-DATE- 19850330 -YEAR- 1985 -DOCUMENT_TYPE- INTERVIEW -AUTHOR- F. CASTRO -HEADLINE- CASTRO DISCUSSES LATING AMERICAN DEBT, SOVEREIGN -PLACE- HAVANA -SOURCE- HAVANA PRELA -REPORT_NBR- FBIS -REPORT_DATE- 19850415 -TEXT- CASTRO DISCUSSES LATIN AMERICAN DEBT, SOVEREIGNTY PA080500 Havana PRELA in Spanish 0500 GMT 30 Mar 85 -- FOR OFFICIAL USE ONLY ["Excerpts" of interview with President Fidel Castro by Regino Diaz, director of the Mexican newspaper EXCELSIOR, on 21 March in Havana] [Text] Havana, Mar [dateline as received] (PL) -- Diaz: Can there be unity among such different Latin American governments? Castro: Well, I think so. The economic crisis and the debt will unite the Latin American countries, and they will unite them much more than the war over the Malvinas did. In the latter case, the Latin American peoples were united by a problem involving what we might call a familiar, sentimental, moral and political relationship. It was a struggle against a fraternal people, originating from a colonial pretension, a historical plunder, an unjust action dating back to the days when England was the most powerful empire in the world. In the war over the Malvinas they saw it as a war of a European country against a Latin American country, but it was something that affected the vital economic interests of the Latin American countries. In other words, except for this patriotic Latin American aspect and the political aspect of the matter, they bad nothing to either gain or lose from an economic standpoint. That solidarity was truly devoid of any interest. However, regarding Latin America's economic crisis and foreign debt, the solution of that problem is a matter of survival for the Latin American countries. There is talk about the crisis of the 1930's. The current crisis is worse than that of the 1930's. Except for oil, the purchasing power derived from Latin America's exports is lower than during the crisis of the 1930's. Without going so far back in time, if we estimate the prices of our products 24 years ago, the purchasing power derived from our major traditional exports, including sugar, is often three or four times lower at present. I will give an example. A total of 200 tons of sugar was needed 24 years ago to buy a 180-horsepower bulldozer. To buy the same bulldozer today, one needs 800 tons at current world market prices. If one analyzes coffee, cacao, bananas, or the minerals that Latin America exports, the quantities of products needed to buy a bulldozer or any other construction, transportation, agricultural or industrial equipment imported from the developed countries is three or four times higher than were needed back then. If we go back to 1950, the deterioration of the trade relationship suffered since then is even higher. Now, what is the difference between the 1930's and the current situation? In those days, Latin America's population was less than one-third the current population. The current social problems are incomparably bigger than those of the thirties. In other words, these problems have been accumulating. That is to say, at present we have three or four times as many people, and social problems that have multiplied if compared to the situation in the 1930's. But the most important thing is that during the crisis of the 1930's there was practically no foreign debt in Latin America. Now we have a bigger crisis, incomparably bigger accumulated social problems, and a debt totaling $360 billion. A mathematical analysis of this situation demonstrates that the debt is unpayable, whether one analyzes the situation as a whole of if each country's individual situation is analyzed: The situation is more serious in some cases, but it is grave in all cases without exception. According to the most recent official data collected by the UN's ECLA, Brazil owes $101.8 billion; Mexico, $95.9 billion; Argentina, $48 billion; Venezuela, $34 billion; Chile, according to what I view as very conservative estimates, $18.44 billion; Peru, $13.5 billion; Colombia, $10.8 billion; small countries like Costa Rica, which has about 2 million people, $4.05 billion; Panama (?with a) similar (?population), $3.55 billion; Uruguay, $4.7 billion. These are conservative figures because according to reports from distinguished Uruguayan and Chilean friends, Uruguay's real debt totals $5.5 billion, and Chile's totals $23 billion. In other words, the official figures are below the real debt level. In many' cases it is not easy for the international organizations or even the governments themselves to know the real volume of the debt because other unreported debts from private institutions are added to the controlled debts. Diaz: And what about the debt of the biggest debtors, like Brazil, Mexico, and Venezuela? Could it be bigger than has been reported? Castro: I am not so sure. Regarding Brazil, the figure 105 billion is sometimes mentioned. With relation to Mexico, there is talk of about 100 billion; regarding Venezuela, there is talk of (?35) billion, but in no case are any of the figures frequently mentioned lower than the figures that appear in the official data provided by the international economic organizations. Some countries, like Argentina, are using 52 percent of their exports to pay the interest on their debt. Bolivia is using 57 percent of its exports; Mexico, 36.5 percent; Peru, 35.5 percent; Brazil, 36.5 percent; Chile, 45.5 percent. It has been estimated that using 20 percent of the total export revenues to pay the foreign debt is already a virtually unsustainable percentage. What do these figures mean? They mean that the development of any country under these conditions is impossible. This is expressed by the fact that the GNP of all Latin American countries declined between 1981 and 1984. For example, the GNP decreased by 13.9 percent in Uruguay; in Argentina, by 6 percent; in Chile, by 5.4 percent; and in Venezuela, by 6.1 percent, despite the latter's huge economic resources. Since the population increased during the same period, the per capita income has been reduced even further. The following figures are the result of such a situation. In Bolivia, per capita income decreased by 24.6 percent; in Costa Rica, by 14.1 percent; in Chile, by 11.2 percent; in Mexico, by 6.3 percent; in Argentina, by 11.8 percent; in Venezuela, by 16.2 percent; and in Uruguay, by 16.2 percent. In the case of Venezuela, the per capita income not only decreased between 1981 and 1984, but it has been decreasing for the past 7 years. It decreased a total of 24 percent during that period. The effect of the economic crisis and the foreign debt, particularly during the past few years, can be seen in the fact that not only has the national and per capita production stopped, but it has actually gone backward. Some countries are making truly impressive efforts to deal with this situation. We might mention three of the biggest and most important ones. In 1982, Brazil's exports totaled $20.172 billion. In 1984, the country's exports totaled $26.96 billion. In 1972 [as received], the country's imports totaled $19.395 billion, while the 1984 imports amounted to [figure indistinct]. Mexico, whose exports amounted to $22.081 billion in 1982, exported goods worth $23.51 billion in 1984, while its imports were reduced from $14.434 billion in 1982 to $10 billion in 1984. Argentina increased the value of its exports from $7.622 billion in 1982 to $8.7 billion in 1984. Conversely, the country reduced the value of its imports from $4.859 billion in 1982 to $4.27 billion in 1984. Through big export efforts and a huge reduction in imports, to levels almost unbearable for their economies, these countries achieved favorable trade balances. Brazil attained a favorable trade balance of $12.6 billion; Mexico, $13.5 billion; and Argentina, $4.43 billion. These earnings, the result of an extraordinary effort, using and exhausting practically their entire raw material stocks, and possibly affecting the maintenance and replenishment of production installations, have been spent by these three countries to pay their foreign debt interest exclusively. In all, Latin American countries paid $37.3 billion, nearly $3 billion more than in 1983, for interest and debt servicing in 1984, while they received $10.6 billion for loans and investments during the same period. Latin America's net transfer of financial resources to the outside in 1984 amounted to $26.7 billion. In 2 years alone, 1983 and 1984, Latin America's net transfer of financial resources for interest and debt servicing amounted to $56.7 billion. This is to say, the undeveloped countries of Latin America have been financing the economy and development of the world's richest countries with impressive amounts of money. This is a fact. This money is gone forever; it will never come back. The rate of growth of the foreign debt decreased to a level far lower than the record 24 percent attained in 1981. This is natural because no one dares to lend now. Anyway, for one reason or another, the foreign debt grew by 5.5 percent. It is expected that from now on, let's say over the next 10 years, payments on foreign debt interest will average $40 billion annually, on the assumption that the foreign debt will barely increase. Twenty-four years ago, when the Alliance for Progress was in operation, Kennedy proposed a $20-billion economic aid program to confront Latin America's social and development problems. The money would be invested over a period of 10-15 years. That idea came up due to the obsessive trauma caused by the Cuban revolution. The idea behind this plan was to forestall conditions favorable to new revolutions. Every year, the undeveloped countries of this hemisphere, having twice as many inhabitants and three times as many social problems, will be delivering $40 billion to industrial countries in interest payments. In 10 years, these countries will have paid $400.1 billion. This is 20 times the figure that Kennedy proposed to be invested over a period of 10-15 years as economic aid for solving Latin America's social and economic problems at a