Foreign Debts

The nation's foreign debt soared to an estimated $263.6 billion last year, with the United States lengthening its lead as the country with the world's largest debt, the Commerce Department reported Tuesday. The net foreign debt--which attempts to measure the difference between the amount foreigners own in the United States and the amount U.S. investors own abroad--more than doubled from a revised $111.9 billion for 1985.

Argentina's president, Cristina Fernandez de Kirchner, fired the nation's central bank chief Thursday after he refused to release $6.6 billion in foreign reserves to service the nation's mounting foreign debt. But questions over the legality of Fernandez's action have raised the likelihood of a double-barreled political and economic crisis. Fernandez's dismissal decree followed an emergency meeting with her ministers in the afternoon after bank head Martin Redrado rejected her call to resign.

A top official in Russia's new government said Thursday that the country will reverse its decision to freeze foreign debt payments and is ready to negotiate a new payment plan with international lenders. "Russia is ready for a dialogue, and in this connection the government would not like foreign partners to take tough measures against us," said Deputy Prime Minister Alexander N. Shokhin. "We call on banks to refrain from seizing Russian banks' assets abroad."

Declaring that "inhuman and cruel globalization" has failed his country, leftist economist Rafael Correa took office Monday with a promise to shift his nation toward socialism and to renegotiate the nation's $10.2-billion foreign debt. The 43-year-old Correa, who received his doctorate at the University of Illinois, became Ecuador's eighth president in 11 years. He was one of six leftist Latin American leaders to win office or be reelected in little more than a year.

Mexico and Yugoslavia urged that poorer countries be given the chance to accelerate their development so they can continue to repay their foreign debts. The two countries said if the conditions for development are not created, it is unrealistic to expect global economic recovery. The call was made in a joint statement issued after an official visit by Mexican President Miguel de la Madrid.

President Miguel de la Madrid said the sharp drop in oil prices will force Mexico to renegotiate payment of its $96.4-billion foreign debt. In a series of speeches he said the decline in oil earnings "worries all us Mexicans." Mexico depends on oil sales for about 70% of its foreign earnings, which are used to buy needed imports and repay its foreign debts. About $27 billion of Mexico's loans are held by U.S. banks.

After insisting it would pay its staggering foreign debts this year and next, Russia gave up and announced Wednesday it will have to ask its creditors to stretch out payments. The government was scheduled to pay $3.5 billion this year and $17.5 billion next year to foreign creditors. But First Deputy Prime Minister Yuri D. Maslyukov said, "Both tasks are too much for our weakened economy." Russia's economy was swept up in the global financial crisis last August.

Cuban President Fidel Castro convened hundreds of delegates here Tuesday for a "continental dialogue" on Latin America's foreign debt, a five-day meeting that has the makings of an earnest but tedious talkathon. What gives it a crackle of electricity, a hint of daring and danger, is Castro's latest pet project. He is campaigning for a foreign debt revolt among Latin American and Caribbean countries.

Envoys from 26 Latin and Caribbean nations ended a regional economic conference Saturday by demanding that payments on their foreign debts be linked to the performance of their individual economies. The envoys had also called Friday for a "political dialogue" to seek a solution between debtor and creditor nations and urged the United States to curb what they called a growing tendency toward protectionism.

The Philippines on Friday signed a $13.2-billion debt rescheduling agreement with more than 400 foreign commercial banks that includes provisions to allow conversion of some debt into ownership of Philippine property. According to Manufacturers Hanover Trust Co., head of the country's bank advisory committee, the pact reschedules $9.3 billion of debt over 17 years with 7 1/2 years of grace on repayment of principal. It also reduces the interest rate margin on the $9.3 billion from 1.625% to .

The Mexican stock market zoomed to a record high Tuesday after credit-rating firm Standard & Poor's lifted the country's debt rating. The main IPC share index jumped 243.40 points, or 1.9%, to 13,340.52, bringing its year-to-date gain to 3.3%. The index is off to a strong start after soaring 44% in 2003 and 47% last year.

Standard & Poor's Corp. raised Mexico's foreign debt rating to investment grade Thursday, a long-awaited seal of approval for President Vicente Fox's economic policies that recently have included steep budget cuts and unpopular tax and electricity rate hikes. The upgrade to BBB-minus from BB-plus by the rating agency often viewed as the most influential will reduce Mexico's cost of borrowing on international markets and generate a significant increase in foreign investment, analysts said.

The man set to become Argentina's newest caretaker president is expected to announce today that his government will temporarily stop making payments on its massive foreign debt, as this nation struggles to recover from a week of violence and political upheaval brought about by the collapse of its economy. Political observers here said late Saturday that Adolfo Rodriguez Saa was likely to be sworn in this morning as Argentina's third president in a week.

The International Monetary Fund said Tuesday it is prepared to provide $8 billion in new loans to help the government of Argentina keep its ailing economy afloat and avoid a potential default on its foreign debt. IMF Managing Director Horst Koehler urged the fund's executive board to boost Argentina's existing $14-billion credit line to $22 billion, the IMF said.

At birth, each child born in Latin America owes a symbolic $1,550 in foreign debt. Nearly 50 out of every 1,000 Latin American children will die before their 6th birthday. Children who manage to survive their first five years probably won't complete elementary school. They likely be forced to work on the streets--or beg--before becoming a teenager. They'll live in a slum without clean water and be malnourished.

South Korea's financial regulator said today that Daewoo Group and foreign creditors have reached a debt restructuring agreement. Daewoo Group's local creditors agreed to buy the company's debt to foreign banks in a move aimed at saving the South Korean conglomerate from bankruptcy. "Foreign creditors agreed to accept 39% to 40% of collection rate of their debts to four Daewoo affiliates," said a spokeswoman at the Financial Supervisory Commission.

When eight Latin American presidents gather in Acapulco for the largest regional summit in 20 years, they are expected to concentrate on the troubled--even desperate--state of their economies. Thursday's summit, the largest of its kind since 1967, will bring together leaders who are likely to issue a fresh plea for help to ease the foreign debt burdens that have drained their developing economies.

In a show of debtor unity, six South American finance ministers met here Monday and agreed that concerted, urgent measures are needed to reduce foreign debt payments by their countries. A joint statement by the six ministers and a special representative from Mexico did not give details on any action to be taken, but it emphasized that funds now used to service foreign debts are needed to finance economic development.

The gap between revenue and spending in Russia's 1999 budget will be too monstrous to even be called a "deficit," and the government has no idea where to find money to plug the hole, a senior finance ministry official said Friday. Russia, facing its worst economic crisis since the Soviet collapse, is seeking relief from creditors as it faces the inability to repay all its foreign debts next year, another official said.

After insisting it would pay its staggering foreign debts this year and next, Russia gave up and announced Wednesday it will have to ask its creditors to stretch out payments. The government was scheduled to pay $3.5 billion this year and $17.5 billion next year to foreign creditors. But First Deputy Prime Minister Yuri D. Maslyukov said, "Both tasks are too much for our weakened economy." Russia's economy was swept up in the global financial crisis last August.