Prospects; Who Will Follow France?
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French President Francois Mitterrand sent a letter to the heads of state attending next week’s economic summit outlining his Government’s plan to forgive one-third of the debt owed to it by the poorest countries of Africa and asking the six other summit nations to join in the plan. But Treasury Secretary James A. French President Francois Mitterrand sent a letter to the heads of state attending next week’s economic summit outlining his Government’s plan to forgive one-third of the debt owed to it by the poorest countries of Africa and asking the six other summit nations to join in the plan. But Treasury Secretary James A. Baker 3d has consistently argued against debt forgiveness. Will the United States and the other summit nations follow the French plan? Shafiqul Islam Senior fellow, Council on Foreign Relations, and visiting fellow, Institute for International Economics. The United States won’t go along with the French proposal. The Germans will go along with the French; so will the British and the Japanese. And the Canadians have already written off some of their loans. The Europeans and Canadians have wanted to do something for Africa for some time, but the United States blocked it. Recently Treasury Secretary Baker said at the African Development Bank that the United States won’t do anything for the African debtors, but that it won’t block any efforts by other countries, either. This opened the door, because in the past the United States has blocked debt-relief efforts. Baker doesn’t like the idea of debt relief for Africa. He fears the idea will spread to Latin America. Peter B. Kenen Professor of economics, Princeton University. My impression is that the summit countries, other than the United States, are reasonably sympathetic to the French plan. I’m not even sure that the Reagan Administration can act on Mitterrand’s proposal. There are statutory limitations as to what the Administration can do. The last thing that it wants now is to go to Congress and beg for debt relief for the poorest countries. This will make Congress ask for a wider debt relief to include Latin America. Britain’s Chancellor of the Exchequer, Nigel Lawson, prefers an approach to the African debt situation that emphasizes interest rate concessions to the poorest countries. Lawson would like to take the United States with him on his interest-rate-concession plan and is trying to bring Treasury Secretary Baker on board. Jorge G. Casteneda Graduate professor of political science, National University of Mexico. President Mitterrand has made this proposal with a certain degree of confidence that the Europeans and Canadians will follow and cancel some of their government loans. There is no chance that America will join in the plan with the French. The French may now be taking the lead on the third-world debt question. But it will be something quite different if they speak of writing off some of the large commercial loans to Brazil that were made by Credit Lyonaise or the other French banks. Stephan W. Dizard Vice president, corporate bond department, Salomon Brothers. I really see the initiative as a French move for French debt, but made in concert with the British and the Germans. There are legal considerations limiting the ability of the United States to follow suit, and Congress has been restrictive about loan repayments being on time. The question is whether there will be a spillover to the larger debtor countries. This is a judgment call right now. We don’t see any extraordinary requests for debt relief from Latin America. It does show, however, that the governments are willing to subordinate their debt. In practice, this means that if Sudan has $7 billion in Government debt and $960 million in bank debt, presumably the private creditors will receive more value if the Government debt is subordinated at some discounted rate. That is to say, if there is relief on the inter-governmental debt, then the repayment prospect for the private debt is also improved. |