time when there were half as many people, a lot fewer accumulated social problems, the international economy marched forward, there was no crisis, and the purchasing power of basic export products was much higher. Latin America's political, economic, and social situation is such that it cannot bear any more restrictions and sacrifices. In recent months, we have learned of events in the Dominican Republic when the IMF measures began to be applied. This country had a relatively stable political situation and a constitutional regime. The exchange rate increase caused by a devaluation of the Dominican currency, which was on a par with the U.S. currency, to 3 pesos per dollar was applied to currency invested to import medicines and other consumer goods and provoked an uprising of the people. The government's response was to hurl the Army and the police against the demonstrators and repress their protest. According to official figures, this repression killed 50 and wounded 300. Many assert that the number of victims is higher. A few weeks ago, new IMF demands determined the application of a 3-pesos-to-the-dollar exchange rate for all imported products, including fuel. The government, trying to anticipate the people's reaction, launched the Army and police forces to take over the cities and try to suppress the people's protests. This has created a desperate and tense situation in the Dominican Republic. Another recent example took place in Panama, after the new government was sworn in. A 7-percent service tax for the doctors and the postponement of salary increases for teachers provoked a similar reaction. Hundreds of people took to the streets, but there was no repression and no victims were reported due to the Defense Forces' attitude, the progressive role it plays, its struggle to recover the country's sovereignty over the canal, and its close links with the people. Consequently, the measures had to be repealed, even though they were not measures intended to solve Panama's grave economic problems, which are similar to those experienced by the other Latin American countries. The purpose of these measures was to try to balance the budget in such a way that would satisfy the minimum conditions set by the IMF for renegotiating the debt. A critical economic situation has arisen in Bolivia, where the inflation rate for 1984 was calculated at 1,682 percent by the ECLA but, according to the latest reports, it actually rose to 2.3 percent during the last 13 days of the year. The country has been paralyzed. Tens of thousands of miners have armed themselves with dynamite. Workers, students, and other sectors have taken to the streets. Peasants have mobilized [words indistinct] the highways, demanding higher salaries, control of prices, appropriate supplies of staple goods, and other measures. A desperate situation has made the problem almost uncontrollable. No one knows how the country will be able to overcome its serious economic crisis. The curious thing about these events which I have mentioned is that they have arisen in an almost spontaneous way, as a result of the existing situation. Diaz: Why hasn't a coup d'etat been advocated? Why hasn't a coup d'etat taken place? Castro: I will talk about this later on, when I state my viewpoint about the probable evolution of events in the different countries, as a consequence of this situation. I am simply pointing out events which have taken place in a spontaneous way, due to the economic crisis and the debt. The economic situation presents its most grave characteristics in Bolivia. Between 1981 and 1984, internal production in Bolivia, as I stated before, decreased 16.1 percent and the per capita income decreased 24.6 percent in only 3 years. Between 1982 and 1984 the value of Bolivia's exports decreased from $828 million to $730 million. Its modest imports increased from $429 million in 1982 to $460 million in 1984, and these figures are really small. It is practically impossible for a country with Bolivia's population, problems, and needs to support itself with only $460 million worth of imports. The $270 million obtained from last year's favorable trade balance have been used to pay the interest on the debt. In other words, the IMF measures, or attempts to enforce these measures in these three countries, have provoked serious political and social conflicts, given that the people are totally opposed to the enforcement of new sacrifices and a deterioration of their living conditions. A democratic opening has taken place in the South American countries, and this has been welcomed with great interest and sympathy in Latin America and the rest of the world. The democratic opening has taken place, almost simultaneously, in three important countries: Argentina, Uruguay, and Brazil. In Uruguay, this becomes important not because of the country's resources and stature, but because of the return to a constitutional regime after prolonged years of military oppression. This country was a model of democracy for a long time. Uruguay, just like Chile, used to be described as the Switzerland of America. These democratic openings have of course taken place following the people's struggle and their resistance to the military dictatorships. They were greatly influenced by the fact that the military regimes, demoralized and overwhelmed by such a deep economic crisis, felt themselves unable to cope with the situation. The military regimes are withdrawing from public administration. However, if the economic situation had been less grave, they would have resisted and tried to remain in power for a longer period of time. Now they have left the state's administration to the civilians and, to be frank, they have left a terrible legacy. We are saying that if the economic problems caused by the debt are not resolved, those democratic processes will inevitably enter into a crisis. In Uruguay, according to persons close to the new government, the foreign debt has risen to $5.5 billion and exports have risen by only $1 billion. Important textile markets such as the U.S. market have adopted protectionist measures. Important beef markets have been snatched away from Uruguay by the EEC, whose exports are subsidized. The standard of living dropped by 50 percent during the years of the military government. How can a government in a country with these conditions, where civilians have just taken charge of the government thanks to the support of the citizens following years of cruel repression, apply the IMF measures and ask the people to make more sacrifices? The democratic processes in Argentina and Brazil are facing a similar situation. One cannot imagine those countries' new leaders, who supported democratic processes during the lengthy years of military dictatorship, putting the Army and the police on the streets to shoot at the people in order to apply the IMF measures and pay every penny of the debt. Those leaders have clearly said three things: That they are not going to make the people bear the consequences of the debt, that they are not prepared to implement recessive policies, and that they are not prepared to sacrifice the country's development. Hence, they have presented three basic premises. However, there is no answer yet on how these premises can be implemented if no solution to the debt problem is found. The first thing the IMF demands is a reduction in the inflation rate, a reduction in budget deficits, and restrictive social measures that produce more unemployment and worsen the problems that have been accumulating and multiplying for many years. The truth is that in 1983 prices faced by Latin American consumers went up 130.8 percent, and in 1984 these prices went up 175.4 percent. These inflation rates make it practically impossible to manage the economy. I ask myself: Under these circumstances, how is it possible to demand that these Latin American countries, whose economies not only have stagnated in recent years but have deteriorated, and whose populations have continued growing at a fast rate, extract $400 billion from their economies every year to pay the interests on the foreign debt? What new sacrifices and restrictions must these countries apply in order to comply with the objective of paying the huge interests and at the same time reducing inflation and stimulating development? What hopes for the future will encourage the people to make the heroic and costly effort that is necessary? What arguments will be used to motivate the people and secure their approval, as well as the unity, support, and spirit of sacrifice demanded by such an endeavor? The task is practically impossible. In some cases the inflation rates are amazing. There is the case of Bolivia, 200 percent; Argentina, 675 percent; Brazil, 190.7 percent; Peru, 105.8 percent; and others. How can they be asked to confront these problems in I year? How can they reduce inflation, adjust their budgets, and pay the astronomic interests on the debt in 1 year? We must take into account that the data on the transference of resources to the industrialized world lists only the resources that have left a country officially, due to the payment of interests, profits, etc. To this we add the flight of capital, which is impossible to estimate because of the way it occurs. However, it it known that in recent years, tens of billions of dollars have been taken from Venezuela to the United States and that the same thing has happened in Argentina. The Mexican people also know that when the economic difficulties emerged and it was evident that a devaluation was imminent, and there are always many indications that enable people to guess when a devaluation is inevitable, tens of billions of dollars were taken from Mexico and placed in the United States. I have referred to only three countries but the same thing has happened in all the Latin American countries as a result of a very simple, logical, and understandable mechanism: When the currency of any Latin American country, is devalued rapidly, trust in that currency is lost -- totally. Usually trust in the government is also