Latin Ministers Call for Relief on Debt : 6 Finance Chiefs Say Reduction in Payments Is Urgently Needed

RIO DE JANEIRO —  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 ministers agreed that a reduction in the transfer of resources abroad is an indispensable condition for adequately carrying out economic policy, as well as for a resumption of sustained growth,” the statement said. “They agreed that the reduction of the debt--principal as well as service--is the most appropriate instrument for reducing the transfer of resources.”

It said the ministers analyzed possible ways of reducing debt, “among them the establishment of multilateral mechanisms.” Their conclusions will be submitted to the presidents of their countries, “with a view toward a concerted effort for defining and establishing an effective program of debt reduction and development financing,” the statement said. “The establishment of such a program is a matter of urgency.”

While debt must be reduced, it said, the countries also need new financing for development.

The seven countries represented at the meeting owe about $350 billion of Latin America’s combined foreign debt of $420 billion. Brazil’s debt of about $115 billion is the biggest. Brazilian Foreign Minister Mailson Nobrega has said repeatedly that his country does not advocate the formation of a debtors’ cartel or other action that could trigger a confrontation with creditors.

In an interview published here over the weekend, Nobrega said he sees only three ways of reducing foreign debt:

Conversion of debt into investment equity, taking advantage of discounted debt paper offered by creditors on the “secondary market.”

Purchase by the International Monetary Fund of discounted debt, paid for with IMF special drawing rights.

Trading debt for long-term “exit bonds” with guaranteed government payment.

“Part of the debt is unpayable,” Nobrega said, echoing a sentiment that is growing strong throughout Latin America.

The other ministers at Monday’s meeting, which was scheduled after an October summit by their nations’ presidents, were from Argentina, Colombia, Uruguay, Peru and Ecuador. The presidents had said that the debt burden and unfavorable trade conditions “endanger political efforts to consolidate democracy” in Latin America.