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World Bank Chief Opposes Debt Proposal : Plan Would Forgive Part of Latin Loans

November 13, 1986|Associated Press

WASHINGTON — World Bank President Barber Conable on Wednesday voiced strong opposition to a proposal by Sen. Bill Bradley (D-N.J.) to help ease the Latin American debt crisis through partial loan forgiveness.

The plan, expected to be given new momentum with the Democratic takeover of the Senate, could backfire, drying up sources of new bank loans to those nations completely, Conable suggested.

Instead, Conable told the National Assn. of Manufacturers that a rival plan advanced by Treasury Secretary James A. Baker III calling for $29 billion in new loans should be given more time to work.

Conable said the so-called Bradley Plan would do little to revitalize troubled Latin American economies. He said the Baker proposal, which ties new loans to economic reforms within the recipient nations, stands a far better chance of succeeding.

The Bradley proposal would cut the interest rates on international loans by 3 percentage points and cancel 9% of the principal that debtor nations owe over three years.

Bradley Legislation

Bradley has sponsored legislation calling on President Reagan to convene an international debt summit to discuss his proposal and other new strategies for dealing with the Third World debt issue.

Bradley aides said Wednesday that they anticipate quick action on the measure when Congress reconvenes in January with Democratic majorities in both chambers.

Conable, a former Republican congressman from New York, said commercial banks would balk at making new loans where corresponding steps were not being taken to spur growth.

"How do you get the additional capital? (Banks) simply won't come forward to make the new loans," Conable said.

Bradley, responding to Conable's remarks, said: "I predict that within 18 months, the World Bank will recognize that throwing good money after bad will not save American jobs or protect Latin American democracy.

"Only debt and interest rate relief coupled with new lending by multilateral institutions offers the possibility of a growth partnership between the United States and Latin America," he said in a statement.

The Baker plan would make $29 billion available over the next three years to 15 debtor nations, most of them in Latin America, that have debts totaling nearly $450 billion. Of the $29 billion, $20 billion would come from commercial banks.

Conable said the Baker approach made more sense, at least from his vantage point as head of the 151-nation lending organization.

"Commercial banks must be convinced that old debt and new debt will be better managed by a growing economy," he said.

The first loan package to be put together under outlines of the Baker plan is a $6-billion relief plan for Mexico. Conable, who is helping assemble the package, said its "critical mass" of private bank loans now has been put together.

Completion of the package, which also includes about $2 billion in new loans from the World Bank and International Monetary Fund, should be announced soon, Conable said.

On another subject, Conable praised recent steps taken by Japan to stimulate demand for the products of other nations and to pump funds into the economies of some developing nations.

He said recent loans by Japan to Colombia and Mexico "were not tied to the purchase of Japanese goods--and that's good news."

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