lost and not always rightly so because new governments sometimes inherit this kind of situation. We could almost suggest that no one be blamed for this situation. It is a result of the crisis of a dominating and exploitative system imposed on the underdeveloped world. I will expand on this idea later. I am trying to follow a certain order in presenting my viewpoints. The economic crisis has become a burden to the economies of the least developed countries. We can say that this process has been developing for some time and has bad more or less serious consequences, depending on the country's economic resources and on the efficiency with which each country has faced this crisis or tried to overcome it. There is a wide variety of cases. Undoubtedly, the policies implemented in Chile, Argentina, and Uruguay, the official policies of the military regimes, have had sad consequences. For example, I remember that in the final months of the Allende administration Chile was importing $100 million worth of beef every year [as received], that was the pace. However, a few months after the coup d'etat Chile began exporting beef. How? Because of all the deaths and missing people; thousands of missing, thousands of deaths, the thousands of tortured people, the most horrible repression methods, the en masse dismissal of public employees, a drastic reduction in social services, the massive dismissal of factory workers, a reduction in salaries, a drastic reduction in the people's standard of living, and, logically, because so many people could no longer buy beef. In a few months, Pinochet was able to begin exporting beef. This was not the only thing Pinochet did. He presented himself as a champion of Western Principles, Western values, capitalism, and free enterprise. Economic advisers, economic experts, and professors from the Chicago school immediately entered Chile. They explained how Western interests and the interests of capitalism must be defended. They told Pinochet that if he wanted an efficient industry, he had to open Chile's doors to foreign competition and make Chile's national industry compete with the industries in Europe, the United States, Japan, and countries like South Korea, Taiwan, and Singapore, where the large transnational companies have taken their technology and imposed their discipline. To do this, they needed strong authoritarian regimes. The axiom for any developing country, an axiom that has been admitted for a long time, is that newborn industries in developing countries must be protected from competing with industries in countries with more resources, more technology, and more development. This was ignored. As a result, the local industry was ruined, unemployment increased, and the debt grew rapidly. In Chile, where all of the most sophisticated economic principles of the Chicago school were implemented, the foreign debt, which was only $4 billion during the Allende administration, has grown to $23 billion. Of all of the figures that have been mentioned in this regard, I find this one the most realistic. Unemployment reached a record level by Latin American standards: 18.6 percent of the labor force. In addition to unemployment, there are many people who are underemployed and who work only a few hours trying to survive. The economic policy that was implemented by the Chilean military dictatorship was also implemented in Argentina and in Uruguay. Imagine putting the Argentine automobile, truck, and tractor industry which produces good quality equipment -- and we know this because we have Argentina trucks, automobiles, and other equipment that meet the needs of Argentines and that also meet our sugarcane transportation and taxi service needs -- in competition with the Japanese truck and automobile industry which produces vehicles in highly automated plants that use robots for many jobs and Japanese steel manufactured by high technology and productivity industrial processes. To say it in a few words: They put skilled Argentine workers in competition with Japanese industry robots. During a recent visit by the emissary of the party that won the recent Uruguayan elections I asked if the Uruguayan military had followed the actions of the military in Chile and Argentina. He told me: "Yes, exactly." He even referred to the case of an industry that produced rollers for women's hair, or something similar. When the same product arrived from Korea at a lower price, the local industry went bankrupt. The same economic recipe was applied in the three countries. However, Chile, Argentina, and Uruguay first applied the political recipe for a military coup, the crude use of force against the people, and the most unmerciful repressive methods. You can appreciate the disastrous consequences of those political methods and economic measures. What is contradictory is the fact that while the world's most industrialized nation, the United States, jealously implements all kinds of tariffs and other mechanisms to protect not only its own industry which is far from being competitive in many fields, but also its agricultural products, such as beet sugar and the corn syrup used to sweeten drinks, its professors come to teach us how to eliminate tax barriers and make our industries more competitive. I do not have sufficient information on Brazil, on what the military did in the economic field or how they did it, what their [words. indistinct] the origins of Brazil's enormous debt, etc. However, I am inclined to believe that Brazil did not follow the same policy that Chile, Argentina, and Uruguay did, that perhaps Brazilian industry was better protected from foreign competition. What the other three countries did was open their doors wide to transnationals, which attracted by cheap labor and all the advantages, guarantees, and assurances that the de facto regimes could offer, would make big investments there. I believe the Brazilian military were more concerned about protecting domestic industry than were the Chileans, Argentines, and Uruguayans. Diaz: Commander: Don't you think that corrupt government officials are also to blame for the origin of this foreign debt? Castro: It is an aspect that must be taken into consideration, because it lies at the basis of the debt. I have attempted to explain to you how the policies of those three governments I mentioned before seriously worsened the crises in each of those countries. That is an example of how governments' actions are better or worse and how they influence situations. There are several factors that gave rise to that debt, including the policies I have mentioned: If you open doors to foreign competition, if you bring domestic industry to ruin, then you must spend fabulous amounts on imports each year, and you are forced to ask for credit to finance those imports. Diaz: Perhaps the money was misused, Commander. Castro: I will try to explain this to you in a certain order. One of the factors is the foreign indebtedness of those countries as a result of their increased imports In addition, much of this money was spent on arms and other military expenses. Also, part of this money enriched many people, that is to say much of it was stolen, while a considerable amount was sent out of the country in various ways. The lenders did not care at all about what was done with this money. During this period huge sums accumulated, mostly from surpluses of several oil countries, the big oil exporters, which were deposited in U.S. and European banks. There was so much money that lenders, that is to say the banks, pursued debtors to offer them loans. The situation was reversed: Generally debtors go to banks and ask for loans, but in many Latin American countries bankers sought their customers out to lend them money at interest rates lower than the current ones. In other words, money was lent at a lower interest rate and is now being collected at much higher rates. But there is more: U.S. currency was lent at a certain value, but collections are now being made in U.S. currency overvalued by nearly 40 percent, according to some experts. That would be similar to my lending you 1 kg of gold and then asking you to give me back 1.4 kg, in addition to the higher interest rate on that 1.4 kg. In short, part of that money could have been invested usefully. Part of this money was spent in other ways, in the purchase of arms. In other words, the money either served to support absurd, antinational, ruinous policies for local industries, was stolen, sent out of the country, or spent on arms and other things. In theory, some of it must have been invested in something useful. Castro: For example, let's say some industrial equipment was acquired and installed. Perhaps some infrastructure, a highway, or a hydroelectric plant was built. In reality, this enormous debt did not benefit Latin America's development. When we discussed inflation associated with the flight of capital, I tried to explain to you that, with a 175.4-percent inflation rate that affects more or less all Latin American countries generally, people lose confidence in the national currency. The natural impulse of anyone having any amount of money and wanting to guarantee it is to exchange it for dollars and deposit it in U.S. banks. Although measures have been taken in various countries to protect exchange revenues and prevent their flight, there are always many ways to get dollars. In nearly all countries a parallel exchange exist side by side with the official exchange. When I talked with some Dominicans they told me that anyone having national currency can get dollars without too much fuss, either through the banks or on the streets, although the latter is somewhat more costly. Summing up, when people lose confidence in the national currency, and this is what has happened in Latin America, many of the people who want to safeguard their money. Those people usually belong to sectors enjoying higher income, and if they have the equivalent of, say, $50,000, $100,000, $500,000, or $1,000,000, they change this money and deposit it in the United States at a high interest