US Gives Visiting Ecuador Leader an Uncertain Picture of Baker Plan; Officials Are Vague on Initiative; Benefits to Andean Nation May Be Limited

American Banker, January 20, 1986 | Go to article overview

US Gives Visiting Ecuador Leader an Uncertain Picture of Baker Plan; Officials Are Vague on Initiative; Benefits to Andean Nation May Be Limited


WASHINGTON -- Last week's visit here by President Leon Febres-Cordero of Ecuador resembled a coronation. U.S. officials vied to bestow warmer accolades on the only Latin American head of state elected on a free-market platform.

But official Washington's cautious words in the benefits that might accrue to Ecuador from the highly publicized "Baker plan" indicate that the three-month-old initiative may amount to less than is widely expected.

Announced by Treasury Secretary James Baker 3d in Seoul in October, the proposal calls for an increase of some $29 billion in credits for debt-strapped Third World nations over the next three years.

Commercial banks are expected to provide $20 billion of the total, with multilateral lenders putting up the rest. The funds are to be made available to countries that reach agreements on economic policy acjustments with both the Internatinal Monetary Fund and the World Bank. The idea is to promote growth under conditions carefully monitored by those institutions.

But ever since the plan became widely debated, and both the banks and the multilateral institutions praised it, no action has been forthcoming.

Ecuador's conservative president has already implemented a Baker-style economic program. He has reduced subsidies, opened up the country to foreign investment, and reached two unprecedented multiyear rescheduling agreements with commercial banks and the Paris Club on the nation's estimated $7.3 billion debt. And Ecuador has declared itself the perfect candidate for the Baker initiative.

Indeed, during Mr. Febres-Cordero's visit, loans worth more than $100 million were signed with the World Bank for the agricultural sector, tied to policy adjustments that U.S. officials described as in the direction prescribed by the Baker plan. Negotiations for the loans, however, began before the U.S. plan was announced.

Alberto Dahik Garzozi, an economics adviser to Mr. Febres-Cordero, said in an interview that Ecuador is negotiating a $100 million industrial-sector loan with the World Bank and has begun discussions about a similar loan with the financial sector.

Mr. Febres-Cordero said he is seeking $500 million in new funds to restore growth to Ecuador. An aide said the figure -- reflecting needs for the next four years -- could double if oil prices fall dramatically.

Some 60% of Ecuador's export revenues come from oil sales, and the nation loses an estimated $25 million with each $1 drop in the price per barrel. …

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