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Lunch with Lord Shawcross
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Hail, worth it -only plan (vi)
The Secretary of State had lunch with Lord Shawcross of Morgan Guaranty and two of his colleagues of 4 October. I was also present. Nothing of great interest came up. The Morgan Guaranty side seemed most interested in a general read out of the Secretary of State's political views on various issues, but the following points may be worth recording:
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Lord Shawcross said that Morgan Guaranty was doing very well in general. Although they were a little overlent in Mexico and Brazil, they had avoided' over-commitment elsewhere, unlike many other
banks.
The Morgan Guaranty team were very concerned about the prospects for the IMF quota increase in Congress and the attempts by its opponents in the US to present it as a mechanism to bail out private banks' past mistakes. The Secretary of State shared this concern and commented that while it was true many banks had lent imprudently in recent years, they had been encouraged to do so by a climate of inflationary expectations which had been fostered by governments in general.
The Morgan Guaranty team agreed that Brazil's debt problems were the most serious on the scene at the moment. They were structural and required very considerable economic changes in Brazil. There was little sign that the required grasp of the problem, political leadership, or will existed. Even with a tough adjustment programme, it would be well into the 1990s before Brazil's problems could be overcome.
The Morgan Guaranty side agreed that Mexico had so far come through remarkably well, but were doubtful that the economic and social strain imposed by current Mexican policy could be sustained for more than another year or so.
There was some discussion of the Falklands (both Lord Shawcross' colleagues had been born and lived in Argentina). There was no inclination to dispute our view that there seemed no way of mounting a political initiative in. the foreseeable future. The Morgan Guaranty team also agreed that the impact on our wider relations in Latin America had been remarkably small so far.
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