rate. In this way they will have ensured their money and interest. Although in this inflationary situation home countries tend to pay higher local interest, precisely to retain the money and prevent its flight. Considering the high inflation levels existing in several Latin American nations a computer would be needed to calculate weekly, if the country were Bolivia, the calculations would have to be made daily, the national currency devaluation and the real value of the interest currently being paid by local banks in order to ascertain what is happening to the money deposited. In addition, they can elect to exchange their money for the currency of a country that pays high interest rates. This new money, far from being devalued, is overvalued, so the people exchange their money and deposit it in a safe place. Life in an undeveloped Latin American country is not easy. Many traps await the people. I mention this because, as 1 told you, to all figures of interest and profits we have to add the money that escapes from each and every country. Capital flies, in small or large measure, basically to the United States. You are Mexican. Today I read an international press release on information announced by the National Bank of Mexico. The information indicated that the flow of exchange for the Mexican economy was negative by more than $7.6 billion during the first 9 months of 1984, not only due to the foreign debt interest, which amounted to 67 percent of the almost $13 billion disbursed, but also because the flight of revenue from January to September amounted to more than $2 billion. Conversely, income from loans amounted to only about $5 billion, while the income from foreign investment amounted to $192 million. At least the Central Bank of Mexico [as received) has a clear enough idea of the amount of the capital flight. Speaking about the drain of capital, this has not been unique to Latin America. In 1983, some $40 billion was transferred from Europe and Japan to the United States, also as a result of the high interest rates that the United States offers. As I understand it, between $4 billion and $5 billion was taken out of the FRG last year to deposit in U.S. banks, which pay 4.5 percent more in interest than German banks. This kind of monetary policy attracts money from all parts of the world. In 1983 alone, foreign capital invested in U.S. government securities totaled $170 billion. So you see that money from all over the world must support a government deficit of close to $200 billion and a trade deficit of some $123 billion. Actually, if industrialized countries like the FRG and Japan, not to mention Spain, Italy, France, and England, which to a greater or lesser extent are all industrialized countries although not as industrialized as the FRG and Japan, suffer a drain of capital, that can you expect of Latin America, with developing countries whose economies are weak and which have a number of economic and social problems? What else can you expect? How were Latin American countries to defend themselves from a policy that is affecting all the other highly industrialized countries? However, there are other factors that have contributed to the crisis and the debt. A very important one is the phenomenon of unequal exchange. This is an old problem that can be traced over the past four decades. I believe that economists must delve deeper into this in order to understand its essence and inner workings. It is like a law that permeates all trade between developing and industrialized countries. I have defined it before: the constant rise in the price of equipment, machinery, and other manufactured products that we import from the industrialized countries, and the increasing fall in the purchasing power of the developing countries' export products. The purchasing power of the sum total of these products, including oil, in 1984, as compared to 1980, has fallen 21.9 percent,almost 22 percent. This means that if you lump all these products together, some of which are more affected by the falling prices than others, a given amount of these products in 1980 would buy the equivalent of $100; today that same amount will buy the equivalent of $78. This is a very important factor. If Latin American exports in 1984 totaled $94.790 billion then the 22 percent fall in purchasing power means that only on account of this one factor, we have lost some $20 billion. This is only one factor, the deterioration of the terms of exchange. This must be added to what was already lost as a result of the high interest rates, which are higher than those in effect at the time the debt, or much of the debt, was acquired, and which are held high arbitrarily and artificially. Then you have that due to this other factor we have lost more than $10 billion, which each country must pay in added-on interests. To this we must add the loss derived from the real increase of the debt and the corresponding interest produced by the overvalued dollar. If you obtained $100 million and we will estimate the overvalue at 30, not 40 percent to the dollar, your debt registered an objective increase of $30 million, plus the interest on those $30 million. Hence, taking these four factors into account -- what they overcharge on their products and underpay for ours as compared to 1980; the artificially-augmented interest, a consequence of the U.S. monetary policy; the drain of capital, and the fact that the dollar is overvalued and inflated -- we see that in 1984 Latin American countries were illicitly deprived of more than $45 billion: $20 billion from the deteriorated exchange relationship; $10 billion from excess interest, $10 billion from capital drain; and, conservatively speaking, $5 billion from the overvaluation of the dollar. All together, including what could be described as the normal interest on the debt, Latin American countries have handed over to the rich and developed world the equivalent of approximately $70 billion in only 1 year. Of this, $50 million has been bard cash. Can Latin America's economy resist such a drain? How much longer will it bold? Can one conceive economic and political stability in Latin America when it is subjected to such a merciless and astounding extortion? Are these pressures acceptable from a moral point of view? Is this policy just? Defensible? A policy of an overrevaluated dollar, in which interests are multidimensional, of unjust exchange -- imposed on us all to promote and support governments [words indistinct] formulas, economic theories, and recommended the use of monetary solutions -- that has irresponsibly loaned fabulous sums of money without regard for how they would be invested or what they were used for. Can one morally defend this? Can one justify it? If one considers that this deterioration of the exchange terms has been taking place for dozens of years, and that that has been one of the problems discussed within the Third World, the Nonaligned Movement, and the United Nations, whenever the need for a new international economic order or a new world economic order has been proposed. If on top of that and on top of everything else I have commented upon, you add the protectionist policies of the wealthier industrialized countries, plus dumping [preceding word in English] and the disloyal competition which these industrialized nations usually practice, then are Latin America's present difficulties and tremendous crisis hard to explain? It is utterly impossible to blame Alfonsin for these problems. It is utterly impossible to blame Sanguinetti. It is impossible to blame Tancredo Neves. It is impossible to blame the leaders who will win the upcoming elections in Peru. It is impossible to blame Belisario Betancur, Febres Cordero, or Siles Suazo for the problems they inherited. Pinochet could very well bear great responsibility for these problems, for example, for carrying out a fratricidal coup d'etat, or for his enthusiastic contribution to and cooperation with that policy for almost 12 years. We could not blame the Government of Panama or the Government of Costa Rica either, nor could we blame the Mexican Government for this situation in the least. We could not blame the Venezuelan Government either. In sum, I honestly feel that, in general, all these elements create a situation which is beyond the government's control, wishes, and choice. We maintain that solving the debt problem has become imperative, crucial, and something which cannot be postponed. Otherwise, none of the democratic processes that have begun will be able to gain strength because the same economic crisis which drove back, which virtually chased the military in countries such as Argentina, Uruguay and Brazil out of public administration, will drag the democratic processes that have begun in those countries into a whirlwind of economic problems, social tension, and insoluble difficulties. Pinochet's methods are no longer applicable in dealing with the political, economic, and social situation many Latin American nations are experiencing. This also applies to the methods employed by Dominican Republic to impose on the people the Draconian measures of the IMF. Their new leaders will not be willing to accept this. The crisis is growing, and will continue to grow. It is totally unreal to believe that that the problems can be solved with simple palliative measures, like renegotiating the debts and other traditional remedies. I sense that many Latin American politicians of all factions changed their minds. I am also saying that there are fewer conservatives in this hemisphere because many persons -- as well as organizations and political parties -- who have traditionally been considered to be right wing or who have been called conservative are aware of the seriousness and depth of the problems. Who can now talk to them about the Chicago school, about ending tariff barriers, about allowing these countries' fledgling industries to compete with industries of the more developed countries with high productivity and technology? Who will persuade them to accept free competition within their own