IMF TO HELP REBUILD STORM-WRECKED CENTRAL AMERICA -- WITH CONDITIONS (fwd)

[Robert Weissman <rob@essential.org>]

Reuters 						November 17, 1998

IMF TO HELP REBUILD STORM-WRECKED CENTRAL AMERICA 

	By Lorraine Orlandi 

MANAGUA - International Monetary Fund chief Michel Camdessus 
Tuesday vowed to seek massive debt relief and an infusion of long-term 
credit for Nicaragua after the Central American nation was devastated by 
Hurricane Mitch. 
	``We are not only talking about immediate aid for reconstruction, 
but rather the construction of a new country,'' Camdessus, the IMF 
managing director, told reporters after meeting with Nicaraguan President 
Arnoldo Aleman. 
	Camdessus, who has led the IMF through its controversial handling 
of the Asian and Russian economic crises, Tuesday turned his attention to 
this impoverished region after the deadliest Atlantic storm in two centuries 
killed an estimated 11,000 Central Americans. 
	Mitch also caused billions of dollars in damage, crippling the 
economies of Honduras and Nicaragua in such a way that loans from 
international lending bodies like the IMF will be needed for a recovery. 
	Camdessus said he would advocate more ``soft'' loans for 
Nicaragua with payments spread over 30 years at 0.5 percent interest. He 
was due to visit neighboring Honduras after his stay here. 
	The IMF is one of the main lenders to Nicaragua, a country 
dependent on foreign aid. But soft loans always come with conditions that 
the country trim its budget deficit, tame inflation and meet other strict 
targets. 
	Those required austerity measures make Camdessus unpopular in 
Nicaragua, where the leftist Sandinista opposition uses the dreaded 
acronym ESAF -- for Enhanced Structural Adjustment Facility -- as a 
rallying cry at street protests and rallies. 
	Some renowned economists like Harvard University's Jeffrey Sachs 
also blast the IMF's shock therapy for developing nations recently hit by 
global financial turmoil. 
	``We question it,'' Sandinista leader and former President Daniel 
Ortega said of ESAF, speaking to reporters after he met with Camdessus. 
``We have asked for a revision of the plan, and to make it more flexible,''
he 
said, referring to public price increases for water and energy. 
	During a series of meetings with political, business and religious 
leaders, Camdessus praised Aleman for sticking to the ESAF even after 
Mitch, calling it a positive sign for creditor nations and financial 
institutions. 
	``President Aleman made the most difficult decision, saying we are 
going to throw ourselves into the reconstruction but we will maintain the 
adjustment program,'' Camdessus said. ``We see that the government is 
trying to transform this tragedy into a moment of opportunity for the 
country.'' 
	Camdessus also promised to speed up Nicaragua's candidacy for the 
Highly Indebted Poor Countries (HIPC) initiative. 
	That program would ease the debt burden as the country rebuilds 
from the storm, writing off large portions of Nicaragua's foreign debt of 
about $6 billion, which is three times the country's annual gross domestic 
product. 
	Nicaragua and Honduras, the countries hardest hit by Mitch, are 
also the poorest in the hemisphere after Haiti and the most heavily 
indebted. 
	Honduras, whose roads and crops suffered the most damage, has a 
foreign debt of $4.1 billion, costing the country $400 million a year to 
service, about a third of its annual budget. 
	``The debt before the hurricane was a heavy burden... Now it's even 
worse because the country is half-destroyed,'' Francisco Machado, leader of 
Social Forum on Foreign debt, told reporters in the Honduran capital 
Tegucigalpa. 
	The forum groups leaders from the Catholic Church, professional 
organizations, labor unions and farm workers. 
	During the past two weeks, Nicaragua and Honduras have received 
commitments for major debt relief from France, Spain, Cuba and the 
United States, and leaders in those countries have called on other creditor 
nations to follow suit.