per cent, and the Mexican stock market tumbled. Once again, Mexico could not pay the interest on its loans. On January 11, President Clinton (CFR) urged Congress to approve U.S. guarantees for new loans up to $40 billion. Secretary of the Treasury Robert Rubin (CFR) explained: "It is the judgment of all, including Chairman Alan Greenspan [CFR], that the probability of the debts being paid [by Mexico] is exceedingly high." But, while Congress debated the issue, the loan clock was ticking. Payment of $17 billion in Mexican bonds was due within 60 days, and $4 billion of that was due on the first of February!
This matter could not wait. On January 31, acting inde-
pendently of Congress, President Clinton announced a bailout package of over $50 billion in loan guarantees to Mexico; $20 billion from the U.S. Exchange Stabilization Fund, $17.8 billion from the IMF, $10 billion from the Bank of International Settlements, and $3 billion from commercial banks.
BRAZIL
Brazil became a major player in 1982 when it announced that it too was unable to make payments on its debt. In response, the U.S.
Treasury made a direct loan of $1.23 billion to keep those checks going to the banks while negotiations were under way for a more Permanent solution through the IMF. Twenty days later, it gave another $1.5 billion; the Bank of International Settlements advanced $1.2 billion. The following month, the IMF provided $5.5 billion; Western banks extended $10 billion in trade credits; old loans were rescheduled; and $4.4 billion in new loans were made by a Morgan L ibid., p. 35.
120 THE CREATURE FROM JEKYLL ISLAND
Bank syndication. The "temporary" loans from the U.S. Treasury were extended with no repayment date established. Ron Chernow comments:
The plan set a fateful precedent of "curing" the debt crisis byheaping on more debt. In this charade, bankers would lend more toBrazil with one hand, then take it back with the other. This preservedthe fictitious book value of loans on bank balance sheets. Approachingthe rescue as a grand new syndication, the bankers piled on highinterest rates and rescheduling fees.1
By 1983, Third-World governments owed $300 billion to banks and $400 billion to the industrialized governments. Twenty-five nations were already behind in their payments. Brazil was in default a second time and asked for rescheduling, as did Rumania, Cuba, and Zambia. The IMF stepped in and made additional
billions of dollars available to the delinquent countries. The Department of Agriculture, through its Commodity Credit Corporation, paid $431 million to American banks to cover payments on loans from Brazil, Morocco, Peru, and Rumania. At the conclusion of these agreements, the April 20, 1983,
Not quite. By 1987, Brazil was again in default on its monstrous $121 billion debt, this time for one and a-half years. In spite of the torrent of money that had passed through its hands, it was now so broke, it couldn't even buy gasoline for its police cars. In 1989, as a new round of bailout was being organized. President Bush(CFR) announced that the only real solution to the Third-World debt problem was debt forgiveness.
Perhaps, through repetition, we are running this history into the ground, but here are just a few more examples before moving along.
ARGENTINA
By 1982, Argentina was unable to make a $2.3 billion payment that was due in July and August. The banks extended their loans while the IMF prepared a new infusion in the amount of $2.15
billion. This restored the interest payments and gave the Argentinian politicians a little extra spending money. Seven 1. Chernow, p. 644.
BUILDING THE NEW WORLD ORDER
121
months later, Argentina announced it could not make any more payments until the fall of 1983. The banks immediately began negotiations for rollovers, guarantees, and new IMF loans.
Argentina then signed an agreement with 350 creditor banks to stretch out payments on nearly a fourth of its $13.4 billion debt, and the banks agreed to lend an extra $4.2 billion to cover interest payments and political incentives. The IMF gave $1.7 billion. The United States government gave an additional $500 million directly.
Argentina then paid $850 million in overdue interest charges to the banks.