domestic market, between their country's industries and the U.S., Japanese, and European industries? These persons truly feel embittered and deceived. I am talking about conservative persons and politicians, I am no longer talking about intellectuals, film producers, artists, writers and professionals. I am talking about persons who represent the most diverse gamut of political parties, ranging from the center to the left, workers, women, doctors, and teachers. For that reason, I have stated, and have said this to the Americans themselves, to visitors from Japan, Europe and many other capitalist and socialist countries, to many visiting newsmen: Either the foreign debt problem is settled and the economic crisis is overcome, or there will be social upheaval in Latin America. If they asked me what kind of upheaval, I would say that there will be rather widespread social revolutions. Diaz: It will not be a rightist revolution? Castro: I do not-think so. I am convinced that the menace for the democratic processes is not rightist military coups, and let me tell you why. It has already happened; it was the last resort used to deal with previous crises, which were nothing compared to the current situation. It was first used in Brazil, over 20 years ago, then in Chile, later in Uruguay, and after that in Argentina. There were harsh military regimes and thousands of missing persons. If you count the missing persons in various places, and never before had such horrible repressive measures been taken, there are tens of thousands of persons murdered, tortured, and banished. Diaz: And if the people should vote for the right? Castro: The people in some of those countries are now coming out of a true inferno. Their main concern is to leave that inferno. In fact, they often decide on formulas to make such a departure more probable, more feasible, and faster. One should not deceive oneself about the evolution of developments. The prescription of repressive fascist military coups has already been used and the militarymen themselves are abandoning the administration of those countries because they have become unmanageable. Only Pinochet is still in place, increasingly isolated both domestically and abroad, a kind of Somoza of the southern cone, injecting steam into the boiler and turning that country into a powder keg that, if prolonged, can blow up resulting in a situation more terrible than anywhere else. I ask you: Do you not believe that under normal circumstances in a country like Bolivia, with only a tenth of the problems that have occurred in recent weeks, pretexts would have already emerged for 10 military coups? Diaz: But, commander, voting might come from the right, democratic voting from the right, unknowingly protesting progressive governments. Castro: Well, I know what you are thinking. As a rule, in any crisis the party in power tends to wear out quickly and the citizens favor the opposition parties wherever there is -- and let us here use the classical terms, if you want -- a right-wing or left-wing, conservative or liberal government, even though these words no longer indicate great differences in stabilized societies. The citizens favor the opposition party because they tend to blame the party in power for the worst problems, for the difficulties they are experiencing at the moment. It is a rule that is observable in Europe, but those societies are more stable. Except for certain exceptions, if Latin America's current economic and social situation remains aggravated I definitely doubt that future events will take place through idyllic political, constitutional and electoral processes. It will happen in certain countries because not all of the countries are experiencing the same situation. The situation is not equally as grave in Venezuela and Bolivia, or in Ecuador and Bolivia. You cannot deduce from this situation however that this is what will happen in all countries. Nevertheless, it can be said that this crisis is already affecting all of these governments to a greater or lesser degree. I do not think any government can be excluded from this reality. I am watching the general situation, especially in the southern cone. I am not talking about Central America. These problems exploded in Central America some time ago. In my view, unless there is a solution to the economic crisis and, above all, a solution to the debt problem there will be an explosion in South America. This is my deepest conviction. The old prescriptions for preventing these explosions have already been used: the instruments traditionally used have already given all they can give. The current crisis is more serious, more profound, and more generalized than ever before. The militarymen are withdrawing from the states' administration because the countries have become unmanageable and they are leaving an ill-fated legacy to the civilians. The civilians are now responsible for finding solutions. We are not making inflammatory or subversive statements. That is not our intention. On the contrary, we are simply analyzing current and future developments with the utmost serenity. If you ask me -- a journalist already has: As a revolutionary would you not be happy because of all this? I will tell you what I think. At this point there is something more important than social change itself and that is the independence of our countries. This situation has led the Third World nations to such a degree of dependence, exploitation, extortion, and abuse that independence and the struggle for a new international economic order have become the key issues for the Latin American and other underdeveloped countries. Social change alone does not resolve anything. Social change can entail more justice; it can speed up development and make it more humane; it can make everyone's sacrifices and efforts more equitable. We have done it and we are satisfied that we did. However, our country's considerable advances in economic and social development did not result merely from social change, but also from the fact that within our sphere we have somehow achieved a new international economic order in our relations with the socialist countries. Eighty-five percent of our commercial relations are with the socialist countries, and although the terms of these relations are not exactly the same with all of them -- as there are differences among them as to the level of development and available resources -- our relations are based on truly just principles of cooperation and trade. Let us say that in our economic relations with the USSR and the more developed socialist countries, we have resolved the tragic law on unequal exchange which has historically ruled relations between the Third World and the developed capitalist powers. We have just prices for our exports, satisfactory prices which are protected through agreements against the deterioration of the terms of exchange; that is, against that phenomenon by virtue of which, except for specific situations, the Third World's exportable funds have less purchasing power daily while the products we import are more expensive every day. We have not been affected by protectionist measures implemented by socialist countries. We do not suffer dumping [preceding word in English] or disloyal competition from socialist countries. Our financial problems, the result of the need for credit for development, have been resolved without delays or difficulties. We have managed to have our debt postponed for 10, 15, and even 20 years, without interest. If the industrialized capitalist countries applied the forms of exchange, and the economic and financial relations that we have with the socialist bloc, the problems stated would be solved, and the development of the Third World countries would be guaranteed. In my view, that is enormously important, because we, I repeat, have solved our problems and not only with social changes, but because we have established a kind of new international economic order with the socialist community, as a socialist country in the Third World, as a developing socialist country. Without these bases our great economic and social successes, our extraordinary victories in the field of public health, education, physical culture, and sports, in the eradication of unemployment and malnutrition, in raising our people's material and cultural standards, would not have been possible. We would not be able to offer the technical cooperation we give to dozens of Third World countries. In order to do this, we need resources, great investments and credits, technology, and a great deal of international cooperation for a long time. Many poor countries with few resources could never achieve these advances if a new world economic order is not achieved, and if there is not a great deal of international cooperation. Social changes can bring about a better distribution of social wealth, greater justice, greater concern for the poorer classes, the poorest classes in the country, but social change alone will not solve the problem, and we therefore feel [passage indistinct] development, including their right to effect social changes, the disappearance of the iniquitous exploitation system that the Third World countries are subject to. That is to say, we feel that it is most essential to immediately struggle for a new world economic order, that world economic order so solemnly discussed and agreed upon at the United Nations 10 years ago, to a great extent due to Mexico's initiatives, support, and active participation. Marx himself always thought of economic development as a law of socialism. (?Life) forced many countries to turn to a socialist form of development, ourselves among them. Each people has to decide what it prefers to do. However, I am fully convinced that for all of the Third World countries, which represent a variety of systems and forms of government, with different degrees of development of productive forces, and the most diverse forms of political and religious beliefs, the task at this time the vital priority, the most essential of all tasks without exception, in