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Baker Calls Bankers to Debt Meeting : Explains Details of Plan for More Credit to Worst-Off Nations

October 01, 1985|United Press International

WASHINGTON — Top executives from leading U.S. banks were summoned to the Treasury Department today to discuss renewed lending to Latin America and other international debtors.

Treasury Secretary James A. Baker III said the meeting was called because he is preparing a major new U.S. initiative to help the most debt-burdened developing countries.

Baker said he summoned the banking executives to explain details of the proposal he will formally announce next week in Seoul, South Korea, where the World Bank and the International Monetary Fund are holding their 40th anniversary joint meeting.

Baker said he thought it was important to talk to "some leading American bankers about what we have in mind before we surfaced something since it will clearly involve them."

There has been speculation that the Administration wants commercial bankers to begin to lend additional money to Mexico, Brazil and other countries in cooperation with the World Bank instead of just rescheduling existing debt.

Today's meeting was scheduled for 6 p.m., one day before Baker and many of the banking executives leave for Seoul.

The Treasury Department had hoped to keep the meeting secret, but Baker confirmed it after details began leaking out.

Short Notice

Sources at three New York banks earlier told United Press International that banking executives were called to Washington on extremely short notice, with their chairmen receiving invitations from Baker on Monday morning.

The meeting is being held as the world debt problems show signs of lapsing into an acute crisis again. The world debt has been kept manageable for the last three years only through extraordinary rescheduling agreements.

The Reagan Administration also is expected to serve notice on the banks that it wants to work out a way in Seoul for them to cooperate with the World Bank and the IMF to begin channeling new credit to other countries instead of merely rescheduling and extending previous loans.

Mexico, which owes almost one-third of the $360 billion owed by Latin American countries, last week prepared to negotiate the first voluntary commercial bank lending to Latin America since the debt crisis erupted in late 1982 when Mexico declared a moratorium on repayments.

But the borrowing effort collapsed when Mexico's summer difficulties with the International Monetary Fund drew new publicity. And the devastating earthquakes added a new layer of uncertainty to Mexico's problems, although some analysts say it could make the country eligible for disaster credits that would not have been available otherwise.

Administration officials are known to consider Mexico's new credit difficulties as a potential major setback to the recovery of all Latin America that in turn could magnify U.S. trade deficits.

Diminished Role

Mexico, together with other Latin countries, had to diminish its role as a major customer for U.S. goods when debt problems forced the adoption of national austerity programs.

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