Jubilee 2000: Cancel Debt in Wake of Mitch (fwd)

[Robert Weissman <rob@essential.org>]

---------
Jubilee 2000/USA Campaign 

Action Alert, November 12, 1998

Call for Cancellation of Debts of Countries Affected by Hurricane Mitch!

 Debt Payments by Honduras and Nicaragua of $2 Million a Day Undermine 
Reconstruction Effort

The Jubilee 2000/USA Campaign, together with sister campaigns in Nicaragua,
Honduras, Great Britain and elsewhere, is calling for immediate cancellatio 
n of the foreign debts of Central American nations affected by Hurricane 
Mitch, particularly Honduras and Nicaragua which have been the hardest hit. 

The Clinton Administration has been silent about the issue of debt since the 
disaster struck, failing to back up the call for debt cancellation made by 
former President Jimmy Carter and other world leaders.  On Monday, Central 
American heads of state met in El Salvador and issued an urgent appeal for 
debt relief, as well as greater emergency assistance.

The US government has plans to provide a total of $80 million in disaster 
assistance.  Much more should be provided.  Yet Nicaragua and Honduras are 
obliged to pay back over $80 million in debt payments every five weeks!  Two 
million dollars a day!  Guatemala and El salvador als carry substantial debt 
burdens.  Unless it is canceled, this burden of debt -- which is essentiall 
y unpayable * will make the effort at long term recovery a tragic failure. 
Its absolutely shameful that, especially after a disaster of this magnitude, 
creditors like the US continue to demand repayment.

The debt, and the accompanying IMF-designed austerity measures, helped 
create a situation in Central America where health and emergency response 
systems were inadequate to cope with the impact of Hurricane Mitch. 
Environmental destruction, to which debt is linked, made the impact 
tragically worse.

  Take action!

 	Call & write to Secretary of the Treasury Robert Rubin and your 
members of Congress (House and Senate) to ask that the debts of Nicaragua, 
Honduras, Guatemala, and El Salvador be canceled immediately (see sample 
enclosed)

 	Write letters to the editor of your local paper as well as national 
news magazines like Time and Newsweek raising the issue of debt and calling 
for cancellation (see sample enclosed)

 	Phone in to radio and TV call-in programs to raise the issue of debt 
when the hurricane impact is being discussed.

 	Contact members of your community and local organizations collecting 
donations for hurricane relief to express support for their work, make a 
donation if possible, and inform them of the terrible burden of debt faced 
by the affected countries.  Ask that they also get involved in the campaign 
to cancel debt (suggest a minimal first step, like signing a letter, or the 
petition, or making a phone call to their member of Congress).

        Discuss the issue of Central American debt in your faith group or 
other organization.

Background:

The Debt Left these Countries Vulnerable:

Hurricane Mitch struck a region that has had its ability to cope with 
national emergencies severely degraded by austerity measures designed  by 
the International Monetary Fund, which requires indebted countries to 
dedicate a large proportion of their national revenue to debt service. 
Alejandro BendaF1a, of the Nicaragua Jubilee 2000 Initiative, has noted: 
"What people don't realize is how having to make debt payments, and adhere 
to IMF-imposed austerity measures, helped degrade our emergency response 
capacity.  Because of budget cuts our civil defense agency is woefully 
understaffed and has no units whatsoever in at least a third of the 
municipalities.  Even the national police, which form the backbone of any 
emergency response, got less than a third of what they had requested during 
the most recent budget agreement.  We need immediate cancellation of this 
unjust, unpayable debt."  Francisco Marchado of the Honduras Jubilee 2000 
campaign said: "We need debt cancellation now more than ever if we are to 
rebuild our devastated country."

Carter, Bush, and Cardinal Obando raising Issue of Debt:

Former President George Bush was quoted in Monday's Washington Post  as 
stating: "I hope international financial organizations can respond [to the 
disaster caused by Hurricane Mitch] by adjusting payment schedules and debt 
repayment."  Former President Jimmy Carter on Friday, Nov. 6 called for the 
cancellation of the foreign debts of Honduras and Nicaragua, as reported by 
the Associated Press.  President Carter, while on a brief visit to Nicaragua 
to survey the damage, stated, "The World Bank and the International Monetary 
Fund should forgive Nicaragua's and Honduras's outstanding debts because it 
will probably take them 10 to 15 years to recover."  President Carter's 
comments were echoed on Nov. 9 by Nicaraguan Cardinal Miguel Obando y Bravo 
who, following the celebration of Mass in the Metropolitan Cathedral, stated 
that the debt should canceled as a gesture of solidarity and compassion. 
French Prime Minister Lionel Jospin on Monday called for a moratorium on 
debt payments, and German Foreign Minister Joschka Fischer has urged that 
some debts be forgiven.

Honduras's Debt Burden:

Honduras's foreign debt has tripled since 1980 and stood at $ 4.5 billion in 
1996.  $147.7 million of this total is owed directly to the US government. 
Last year it paid $539 million in debt payments, more than $1 million a day. 
The Honduran government has requested cancellation of its foreign debt 
burden so that it could dedicate as much funds as possible to the 
reconstruction effort.  In addition to killing thousands, the recent 
flooding and mudslides destroyed an estimated 70% of the nation's crops. 
Honduras relies on proceeds from primary export crops to service its debt.

Nicaragua's Debt Burden:

Nicaragua has a foreign debt of $5.929 billion, much of which was incurred 
during the US-sponsored Contra war.  Last year it made payments of $349 
million, nearly $1 million a day.  $106 million of its total debt is owed 
directly to the US government.  The country was devastated by Hurricane 
Mitch, causing thousands of deaths, destroying 2,500 kilometers of roads, 
destroying crops and leaving 42 bridges damaged beyond repair.