which all of these countries can unite and struggle, is development. We have to get to the root of the problems that have caused underdevelopment in our countries, and which increasingly open a gap between the industrialized countries and the Third World countries. It has been said many times that this gap has to be reduced, and should be reduced, but it has not been reduced. It has widened more and more, and at this time it is widening more than ever. There are industrialized countries that are reaching a production rate equivalent to $15,000 per capita. Compare this with Africa's production, with its small per capita production of a few hundred dollars, and with the production of Latin American countries. If at one time the difference was 10 to 1, today is 15, 20, 30, and in some cases of 40 and 50 to 1. That is to say, the gap between the industrialized world and the underdeveloped world is increasingly greater. The gap in the per capita monthly income is also widening. We have not advanced, we have even regressed. Far from developing, we are underdeveloping [subdesarrollamos]. We have been experiencing a process of underdevelopment, not a development process. When we become increasingly different from the industrialized countries, and get farther away from them, we are really underdeveloping, even though a mathematical index may state that our production has grown by 2 or 3 percent the gap broadens. And the Third World is even poorer in comparison with the developed world, with the added problem that if the population growth of the industrialized countries is 0.6 percent, the rate of growth in the Third World countries is 7 or 8 percent. The population growth rate in the Third World countries is at the [word indistinct) of 2 to 3 percent, and because of this, within the next 15 years, 80 percent of the world population will live in the Third World. This is why I say that a new world economic system is extraordinarily important for this group of countries in that it would make development truly possible. You can understand, then, why I think that if we do not achieve this new world economic order, the terrible problems in our countries cannot be solved simply through social changes. Social changes, I repeat, even in poor countries, can result in a better distribution and solve important problems, among them to improve human life when horrible social injustices and inequalities which could take place in rich as well as poor countries, are ended. The question, or premise, of struggling for a new world economic order is at this moment the most important issue for the Latin American countries and the Third World because this is what can result in the creation of conditions for real independence, real sovereignty, and even the right -- and not only the right -- but the possibility of making social changes. There is an essential question: The simple cancellation of Latin America's foreign debt would not solve our problems; it would only provide a breather for a few years. In the case of several Latin American countries, if you were to write off their debt tomorrow, practically nothing would be solved. Problems have grown so much worse in some countries -- and I would use Bolivia as an example -- that cancelling the debt would hardly have any effect. They could count, let us say, on an additional 200 million, 250 million, or 270 million [currency not specified], which was their favorable trade balance last year, but the problems that have piled up in that country are so serious that they would not even have what can be described as a breather. I have been informed about installations where the production cost of a pound of tin is $16, while the current price on the world market is $5. Now then, I feel that there are some countries that would unquestionably have a breather if the problem of the debt is solved. Argentina would have a breather, and so would Uruguay, Brazil, Venezuela, Colombia, Ecuador, Peru, and, well, I can also mention Mexico. Mexico is not one of the most seriously affected countries, but it would indeed have a breather. However, we must be conscious of the fact that there will not be a definitive solution to problems as long as the fateful law of continuous deterioration of trade relations continues; as long as the protectionist policy of the industrialized capitalist powers continues; as long as the practice of dumping subsidized products continues, which takes away markets and lowers the price of export products from which many Third World countries make a living; as long as monetary policies by virtue of which interest rates are determined by a big industrial power can be imposed on us; as long as we are loaned money which is then collected at a higher value; as long as we are deprived of the capital we need for our development; and as long as methods and prescriptions like those of the Chicago school are imposed on us. Just yesterday, in a note to the United States, the Andean countries expressed their deep concern and alarm over the drastic reductions being made in the U.S. sugar import quotas. That country was still importing 5 million tons in 1981. It reduced imports to 2.7 million in 1984, and its imports will not exceed 1.7 million in the near future. The countries referred to described the situation as tragic. These U.S. protective measures will reduce Latin America's earnings by hundreds of millions of dollars. Of course, the measures will also result in surpluses, which will further depress world prices. A little over 20 years ago, Cuba had a quota of 3 million tons in that market. One day it was taken away and . redistributed among other countries on this hemisphere. The pretext was the Cuban revolution. It had to be crushed mercilessly. However, now that the debt totals 360 billion [currency not specified], what reason will the United States use for eliminating the sugar quota of the Latin American countries? In other words, if we do not overcome these problems, we will only get a breather; a few countries would get a breather but the deeper causes of our problems will not have been eliminated. In my opinion, this is precisely the time to wage that struggle. Such a grave crisis situation has been created that the Third World countries are obliged to think, to unite, and to seek solutions -- regardless of their militancy and political ideologies -- as an elementary question of survival. I think that the Latin American countries need to wage this struggle and, fortunately, are in the best position to wage it. However, whatever struggle is waged for a solution to the debt will benefit all Third World countries -- not only the Latin American countries, but all developing countries in Asia and Africa. We feel that the debt must be written off. It can be mathematically demonstrated that it is unpayable. The problem no longer concerns the amount of the debt, but rather the interest being paid on it. I will start out with four hypothesis each of which is based on the assumption that the debt will not grow. First hypothesis: To grant a 10-year grace period for the payment of principal; to continue paying interest as it is currently being paid during that period; and to allow for 10 years after the grace period to pay off the debt at an interest rate not exceeding 10 percent. Latin America would have to pay $400 billion during the next 10 years and another $558 billion during the following 10 years. Within 20 years Latin America will have transferred $958 billion to its creditors -- almost $1 trillion or a Spanish billion. That is to say, almost $1 trillion will flow out of these countries, not taking into account in any way the huge, accumulated social problems, the huge economic problems, and the development to be achieved. Within 20 years they would have to extract almost $1 trillion from their modest economies to send to the industrialized capitalist countries. Is it possible? Is it conceivable? I repeat, that is supposing that the debt does not increase at all and that interest rates do not exceed 10 percent during the amortization period. Is it conceivable, especially if one takes into account the other problems we have mentioned already, that is, unequal exchange, protectionism, dumping [preceding word in English] and so forth? It is not conceivable. Second hypothesis: That an arrangement be made to pay at most 20 percent annually of the value of exports and an annual interest rate not exceeding 10 percent be implemented. Latin America's exports combined are already close to, although not quite, $100 billion. In fact, let us suppose that even if exports were to exceed that amount, the Latin American countries would not pay more than $20 billion per year. In that instance, we would have to pay $400 billion in 20 years, and in the end the debt would amount to $1,161,050,000,000. That is, we would have paid $400 billion and the debt would be triple what it is today. Third hypothesis: To grant a 10-year grace period including interest and after the grace period to grant 10 years to pay off the debt. Undoubtedly, this would bring a 10-year relief. In 20 years, the Latin American countries would have to pay of 447,310,000,000. Fourth hypothesis: To reduce the interest rate to 6 percent; to grant a 10-year grace period, including interest and after the grace period to grant 10 years to pay off the debt. Needless to say, this is the most lenient hypothesis of the four, at any rate in 20 years these countries would have to pay $857,471 billion. I have proposed four hypotheses, and in each of them I am assuming that the debt will not increase and that interest will not exceed 10 percent. In each of them it is clear that the foreign debt and its interest cannot be paid. Based on the reality, on all the problems already mentioned, it is simply impossible to pay the foreign debt, or to ever solve the problem of development. The debt and its interest are an economic impossibility, as well as a political impossibility. Moreover, they would be a moral impossibility. It would be unjustifiable to demand from the people the