major reasons for the length of the present boom in the advanced capitalist economies has been the huge transfer of resources from the Third World approaching $150bn since 1982 - and reaching $43bn in just 1988 alone. Imperialism through the international banks is sucking the rest of the world dry like vampires - as one recent excellent book on the Latin American debt burden described it.*
The boom has been at the expense of the lives, living standards and productive wealth of Third World economies. As another study of Third World poverty has graphically shown, living • Standards in Latin America are now one-tenth what they were in 1982.**
The ed the spent Third
situation has even provok- Pope to complain. Having much time touring the World attacking priests
who have rebelled against gorernments enforcing these policies of plunder, Pope John Paul exclaimed recently: "how many children die every day in Africa because resources are now being swallowed up in debt repayments?"
The Reagan administration was against any government help to Third World countries to ease the debt burden. Under its Baker Plan, they called on international banks to lend more money to its debtors so that they could pay their old debts! Naturally the banks did not want to thron good mone! after bad. and insread refused to lend any more money and pressed for their interest and repayments in full.
But the banks' unrelenting pressure now threatens social upheaval which could bring to power movements refusing to pay anything. so now Bush's financial supremo, Nicholas Brady, has proposed a new plan. The Brady Plan wants the governments of the advanced economies to provide funds through the IMF and the world Bank so that Third World debtor nations can pay off some of their debts to the banks: and to subsidise their interest payments. Brady aims to cut the foreign debt of the 39 Third World debtors by 20 per cent over three years.
But there are many weaknesses in the plan. Firstly, it would only reduce the annual transfer of resources by about s7bn out of $43bn - the drain would continue if at a slightly lower level. And then who is going to pay for this debt relief? The US government wants the banks to accept repayment of their loans at only 30 per cent of their original value. Naturally the banks are very reluctant to do this, even though
many of them, like the British ones, have reserved a portion of their profits in case some of their loans are defaulted - for this they get tax relief from the government! The banks prefer the idea of government money to subsidise interest payments that way they hope to get their money without selling off any loans cheaply.
Also some governments like the UK and West Germany are not happy with the Brady Plan because it means that they must provide public money to finance loan repayments by the Third World debtors to the banks. They prefer to do nothing.
But the US government cannot afford to ignore the dangers to their hegemony, especially in Latin America, so they are insisting that the banks agree to discount some of their loans and that other governments provide funds. So far only Japan has been prepared to offer extra money in return for which it wants to move into second place in the financial pecking order within the IMF above Britain and West Germany.
No doubt the Americans will finally get their way. But little will change. Any Third World government that accepts help from the Brady Plan must also agree to a programme of austerity including price rises and cuts in wages and services.
The Brady Plan offers too little relief too late, and may yet fall apart through squabbles with the bankers. Already the first government to ask for help from the Plan, Mexico, has been told by the bankers that its debt burden would not fall significantly. The financial Shylocks still want their pound of flesh.
* Latin America - Dance the Millions by the Latin America Bureau, London 1989 price £5.95.
**Wealth, poverty and starvation by Vic George, Harvester Wheatsheaf, 19: price $10.95.
of
Brady.
Economic Notes
MIR 017