Date: Fri, 13 Nov 1998 11:01:29
From: Njoki Njoroge Njehu <wb50years@igc.apc.org>
Subject: Sign-on for Central America Debt Cancellation
RESPOND TO: <naimanr@preamble.org>
Support Immediate Debt Cancellation for Honduras and Nicaragua in
the Wake of Hurricane Mitch
To:
Members of the United States Congress
Robert Rubin, Secretary of the Treasury
Michel Camdessus, Managing Director, International Monetary Fund
James Wolfenson, President, World Bank Group
With Hurricane Mitch, Honduras and Nicaragua, two of the poorest
and most indebted countries in Latin America, have been hit by
what may be the worst disaster they have ever faced. In response
to the humanitarian emergency, we call for the immediate and
unconditional cancellation of the external debt repayment
obligations of both countries, and substantial debt reduction for
El Salvador and Guatemala, both also severely affected by the
hurricane. The disaster has removed the ability of these
countries to repay external debt. All available resources should
be used address to the needs of the population in this crisis.
Recent press reports indicate that the reconstruction effort
will cost billions and take many years.
Both Honduras and Nicaragua, as heavily indebted poor countries,
were supposed be eligible to receive relief on their debt
obligations in the future in return for complying with IMF
"structural adjustment" economic policies. But debt cancellation
should be immediate and unconditional so the countries can use
their limited resources for rebuilding their social and physical
infrastructure rather than diverting resources to export
promotion. The devastation caused by the hurricane is making any
delay immoral and inhuman. Honduras and Nicaragua are among the
poorest countries in Latin America, with a per capita GDP of
less than $700. In both countries, the burden of foreign debt
service and structural adjustment has weakened the social
infrastructure and contributed to the toll of the disaster. The
health and education system in both countries has been in a poor
state for more than ten years. A major cause is that more money
has been spent on servicing debt than on health or education. In
1997, Honduras spent over $410 million on debt service while
allocating only $16 million for the purchase of medical
equipment now so urgently needed. In 1996 debt service was 80%
of government revenue. Nicaragua is not doing much better, with
51% of government revenue used for foreign debt service. Total
debt service for Nicaragua was $221 million in 1996. In 1998,
international creditors expect debt service payments of $450
million from Honduras and $300 million from Nicaragua, over $2
million each day.
Debts to international financial institutions, including the
Inter-American Development Bank, should be canceled immediately.
With the International Monetary Fund set to receive $90 billion
in new quotas, including $18 billion from the U.S., debt
repayments from these devastated countries to international
financial institutions would be an obvious misallocation of
desperately-needed resources. It would not make sense to send
humanitarian relief to these countries while demanding that they
pay out more in debt servicing -- over $1 million a day in the
case of Honduras and nearly that amount for Nicaragua --than
they will receive in aid.
The bilateral debt of these countries owed to the United States
should also be canceled immediately. Former Presidents Bush and
Carter have both called for immediate action on the debt issue
in the wake of the crisis. Both France and Cuba have already
erased the debts owed them by these countries, and other
creditor nations are supporting debt cancellation. But the U.S.
has remained silent on the need for debt cancellation. We
emphasize that debt cancellation must not be conditioned on
compliance with IMF structural adjustment programs or similar
demands. Demands for government austerity are surely
inappropriate in the face of sudden and massive homelessness,
disease, and hunger.
More than 25,000 people have now been reported dead or missing.
Ten times that number may be in jeopardy from malaria and other
diseases. Tens of thousands of survivors are threatened because
they cannot easily be reached with food, drinking water and
medicine. Two and a half million people are homeless. Rebuilding
will cost billions. Honduras and Nicaragua need to build homes
for 20-25% of their population. This disaster will take the
affected nations, already two of the poorest countries in Latin
America, decades to overcome. Half-measures such as debt re-
scheduling or a "debt moratorium" would be insufficient.
Anything less than cancellation of the monumental, unpayable
debt burden would extend and deepen the suffering of the
victims.
Broad coalitions of social organizations in Honduras and in
Nicaragua have called for cancellation of debt. The export base
of Honduras and Nicaragua has been devastated, so these
countries will lack the foreign currency for repayment of debt.
The governments of both countries estimate that reconstruction
will take between twenty and forty years. We call for the full
cancellation of foreign debts, including both bilateral and
multilateral debt, in the face of this overwhelming catastrophe.
Thank you for your consideration of our concerns.
Nicaragua Network
Latin America Emergency Response Network
50 Years Is Enough: U.S. Network for Global Economic Justice
Friends of the Earth
Essential Action
Preamble Center
Jubilee 2000 Afrika Campaign
: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :
Njoki Njoroge Njehû
Director
50 Years Is Enough Network
1247 E Street, SE
Washington, DC 20003 - USA
Phone: 202/IMF-BANK; 202/544-9355
Fax: 202/544-9359
Email: wb50years@igc.org
Web: http://www.50years.org