Argentine President Suggests Interest Rates be Frozen
BUENOS AIRES, Argentina (AP) _ President Raul Alfonsin said Tuesday that ″unconventional″ ways must be found for Latin American countries to repay their massive foreign debts, and he suggested one way would be to freeze interest rates.
″Beginning next year, we people of Latin America will begin to find unconventional solutions to resolve the problem of foreign debt,″ Alfonsin said in an opening address to the 12th annual assembly of the Latin American Parliament.
″These (unconventional solutions) cannot occur without a freezing of interest rates, and cannot take second place to the march of the economies of the developed countries,″ he said.
Argentina, Brazil and Mexico are the three developing countries with the highest foreign debt. Argentina recheduled last year most of its $56 billion debt, but still has a hard time repaying interest that this year will total about $4.6 billion.
Neighboring Uruguay’s $5.3 billion debt, divided theoretically among its 3 million citizens, is one of the highest per capita in the world.
Argentina currently is negotiating with the International Monetary Fund for a $1.2 billion standby loan, after which it plans to seek new loans from commercial banks to help meet its interest payments.
The loans, made mainly after the oil price increases of the 1970s, are tied to interest rates like the U.S. prime lending rate and the London Interbank Offered Rate, or LIBOR.
Earlier this month, the U.S. prime rate rose by half a percentage point to 10 percent. As interest rates rise, so do repayment costs on the approximately $1 trillion owed by Third World countries to foreign creditors.
″You can’t keep looking distractedly at the situation of Latin America, whose economies are devastated as if there had been a war,″ said Alfonsin, who has never called for a debt moratorium but has urged creditor nations to lower interest rates.
The Latin American Parliament, comprised of legislators from member countries and having no legislative power of its own, was to take up the issue of drug trafficking and the political situation in Central America, as well as the foreign debt question, before concluding on Saturday.