Iron Triangles and Revolving Doors: Cases in U.S. Foreign Economic Policymaking

By Raymond Vernon; Debora L. Spar et al. | Go to book overview

4
International Debt and the Creation of the Brady Plan

On March 10, 1989, Treasury Secretary Nicholas F. Brady announced a fundamental change in U.S. policy toward the debt of developing countries. For the first time, the new strategy focused on reducing the overwhelming burden of such debt. In announcing the new approach, which was quickly dubbed "the Brady plan," Brady said, "The path toward greater creditworthiness and a return to the markets for many debtor countries must include debt reduction." 1 To assist in the process, he called on the World Bank and the International Monetary Fund ( IMF) to play new roles by providing additional resources to debtor countries to support debt reduction operations. Doing so, Brady said, "could lead to considerable improvements of the cash flow positions of debtor countries." Although Brady did not explicitly say so, insiders also knew that the first beneficiaries would be Mexico, and perhaps Venezuela.

In a choreographed fashion, Japanese authorities immediately announced that they supported the plan and were ready to commit financial resources to see it implemented. 2 With various levels of enthusiasm, officials from other industrialized countries also announced support for the change. 3 Latin American governments welcomed the proposal as a step in the right direction, although they were skeptical that the plan would go far enough. 4

For a fundamental change in strategy, however, Brady's speech was remarkable in its understatement. This characteristic was not lost on one close observer, Rep. James Leach ( R.-Iowa), who later said, "This was a speech that was more important to Latin America than any in recent years. Yet Brady did not define the grandness of the endeavor; there was no sense that this was a major departure. It was a professional understatement; not at all what one might expect from a political figure." 5

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