Magazine article American Banker

Latin Debt Paring 'Barely Beginning.'

Magazine article American Banker

Latin Debt Paring 'Barely Beginning.'

Article excerpt

Latin American economies took a small step, towards recovery in 1984, but their medium-term outlook remains grim, according to the Inter-American Development Bank.

In "Economic and Social Progress in Latin America," the IADB's annual report on economic and social progress in the region, the Washington-based lender reports that the favorable performance of the world economy last year helped to halt the downward trends seen in Latin America since 1982.

But it said that debt-servicing costs, low commodity prices, and resurgent protectionism threaten future gains.

Overall last year, the region's gross domestic product increased by 3.1%, raising the per capital GDP by 0.6%. This compares to a 10% decline in per capita output seen over the 1982-83 period.

The main problem continuing to face the region, the IADB says, is how to cope with its $360 billion foreign debt, while generating enough resources to improve investment levels in both the productive and social sectors.

"A fundamental conclusion of the analysis," says the 441-page report, "is that the adjustment process--in the sense of a positive structural adaptation to a changed external situation--is barely beginning in most of the countries, despite the apparent success of several countries over the past two years in generating sizable trade surpluses with which to service their external debt."

Seek Fixed Rates, Long Term

For the most part, the income generated by the trade surpluses has gone towards interest payments, the report notes, pointing out that "total resources available for investment have declined dramatically."

"The depressed levels of investment recorded in most of the countries in the 1983-1984 period appear incompatible with the achievement of sustained real rates of economic growth over the medium-term sufficient to service external debt obligations and gradually improve living standards," it states. …

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