Sign-on to cancel debt in wake of Mitch! (fwd)

[Robert Weissman <rob@essential.org>]

Dear friends and colleagues,

Please join us in supporting the following appeal for debt cancellation for 
Central America in the wake of Hurricane Mitch. Please send organizational 
endorsements to Robert Naiman (naimanr@preamble.org) by Tuesday afternoon, 
November 17. Please forward where appropriate, and apologies for 
cross-postings.
-Robert Naiman, Preamble Center

--
Support Immediate Debt Cancellation for Honduras and Nicaragua in the Wake 
of Hurricane Mitch

To:
Members of the United States Congress
Robert Rubin, Secretary of the Treasury
Michel Camdessus, Managing Director, International Monetary Fund
James Wolfenson, President, World Bank Group

With Hurricane Mitch, Honduras and Nicaragua, two of the poorest and most 
indebted countries in Latin America, have been hit by what may be the worst 
disaster they have ever faced. In response to the humanitarian emergency, we 
call for the immediate and unconditional cancellation of the external debt 
repayment obligations of both countries, and substantial debt reduction for 
El Salvador and Guatemala, both also severely affected by the hurricane. The 
disaster has removed the ability of these countries to repay external debt. 
All available resources should be used address to the needs of the 
population in this crisis. Recent press reports indicate that the 
reconstruction effort will cost billions and take many years.

Both Honduras and Nicaragua, as heavily indebted poor countries, were 
supposed be eligible to receive relief on their debt obligations in the 
future in return for complying with IMF "structural adjustment" economic 
policies. But debt cancellation should be immediate and unconditional so the 
countries can use their limited resources for rebuilding their social and 
physical infrastructure rather than diverting resources to export promotion. 
The devastation caused by the hurricane is making any delay immoral and 
inhuman. Honduras and Nicaragua are among the poorest countries in Latin 
America, with a per capita GDP of less than $700. In both countries, the 
burden of foreign debt service and structural adjustment has weakened the 
social infrastructure and contributed to the toll of the disaster. The 
health and education system in both countries has been in a poor state for 
more than ten years. A major cause is that more money has been spent on 
servicing debt than on health or education. In 1997, Honduras spent over 
$410 million on debt service while allocating only $16 million for the 
purchase of medical equipment now so urgently needed. In 1996 debt service 
was 80% of government revenue. Nicaragua is not doing much better, with 51% 
of government revenue used for foreign debt service. Total debt service for 
Nicaragua was $221 million in 1996. In 1998, international creditors expect 
debt service payments of  $450 million from Honduras and $300 million from 
Nicaragua, over $2 million each day.

Debts to international financial institutions, including the Inter-American 
Development Bank, should be canceled immediately. With the International 
Monetary Fund set to receive $90 billion in new quotas, including $18 
billion from the U.S., debt repayments from these devastated countries to 
international financial institutions would be an obvious misallocation of 
desperately-needed resources. It would not make sense to send humanitarian 
relief to these countries while demanding that they pay out more in debt 
servicing -- over $1 million a day in the case of Honduras and nearly that 
amount for Nicaragua --than they will receive in aid. 

The bilateral debt of these countries owed to the United States should also 
be canceled immediately. Former Presidents Bush and Carter have both called 
for immediate action on the debt issue in the wake of the crisis. Both 
France and Cuba have already erased the debts owed them by these countries, 
and other creditor nations are supporting debt cancellation. But the U.S. 
has remained silent on the need for debt cancellation. We emphasize that 
debt cancellation must not be conditioned on compliance with IMF structural 
adjustment programs or similar demands. Demands for government austerity are 
surely inappropriate in the face of sudden and massive homelessness, 
disease, and hunger.

More than 25,000 people have now been reported dead or missing. Ten times 
that number may be in jeopardy from malaria and other diseases. Tens of 
thousands of survivors are threatened because they cannot easily be reached 
with food, drinking water and medicine. Two and a half million people are 
homeless. Rebuilding will cost billions. Honduras and Nicaragua need to 
build homes for 20-25% of their population. This disaster will take the 
affected nations, already two of the poorest countries in Latin America, 
decades to overcome.  Half-measures such as debt re-scheduling or a "debt 
moratorium" would be insufficient.  Anything less than cancellation of the 
monumental, unpayable debt burden would extend and deepen the suffering of 
the victims. 

Broad coalitions of social organizations in Honduras and in Nicaragua have 
called for cancellation of debt. The export base of Honduras and Nicaragua 
has been devastated, so these countries will lack the foreign currency for 
repayment of debt. The governments of both countries estimate that 
reconstruction will take between twenty and forty years. We call for the 
full cancellation of foreign debts, including both bilateral and 
multilateral debt, in the face of this overwhelming catastrophe.

Thank you for your consideration of our concerns.

Nicaragua Network
Latin America Emergency Response Network 
50 Years Is Enough: U.S. Network for Global Economic Justice
Friends of the Earth
Essential Action
Preamble Center

-------------------------------
Robert Naiman <naimanr@preamble.org>
Preamble Center
1737 21st NW
Washington, DC 20009
phone: 202-265-3263
fax:   202-265-3647
http://www.preamble.org/
11/13/98 11:35:57
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