tremendous sacrifices, including a bloodbath, required to pay such huge sums, which in great part have left the country, were squandered, or were misappropriated. In the Dominican Republic, the foreign debt has already claimed its first drops of blood as dozens of humble persons were killed. To attempt to pay off the debt under Latin America's current political, economic, and social situation would bring a bloodbath to our suffering and impoverished nations, and that goal would never be achieved. Our peoples cannot be blamed for their underdevelopment or their debts. Our peoples cannot be blamed for having been colonies, neocolonies, or banana republics, countries focusing on coffee, mining, or oil; they were doomed to produce raw materials, exotic products, fuel at low price and cheap labor. Historians and economic experts state that the fantastic quantities of gold and silver extracted from our nation's core, and amassed throughout the ages with our people's blood and sweat served to finance the development of the industrialized world which is now our demanding creditor. What has been taken from our people, in recent decades alone, through unequal exchange, high interest, protectionism, dumping [preceding word in English], monetary manipulations, and the flight of foreign currency, is much more than the total amount of the debt. One cannot even attempt to measure the total in terms of wealth and welfare of which we have been deprived because of the economic dependency and underdevelopment that was imposed on us. Instead our peoples are the creditors, not only morally, but also materially of the industrialized and wealthy Western world. The FRG has been paying Israel financial reparations for the genocide of the Jews by the Nazis. Who is paying for the genocide committed not only against the lives, but also against the wealth of our peoples throughout the centuries? Based on these mathematical calculations and on these economic, political, historical, and moral considerations, I have reached the conclusion that the Latin American debt cannot be paid and must be canceled. It has been stated that if the debt cannot be paid, it would destabilize and destroy the international financial system. That does not necessarily have to happen. We propose that the creditor industrialized nations can and must assume the debt to their own banks. As a rule, an industrialized nation's public debt increases; throughout time the principle that the debt tends to increase has been proven. The industrialized states simply meet the interest on that growing public debt. In 205 years the U.S. public debt has risen to $1 trillion -- by a trillion I am talking about the U.S. trillion, which is equivalent to the Spanish billion, or $1 million million. Well then in 1981 the U.S. public debt rose to that amount, that is between 1981 to 1984, in 3 years alone it rose by $650 billion and in 1986 it is expected to rise to or exceed 2 trillion. This, however, is barely mentioned in the United States. It is not something that causes major concern. On the contrary, emphasis is placed on the fact that the economy is growing and, precisely, it was reported that it increased by 6.8 percent in 1984. This means that, if we go by the government's economic idea and theory, the growth of the public debt has not ruined the economy or curbed growth. It has not hampered the optimism that certain U.S. economists expressed when talking about future development and growth in their economy. If the United States, just like other industrialized powers, were to assume the debt of the Latin American countries and the other Third World countries through its private banks, this would entail an additional increase in its public debt. But where could the resources be obtained to pay the interest that would result from the increase in this debt without affecting the country's economy in the least? It is very simple: from the military expenditures, and not from all the military expenditures but from a small percentage of them, 10 percent of them, and if the interest continues to be so high, then with a maximum of 12 percent. With that small percentage of the military expenditures, all the industrialized powers can respond to their own banks by covering the foreign debt of Latin America and the Third World countries. And even then, the military expenditures would continue to be tremendously high and worrisome. As everyone knows, $1 million million, that is 1 U.S. trillion or 1 Spanish billion, is being invested each year in military expenditures throughout the world. [Unreadable text] the arms race -- which the world views as something absurd and unacceptable, in a world of more than 100 underdeveloped countries and thousands of millions of people suffering food, health, housing, and educational shortages -- is not stopped, then these expenditures will continue to increase, leading to a nuclear catastrophe -- an even more worrisome risk than the economic catastrophe that a large part of mankind is already suffering. It would be truly wise to associate the beginning of a reduction in military expenditures with the beginning of a solution to international military problems. All economists have stated that the problems of underdevelopment and poverty in the world could be solved with part of the funds used for military expenditures. This problem of increasing military expenditures and the dangers they entail for mankind, was the focus of attention at the recent New Delhi meeting which included the participation of prestigious international figures such as Rajiv Gandhi, Julius Nyerere, Raul Alfonsin, Miguel de la Madrid, Andreas Papandreou, and Olof Palme. The United States, using 10-year treasury notes and 30-year treasury bonds, could answer to its creditor banks for the debt of the Latin American countries and even those of the Third World. This would not effect the contribution that U.S. citizens make to the budget. The banks would recover the capital invested, the U.S. exporting companies would increase their exports, and the U.S. investors abroad would increase their profits. And what is even more important: This solution would increase employment in all the industrialized countries; their industries would use a greater percentage of their [Unreadable text]acities; and international trade would increase. It must be understood that the main problem of the industrialized countries at this moment is not the internal or the external public debt, but the unemployment which is growing constantly in most Western countries. The unemployment figure has reached 3.5 million in the United Kingdom, despite its new oil resources; 2.6 million in the FRG; a postwar record of 3 million in France; 2.8 million in Spain; and so forth. The solution of the foreign debt problem of industrialized countries could be an important step toward pulling out of the prolonged international economic crisis which is far from being over, despite the optimistic predictions that some want to make. The economy of the EEC grew by only 2.4 percent in 1984 and better results are not expected this year. What is growing, constantly, is unemployment. According to very recent data, the U.S. economy itself is facing difficulties with its growth in the first quarter of this year. Solving the problem of the Third World's foreign debt, although it would be a relief to many countries, would not solve the problems of development. In a few years, the situation would be the same or worse than it is now if the unequal exchange, the protectionist measures, the dumping [preceding word in English], the monetary policies based on the economic power of a few countries, the excessive interest rates for loans, and other factors that make up the unjust system of the economic relations and exploitation imposed on the Third world are not definitely overcome. In other words, if a new world economic order is not truly established. Diaz: How would we handle this? Could we somehow reverse the pressure put on these countries by the crediting banks, and demand that these institutions adopt measures to avert a financial crisis? Castro: In my judgment the Latin American countries, because of their political importance, because of their political weight in the world, their enormous debt, their terrible economic and social crisis, and the risks of a social explosion of unforseeable consequences, because of their deep common interests, and their possibilities of united action, are in a better position than any other region of the world to seriously broach this subject. Many Latin American leaders have already clearly and precisely established the facts regarding the foreign debt, which is the first step in this struggle. However, it is inconceivable that at this point in time the first thing that is proclaimed and solemnly promised is that the countries in this hemisphere that are affected by this situation will not form a debtors club, even though the creditor countries are closely united in the IMF, and in the Paris Club. A club, a committee, a group, or whatever it may be called, is essential. These countries, acting as separate units, will never achieve a true solution to their problems. They will merely find alleviating formulas that will barely mitigate the difficulties: a brief grace period for payment of the capital, small reductions in the percentage of the interest to be paid and in the London Interbank Offered Rate [LIBOR]. As I told you earlier, the problem is no longer the payment of the capital. A grace period of 4, 6, 8, or even 10 years could be granted, and a similar or even longer period of time could be set aside for total payment of the debt. The problem will grow worse. The present renegotiations solve absolutely nothing. The problem is the result of the enormous interest that has to be paid each year, religiously and punctually, accompanied by politically inapplicable measures, as well as exaggerated and unreal goals related to inflation, the reduction of the budget deficit, restriction of social expenses in countries full of