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Castro Call to Repudiate Debt Falls on Deaf Ears

July 26, 1985|JUAN de ONIS | Times Staff Writer

RIO DE JANEIRO — Cuban President Fidel Castro's call for Latin America to collectively repudiate its foreign debt has fallen flat.

The governments of the two largest debtors in the region, Mexico and Brazil, have dismissed the idea of a debtors' rebellion as politically undesirable and financially irresponsible.

Mexican President Miguel de la Madrid, facing a crisis from declining oil prices, announced internal economic reforms this week but said that a debt moratorium is "out of the question."

Mexican Finance Minister Jesus Silva Herzog said, "This solution may seem attractive at a theoretical or emotional level, but it would be an irresponsible decision because it would have adverse effects on future economic development."

Brazilian President Jose Sarney, whose government owes $100 billion abroad, said early in the week that the debt is not an "ideological weapon" and should not be made into an issue for "East-West confrontation."

Political Hot Potato

In a region where most countries have been in recession since 1982, and low commodity prices and protectionism in industrial markets make trade prospects dim, the collective debt of $360 billion is a political hot potato.

Bolivia has halted payments to foreign private banks because it cannot pay for even essential imports. Peru's debt is also in arrears. Democratically elected governments, such as that of Argentina's Raul Alfonsin, are resisting heavy pressure to break with their creditors.

There is a strong sense among Latin American political and economic leaders that high interest rates and tough repayment terms make the debt, owed primarily to private international banks, a major obstacle to economic recovery.

Breaking with the creditors, though, would mean losing access to the Western international financial system, which provides credit and commercial financing necessary to maintain most foreign trade. That means the debt cannot be written off as just a problem of the past; it would remain a problem of the future.

On Cuban Computer

Castro has put much of the available data on the cost of the debt service, interest rates and trade flows into a personal computer in his offices in Havana. Visiting politicians, union leaders and journalists are shown the printout, with the pronouncement that the Latin American debt "can never be paid."

The Cuban leader is playing host to a meeting July 30 in Havana on his debt-repudiation proposal. However, virtually no one who has responsibility for debt decisions in Latin America is attending, and it apparently will be a low-level debating exercise.

President Belisario Betancur of Colombia, who recently has been in frequent contact with Castro over Central American issues, declined an invitation to send an official representative to the Havana meeting. So did former President Alfonso Lopez Michelsen, of the Colombian Liberal Party, which is in opposition to Betancur.

This is not the first time Castro has adopted the pose of speaking for Latin America.

In 1959, just three months after overthrowing the regime of Fulgencio Batista, Castro traveled to a regional economic conference in Buenos Aires and demanded $20 billion in U.S. aid to Latin America. The Eisenhower Administration rejected that proposal as anti-American grandstanding.

Two years later, President John F. Kennedy launched the Alliance for Progress, pledging $10 billion to Latin American over a decade.

Relatively Isolated

In the last 20 years, though, Cuba has been relatively isolated from Latin America, first by a U.S.-sponsored political and economic embargo, then by Cuba's integration into the Soviet economic system.

Cuba depends on Moscow for its oil and sells most of its export crops, mainly sugar, to the Soviet Bloc. It gets industrial supplies from Canada, Britain, France and Spain, and occasionally has sought them in Argentina, but has been limited by a lack of foreign exchange.

Cuba is less than $10 billion in debt to Western institutions--credit essential for Cuban trade--and Castro has made no threat to repudiate that.

Therefore, the Cuban leader's attempt to become a champion of Latin American debt repudiation has little to do with the region's economic burden. It is mainly an attempt to rally political support for Cuba among Latin political and intellectual movements.

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