Most of today's democratic leaders in Latin America are natural, or at least potential, allies of the United States. They are exactly the kind of interlocutors that were so scarce during the 1960s' Alliance for Progress: humane, moderate, pragmatic, reformist and disposed to cooperate with the United States. They are the region's centrists, trying to build political support against the appeals of ideologues of both the left and right. Most of them are more knowledgeable and realistic about economic issues than either the traditional politicos or the new technocrats, civilian or military. They know that structural reforms, continued austerity and financial responsibility will be expected of them, and they are ready to do their part.
These democratic leaders believe that the overwhelming threats in the Hemisphere are debt, poverty and unemployment--not guerrillas, Soviet influence or drugs. What they seek from Washington--apart from attention, sympathy and respect--is economic cooperation on a multilateral basis. They want the United States to help provide the breathing space that they require to maintain public backing while they tackle tough domestic issues. Specifically, they are urging Washington to take the lead in mobilizing additional credit for the region's development from the United States, Europe and Japan. They want Washington to work with the commercial banks and the international financial institutions to reduce or cap interest payments so that the burden of adjustment is more equitably shared by lenders and borrowers. They appeal to the United States to put its own fiscal situation in order through deficit reduction, and to beat back protectionist pressures that would hurt developing-country exporters. They are calling, in short, for a U.S. commitment to refurbish the international economic order.
Washington should respond positively to these appeals with a policy as comprehensive as the Alliance for Progress. The United States is no longer able, as it was in the 1960s, to provide billions in foreign aid, but it could help reduce the outflow of funds from Latin America to industrialized countries. The United States is no longer a hegemonic power in the Hemisphere, but it is still by far the most important external actor in Latin America. And so the United States must take the initiative if the region's crisis is to be turned to opportunity.
This is not the place to discuss in detail a new U.S. policy adequate for the late 1980s. In brief, it should include provisions to stretch out Latin America's debt for a generation; capitalize interest above an agreed rate; allow a share of interest repayments to be reinvested in the region; provide orderly write-downs of debt from those small countries that are hopelessly over-indebted; increase the resources available for lending by international institutions, and expand trade credits to facilitate Latin American imports in the context of resumed growth. The United States also needs to adopt trade policies that will reverse protectionist pressures; effective trade adjustment programs to assist displaced workers must be an integral part of trade policy.
The United States should adopt such measures not out of charity but out of self-interest. A more prolonged Latin American recession could lead to debt moratoriums or even defaults, with serious consequences for several major U.S. banks and perhaps for the entire commercial banking system. U.S. investors and exporters would also be further hurt if Latin America's depression continues. It is estimated that 800,000 jobs in the United States have already been lost because of diminished Latin American imports from this country. Latin America's recovery, in turn, would clearly help U.S. business, for this country has a strong comparative advantage in reaching that market.
Helping Latin America resume a reasonable rate of economic growth will be important to the United States in other ways. If the region's new democracies crumble, the United States will again be faced with a Hemisphere in which our core values, including respect for fundamental human rights, are at risk. Sustained depression in Mexico, Central America and the Caribbean would intensify the already considerable pressures for migration from these regions to the United States, and an expanded flow could arouse restrictionist and even racist sentiments in this country.