Fifty-four Members of Congress Call on President Clinton to Cancel Central American Debts

Fifty-four members of the US House of Representatives today wrote to President Clinton to urge him to "cancel the current US bilateral debt of the countries most affected by Hurricane Mitch." The Representatives also urged the President to "work with other G-7 nations to convene an emergency meeting...to agree on bilateral and multilateral debt cancellation." The letter was sponsored by Rep. David Bonior (D-MI), Rep. Sue Kelly (R-NY), and Rep. Xavier Becerra (D-CA).

The Clinton Administration has granted Honduras and Nicaragua a temporary moratorium on payments on debts owed the US government. It has also supported measures by the World Bank and other creditors that would provide a similar moratorium on multilateral debt payments. The Representatives "welcomed" these initiatives, but they emphasized that "while a payment moratorium may provide temporary relief, these countries will still be unable to service their debts after three years, especially if they expect to make needed investments in emergency preparedness and sustainable development."

Honduras' debt stands at $4.1 billion (late 1997 figure), with $147.7 million of this total owed directly to the US government. Nicaragua's debt is even higher, at $6.1billion (April 1998 figure), with $106 million owed to the US. Guatemala and El Salvador are lower but still unsustainable, with debts of $3.8 billion and $2.9 billion respectively (1996 figures). The letter states, "It is the continuance of these tremendous debts, not just the interest payments owed on them, that threatens the entire region's reconstruction effort." "The debts not only deter foreign investment but also yield most economic decision-making to the hands of international creditors, undermining fragile democratic processes."

Last month President Clinton promised US support for cancellation of a portion of the debts owed by Nicaragua and Honduras once they had successfully implemented several years of economic policy changes designed by international creditors (principally the International Monetary Fund). In today's letter, however, the Representatives cautioned that "debt cancellation must not be conditioned on the implementation of economic policies that increase poverty or environmental damage."

"We applaud the concern these legislators have shown for the people of Central America, who have suffered a disaster of epic proportions," stated Carole J.L. Collins, National Coordinator of the Jubilee 2000/USA Campaign, a coalition of over 30 US religious, environmental, development and social justice agencies. "As he prepares to visit the devastated region next month, we hope that President Clinton will take to heart this urgent appeal for leadership on the debt crisis."

Broad coalitions of Honduran and Nicaraguan civic organizations have appealed for debt cancellation, as well as for accountability in the provision of reconstruction funds. Honduran Archbishop Oscar Rodriguez has added his voice, stating that his country's external debt was "closing the space for human survival."

Jubilee 2000 maintains that outright cancellation of unpayable debt can be done in a way that makes sure savings are appropriately redirected to sustainable development and environmental protection. "We are not advocating a no-questions asked, blanket cancellation," stated Dr. Jo Marie Griesgraber, chair of the Jubilee 2000/USA Executive Committee. "It must be done in a transparent manner, with participation by and accountability to broader civil society."

To date, the appeals by the Jubilee 2000 campaign for debt cancellation for Central America have drawn a lukewarm reception from the Clinton Administration. In a January 5 letter to the Jubilee 2000/USA Campaign, William Schuerch, the Deputy Assistant Secretary for International Development, Debt, and Environmental Policy, stated, "The unprecedented debt deferral that has been agreed to by the Paris Club will give these countries time to recover from the hurricane damage." However, this debt payment deferral will last for just over two years. Oxfam International has stated that it will take at least ten years for affected countries to recover. The government of Honduras has estimated that recovery efforts may take more than twenty years, just to reach the development levels existing prior to Hurricane Mitch.

When asked if Honduras and Nicaragua would be able to both overcome the disaster and resume debt payments two years form now, Kim Tuminaro, Deputy Director of the Office of Monetary Affairs, US State Department, told Jubilee 2000/USA, "I don't know, but I hope so. We have to wait and see what the assessment of the situation is by the IMF." Ms. Tuminaro indicated that the Administration opposed deeper debt relief for Honduras because it considered Honduras to be "not a good reformer."

Carole Collins, Jubilee 2000/USA Campaign's National Coordinator, criticized the Administration, stating, "'I hope so' is just not good enough. The Administration has made a public commitment to helping these countries recover and not simply return to their vulnerable state of social development pre-Hurricane. The Administration has issued high-profile statements of support and sponsored trips by the First Lady, Mrs. Gore, and,next month, by the President himself. It is incumbent on the Administration to give some serious attention to the long term impact of debt on these countries, show more flexibility, and listen to what the people affected are saying. And, it should develop its own assessment of the situation, independent of the International Monetary Fund."

The Clinton Administration has pledged $300 million in assistance to the region, but there have been reports that help has been slow in coming. On January 7th, the Washington Post cited complaints by Honduran President Carlos Flores that two months after the disaster Honduras still lacks the resources to rebuild. "1999 will be a very hard year for Hondurans," stated President Flores.

Prior to Hurricane Mitch, the countries of Central America were already among the poorest nations in the Western Hemisphere. In 1997, 2.6 million Hondurans and 2.1 million Nicaraguans lived below the poverty line. This represented 50% and 47% of the countries' respective populations. In Guatemala, 53% of the population lives on less than $1 per day.

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Jubilee 2000/USA
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