The Scale of the Debt Problem:

Honduras and Nicaragua are the poorest countries in Latin America, with GDP 
per capita of under $700.  The impact of Hurricane Mitch takes place in the 
context of years of underspending on health and education due, in part, to 
the need to service international debts.  In Honduras debt payments are 
equal to the budgets for health and education combined.  In Nicaragua, where 
debt payments are greater than half of all national revenues,  public 
agencies have had to cut expenditures from between 30% and 90% in real terms 
since 1994.

Both countries are in the IMF/World Bank's debt relief program, the Heavily 
Indebted Poor Countries Initiative (HIPC), but debt relief under the 
initiative is not due for many years and the relief is conditioned upon 
adherence to austerity programs designed by the International Monetary Fund 
(IMF).  Nicaragua will have to wait until 1999 before a decision on how much 
debt relief it will receive, and then have up to three years longer before 
receiving anything.  Honduras, however, will not reach a decision point 
within HIPC until 2001, and the IMF holds the view  that Honduras does not 
need full HIPC debt relief.  Estimates at the cost of rebuilding in Honduras 
and Nicaragua range from$4 to 5 billion.  Prior to the Hurricane they were 
receiving only about $20 million a year in US assistance. 

Debt in El Salvador and Guatemala:

El Salvador was also hit by hurricane damage, where crops were over 80% 
destroyed in 4 provinces.  El Salvador has an international debt of $2.894 
billion (1996 figure).  In 1996 it made $314 million in debt service 
payments, equal to 9.5% of its earnings from exports, almost $1 million a 
day.  In Guatemala the coffee crop was heavily damaged, according to 
reports, and Guatemalan Vice President Flores Asturias has called for debt 
payment  rescheduling.  Guatemala has an international debt of $3.785 
billion (1996 figure). In 1996 it made payments of $353 million, equal to 
11% of its earnings from exports, almost $1 million a day.

Jubilee 2000/USA urges that debt cancellation be done in a transparent 
manner, with participation by and accountability to broader civil society in 
each country.  It must not be conditioned on adherence to policies that lead 
to even greater poverty or environmental damage.



Sample Letter to Congress and the Clinton Administration:

Dear __________:

With the terrible devastation left by Hurricane Mitch in Central America, 
particularly in Nicaragua and Honduras, but also in El Salvador and 
Guatemala, I ask that you take strong leadership in achieving immediate debt 
cancellation for these countries, so that resources can be redirected to 
reconstruction.  The US government should begin by canceling the debts owed 
directly to it.

While the $80 million in emergency aid to the region now pledged by 
President Clinton is welcome, much more is needed.  I believe it is a truly 
shameful that, despite the terrible destruction, two of the affected 
countries, Honduras and Nicaragua, are still obliged to make  more than $2 
million a day in debt payments.  At this rate, Honduras and Nicaragua are, 
in effect, obliged to pay out a sum equivalent to the US donation every five 
weeks.  That's loan sharking.  The long term reconstruction effort will be a 
failure if this continues.

If resources spent on debt service had been spent on health care, emergency 
preparedness, sustainable rural development, and environmental protection, 
the impact of the hurricane would have been reduced.  However, due to the 
debt, the affected countries have had to comply with austerity measures 
designed  by the International Monetary Fund.  In Honduras debt payments are 
equal to the budgets for health and education combined.  In Nicaragua debt 
payments are greater than half of all national revenues.

Assistance must be greater than that provided so far and done in manner that 
provides for full oversight by civil society.  Likewise, debt cancellation 
must be done quickly and in a way that provides for participation by and 
accountability to broader civil society in each country.  It must not 
conditioned on implementation of austerity measures that increase poverty or 
environmental damage.  The time for action is now.

Sincerely,

Addresses & phone numbers:

Mr. Robert Rubin
Secretary of the Treasury
Department of the Treasury
1500 Pennsylvania Ave., NW
Washington, DC 20220
Tel:  202-622-1100
Fax:  202-622-0073

White House Comment Line:  202-456-1111

The Honorable _______ 
US Senate Washington, DC 20510

The Honorable ____ 
US House of Representatives Washington, DC 20515

US Capitol Switchboard:  202-224-3121

Sample letter to the editor:

Dear Editor: The stories I have read in your papers about the impact of 
Hurricane Mitch in Central America have been heartbreaking.  What I find 
equally heartbreaking is that despite the death, misery and destruction of 
productive capacity, the urgent appeal for debt cancellation being made by 
these countries is simply being ignored by the US government.

How will Honduras and Nicaragua rebuild people's homes or replace the many 
bridges now damaged beyond repair?  Emergency assistance is certainly needed 
and at a higher level than  currently planned.  But the effort at 
reconstruction will be a tragic failure if Nicaragua and Honduras must each 
expend over $1 million a day to pay off their tremendous debts.  These debts 
are essentially unpayable and it's cruel and unfair to pretend otherwise. 
Writing them off would cost only a fraction of their face value.

It's time for our government to get behind full debt cancellation for these 
countries, with careful oversight by non-governmental groups in determining

how resulting savings can best be redirected to reconstruction and 
development and how to avoid getting into such debt in the future.  That's 
the least we can do help these countries down what will be a long road to 
recovery.

Sincerely,

[include your home address & phone number] 
Jubilee 2000/USA 
222 East Capitol St., NE 
Washington, DC  20003-1036 
tel: 202-783-3566 
fax: 202-546-4468 
coord@j2000usa.org 
www.j2000usa.org