ebtor Concertation
CONFIDENTIAL
iv
7 In late October Presidents of Latin America G-8 countries* issued a "Declaration
of Uruguay" calling for, inter alia, urgent talks on debt with the new US
administration. A follow-up meeting of G-8 Finance Ministers has been held in
Rio de Janeiro to prepare a new dialogue with creditors and to discuss intra-regional
debt concessions. (Brazil is owed about $3 bn by other countries in the region and
much of the debt is not being serviced. Brazil is seeking the consent of members of
the Paris Club to be accorded preferred creditor status in Club restructurings
involving other Latin America countries.)
8 The "Declaration" may well prove as toothless as the earlier Commitment".
Nevertheless, elections are producing a new crop of Latin American leaders who are
committed to a tougher stand against creditors. In the face of a more difficult
economic climate and with the prospect of voluntary access to overseas capital
apparently no nearer, attempts to act in concert (for example the imposition of a
unilateral limit on debt service so as to restrict outward resource transfers) cannot
be ruled out.
Secondary Market
9 Prices have fallen sharply since the late summer (Chart 3). It appears that
non-money centre banks in the US have continued to dump their relatively small
exposures in order to boost the market price of their equity (Table 1). Heavy sales
have also been made by some Canadian chartered banks ahead of their end-October fiscal
year. Most recently, prices are reported to have fallen sharply in response to
Irving Trust's indiscreet request for a valuation of its $500 mn portfolio of Latin
American debt ahead of the bank's acquisition by Bank of New York. Demand for debt
has also been reduced by the suspension of Mexico's debt equity programme. Brazil
has also banned state enterprises from participating in informal swaps and the
suspension or scaling down of its official auctions is also rumoured. Another factor
apparently depressing prices was the emphasis given at the Berlin meetings to debt
reduction.
10 Having secured the necessary waivers from its bank creditors, Chile has used its
own resources to repurchase about $300 mn of its debt at an average price of 56.3 c in
the dollar, close to the prevailing market price.
*
Panama,
Argentina, Brazil, Colombia, Mexico, Panama, Peru, Uruguay and Venezuela. however, did not attend. The Group first met a year ago, issuing their "Acapulco
Commitment".