Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

179. Minutes of an Interagency Group–International Economic Policy on International Debt Meeting¹

Washington, January 24, 1985

Minutes of the IG–Debt Meeting of January 24, 1985

1. Treasury opened the meeting by summarizing the points made in the background papers for each agenda topic.² With respect to the first subject, “A Review of the Overall Debt Situation,” Treasury’s impression was that we had reached a watershed in the evolution of the debt problem with all the major debtors having made progress toward adjustment or at least having committed themselves to the IMF programs that would have that effect if implemented properly. The exception was Nigeria. The problem with major debtors would now be one of whether or not they could remain in compliance with the programs. The outlook for continued growth in the industrial countries, the level of interest rates and inflation was also favorable. Nevertheless, progress was uneven and we might have problems in the future with medium-size debtors like Chile, Peru and Colombia.

2. STR wondered whether there would be sufficient net new bank credit to the debtor countries in view of banks’ attitudes. Should we be updating the study made a year ago in which credit availability was projected? In response, the FRB referred to a study in the October issue of the FRB Review which indicated that credit could grow six percent per annum and still be compatible with a reduction in LDC exposure relative to bank capital.³ As to the general situation, Mexico and Brazil had done better than expected but still faced problems of internal adjustment.

3. On the second agenda item, Treasury said that we had achieved some of our objectives of obtaining a more flexible format which would favor dialogue but there was still resistance to our idea of a simple barebones communique that would not have to be laboriously negotiated in advance. Commerce asked whether we were doing the necessary analytical work for the April Interim and Development Committee meetings.⁴ Should not we be planning now what we are prepared to do under various scenarios. State felt it would be difficult to plan ahead but we must keep an open mind. FRB thought the principal issue at those meetings was medium term adjustment of the LDCs. We ought also to take a more liberal view on international trade and he referred to the multilateral trade initiative that is being studied by several agencies. NSC pointed out that in their deliberations issues were always considered from the point of view of their effect on the debt strategy.

4. State asked if anything fundamental had changed in our position and whether we ought to consider some minor concessions. Treasury replied that we ought to maintain our present position which contemplated no concessions. Treasury saw this meeting as having no necessary sequel. Naturally, since we were serious about the need to have a dialogue, discussion could not be pre-cooked. There was always a risk inherent in that situation that something would come out that would have to be considered subsequently.

5. With respect to the third agenda item “Coordination of Export Credit and Debt Policy”, Treasury said that a number of discussions in recent months continue to reveal differences in the willingness of other export credit agencies to cut off credit as debt crises appear or resume cover when countries were taking appropriate adjustment measures. We were seeking practical ways to further our objectives of closer coordination between the debt strategy and export credit policies.

EXIM pointed out that most export credit agencies had traditional operating rules as exemplified in the meetings of the Bern Union. They wanted to avoid criticism and pursued a somewhat narrow definition of self-interest. Treasury wondered whether this was not a topic for the spring meetings,⁵ something which would show U.S. policy in a more favorable light. Others noted that it might be useful to talk to other countries extending credit before we decided what to do.

1. Source: Reagan Library, Roger Robinson Files, Subject File, SIG–IEP 01/23/1985—02/14/1985; NLR–487–6–19–10–4. Limited Official Use. The meeting took place at the Department of the Treasury. No drafting information appears on the minutes. Sent under a February 6 covering memorandum from Edward Stucky to multiple recipients.
2. Copies of the background papers for the agenda items for the meeting are in the National Archives, RG 56, Records of the Office of the Secretary of the Treasury, Official Files of the Executive Secretariat, 1985, UD–11W, 56–88–79, Box 62, SIG–IEP, Jan–Jun ’85. The three agenda items were: “1) A review of the overall LDC debt situation; 2) Objectives for the Interim and Development Committee meetings in April; and 3) Coordination of export credit and debt policy.” (Memorandum from Christopher Hicks to multiple recipients, January 22; ibid.)
3. Not found.
4. The IMF and World Bank Interim and Development Committees were scheduled to have a dialogue at their April 17–19 meetings on the prospects and policies for adjustment, growth, and balance of payments sustainability over the medium term.
5. Presumable reference to the spring meetings of the IMF and World Bank Group.