171. Memorandum of Conversation1
SUBJECT
- Meeting with French President Francois Mitterrand
PARTICIPANTS
- The President
- Secretary of State George P. Shultz
- Secretary of the Treasury Donald T. Regan
- Edwin Meese III
- Robert C. McFarlane, Assistant to the President for National Security Affairs
- Ambassador Van Galbraith
- Under Secretary of State Allen Wallis
- Assistant Secretary of State Richard R. Burt
- Richard G. Darman
- Tyrus W. Cobb, NSC
- Alec Toumayan (Interpreter)
- President Francois Mitterrand
- Foreign Minister Claude Cheysson
- Finance Minister Jacques Delors
- Spec. Asst. to the President Jacques Attali
- Presidential Spokesman Michel Vauzelle
- Advisor/Office of the President Pierre Morel
- Advisor/Office of the President Hubert Vedrine
- Advisor/Office of the President Madam Guigou
[Omitted here is discussion not focused on international debt.]
President Mitterrand then turned to the question of global indebtedness. He indicated that France felt the situation facing many of [Page 446] the underdeveloped and developing countries was nearing the crisis point, particularly in Latin America, Africa and Asia. President Reagan responded that indeed we needed to be concerned about the problem of LDC debt, but that we felt that the proper approach was to address each country’s problem on a case-by-case basis. He asked Secretary Regan to further elaborate on this point.
Secretary Regan observed that considerable progress had been achieved since 1982. The Paris Club has handled over 60 billion dollars in debt rescheduling. On the horizon, he felt that the Philippines, Venezuela and Argentina needed particular attention. Again, however, we felt the best approach was to treat these countries on a case-by-case basis. No one formula, Secretary Regan pointed out, would be applicable to all countries facing debt problems. The London Summit should, above all, not make promises in declarations that cannot be fulfilled.
President Mitterrand agreed that we should avoid issuing promises that cannot be kept. There were two general problems associated with LDC indebtedness. First, there is a common basis for all of their problems. The underlying basic debt situation is the same even though the solution must be individualized in each case. We must apply common sense as we search for a solution. We have the reverse of the normal situation where the creditor approaches his debtor—here, the debtor approaches his creditor. It is the easy way out to use your indebtedness as a way to finance your needs. It is usually the first thing that comes into many people’s minds; that is, to have someone else’s money solve your financial problems. If you are a small debtor, you are crushed; if you are a major one, you are respected.
Secretary Regan agreed, noting that the larger countries have worked out their debt problems better than the smaller ones. Mexico is addressing its indebtedness problem quite properly and we are prepared to move to the next stage with the Mexicans. President Mitterrand said that LDC indebtedness was a difficult issue, but at any rate we would discuss it this week. Further, our Finance Ministers, meeting separately, will have to come to grips with this important issue. Secretary Shultz added, “be grateful that the Foreign Ministers are not discussing it!”
President Mitterrand pointed out that the second major issue of importance was that of the North-South relationship. We must not allow a situation to develop where the North-South relationship becomes antagonistic. We must avoid the emergence of two hostile blocs of countries, or even the appearance of this.
Secretary Shultz mentioned a recent speech given by the head of the International Monetary Fund (IMF), Jacques de Larosiere, from France. His address on Third World indebtedness received much attention and we felt that much of what he said in that speech needed saying, [Page 447] particularly the comment that, as a first order of business, these nations needed to help themselves.
President Mitterrand agreed that assistance must begin at home. He was particularly concerned about the situation in Tunisia and Morocco where the IMF terms required that the government increase food prices. A lot of political structures may be swept away because of such stringent procedures. (This was an apparent reference to recent rioting in Tunisia and Morocco in January when food prices were increased.) Shultz said that the way nations could help themselves best was to attract equity capital. The most pressing requirement these countries faced was a need to attract capital. President Mitterrand pointed out that, while this was true, the problem was that capital was flowing toward the United States. Secretary Regan interjected that this was not the case, that the capital apparently flowing toward the United States was only being “repatriated.” Shultz added that nations must balance their debt and debt service ratios.
The President observed that our recent trip to China was quite a spectacular visit. We were particularly impressed by the manner in which the Chinese were encouraging foreign investment and attempting to attract foreign capital. This is an example of how nations should act. President Mitterrand interjected that the Chinese example is not entirely applicable since it is a country that is both poor and powerful; thus, it is a country that meets the classic definition of a nation that was able to develop. The President agreed, but said that although the problems facing the Chinese were large, their efforts to address their debts were equally impressive. For example, they have 1 billion people, but only one third of the arable land that the United States possesses. This practically condemns them forever to be a food importing country.
The President thanked President Mitterrand for coming to Winfield House.
The meeting closed at 6:35 p.m.
- Source: Reagan Library, Executive Secretariat, NSC Trip File, [London] Summit—May–June 1984; NLR–755–19–9–5–9. Confidential. No drafting information appears on the memorandum.↩