nutritional, medical, educational, employment, housing needs, and so forth, and other demands imposed by the IMF, which are impossible to fulfill when the country is forced to distribute its resources to pay the huge interest accrued on the debt. The people do not understand this, they cannot understand it. There is no other message for them but that of useless sacrifice. Many promises have been made to them over a long period of time, and they see the situation worsen daily. They do not understand those technicalities, which mean nothing to them, which offer them nothing when they go out each day to search for jobs, or when they see their salaries reduced each morning and products becoming increasingly expensive. Remember what Lincoln said: "You cannot deceive all of the people all of the time." The Cartagena Consensus was limited to 11 countries. I was informed by Enrique Iglesias, director of ECLA -- now Uruguayan foreign minister and a highly regarded economist in our hemisphere, who has excellent relations with various heads of state -- of the prevailing attitude during those days that the group should not be broadened because the presence of a large number of countries would hinder its analyses and negotiations. The principle was not democratic at all. It cannot even be fully explained why some countries bad the privilege of belonging to the group and others did not. This policy seems more applicable to a private club than to the idea of how we must deal with a serious and crucial situation that involves all of the Latin American countries without exception. In my judgment, this attitude does not make sense right now. All of the Latin American countries should be included in this group. Countries such as Guyana, Trinidad-Tobago, Jamaica, and others of greater influence and age -- such as independent nations in the Caribbean area -- which are willing and eager to cooperate with loyalty, could be included. Their debts are also considerable. There is no reason to fear possible disloyalty. I do not think that any Latin American government that respects itself would be capable of betraying the feelings and interests of the Latin American family under these critical circumstances. In any event, those who disagree will never be any more individual cases or isolated groups. Cuba would willingly exclude itself from such activities if it were advantageous, if it were trying to avoid irritating the United States. I do not think it is a good tactic in a situation such as this to be excessively finnicky and cowardly toward the northern giants. The United States should be persuaded to cooperate of course, but without our adopting attitudes that could be considered undignified and lacking in seriousness. These attitudes do not ever command respect from the United States. I am not stating this problem so that our situation will be considered or to reflect a Cuban problem. Fortunately, today we are the only country in Latin America and the Caribbean immune to the crisis. Our debt in foreign currency is minimal, approximately $300 per inhabitant. We have no problems whatever in our financial relations or in our trade with the socialist bloc with which, fortunately, we carry out as I have said before, 85 percent of our trade. Between 1981 and 1984, our total social product rose 24.8 percent and the product per inhabitant rose 22.6 percent. Our plans for economic and social development in the next 15 years are assured, which is a true privilege during a phase such as this one. If it were not for the principles of the new economic order which, as I have explained, we have established with the socialist community, the more than 7.5 million tons of sugar that we export per year, at the current prices on the so-called world market -- and assuming that there were markets for that volume of exports -- would not yield enough to cover even 25 percent of our fuel imports. If they want to come to terms with the foreign debt problem, the Latin American countries must reach a consensus in order to really achieve the goal that many of their leaders have proposed; namely, to establish a political dialogue with the creditor countries, because as it has been accurately said, the debt problem is a political, not a technical problem, and the way things are going this is becoming a revolutionary problem. I want to add some remarks on the medium-range options [words indistinct] that may emerge. In the mathematical calculations that I showed you, you can see that the option to pay by using only 20 percent of each year's exports -- and keeping that within $20 billion per year -- does not work out. Without including new loans, the $400 billion that would have to be paid over 20 years -- at 10 percent interest -- would result in a payment of $1,161,850,000,000 [figure as received]. Even if interest were lowered to 6 percent and a 10-year moratorium on the debt and its interest were called -- and theoretically this option is more benign -- Latin America would still have to pay $857.471 billion over the following 10 year period. Medium-range solutions, such as lowering the payment to 20 percent of yearly exports, or simply by reducing interest without calling a moratorium, for a period of no less than 10 years, would not even give Latin America a breather. These medium-range options do not attract, bring together, persuade, encourage, or move anyone to action, simply because they do absolutely nothing to resolve the problem. Something that is very important to consider is what would be done with those funds. In my opinion, and interview of the austerity measures already introduced by many governments, most of the funds would have to be used to finance economic development as the essential and solid base from which to combat unemployment, hunger, and many other social ills. Notwithstanding the seriousness of the problems, the funds cannot simply be distributed and consumed, immediately raising living standards. However, 20 percent, or -- at the most and according to the circumstances -- 30 percent could be used to cover the most urgent health, housing, and educational needs. A lot can be done with 20 percent of $400 billion, as a complement to the resources currently utilized to those ends. All of this would require a great deal of conscientiousness and a great national consensus to meet the challenge imposed by the situations in each country. The solution of the debt problem would simply be a first step. Then the countries would have to delve into the real and in-depth causes of the debt and of the subsequent economic crisis and the factors that created it. Resolving the debt problem would only be a beginning. Latin America must demand a halt to protectionist policies, dumping [preceding word in English), unjust and abusive monetary policies, exaggerated interest rates, overevaluation of the dollar, and other diabolic procedures that make it impossible for our countries to develop. We must demand just prices for our basic export products. We cannot continue to furnish coffee, cocoa, banana, sugar, meat, minerals, and other essential raw materials produced on starvation wages that are often lower than $80 per month, in order to purchase merchandise, machinery, medicines, and other manufactured products made in industrialized countries that function on high yields and salaries of more than $1,000 -- that is, 10, 15, or even 20 percent higher than those of workers and technicians in Latin America. Our unemployed are not protected by any sort of subsidy and a large portion of the population does not even receive medical and educational services. Paradoxically, this crisis is turning into the first real opportunity for the countries of Latin America and the Third World to have their demands given due consideration. We have spent dozens of years at the United Nations, at the Nonaligned Movement, and at all the international organizations demanding a more just economic order and better prices for our products and requesting loans and funds for development. Not long ago, after the sixth summit of the Nonaligned Movement, and on behalf of that organization, we said that the Third World would need $300 billion in aid for development during this decade. Now it is not a matter of getting on our knees to beg for funds, or of having a modest 0.7 percent of the industrialized countries' GNP's go toward development -- only a handful of countries agreed to this. At present, when Latin American countries are being asked to pay $400 billion in 10 years, the decision is in our hands. We are in a situation in which we can simply say that we do not accept this ripoff [despojo] and that we will not band over $400 billion. They could respond by calling off the loans. The $400 billion that they are demanding we pay with the sweat and sacrifice of the Latin American peoples, well invested, could finance Latin America's development over the next 10 years. Each country can lend itself what it is paying in interest. If the industrialized countries were rational, they would not only benefit from our increased exports, but their banks, through a formula like the one outlined here, which would guarantee the availability of credit, could grant new loans. After all this is their role in the world of international finance and business. Should a new international economic order be established, on a solid foundation, new loans could be granted and paid off. Once OPEC increased oil prices from about $25 to $30 per barrel, the industrialized countries, namely Europe, the United states, Japan, and others, have paid more than $1 trillion in only 11 years. This is much more than the entire Third world foreign debt. The industrialized countries did this without wrecking their economies or sacrificing their large military expenditures. In fact, 90 percent of the money paid ended up in the banks of the countries from which it originated. Those countries also received money spent on oil imports by nonoil-producing Third World countries. The price of imports from industrialized countries have multiplied. Numerous Western companies, including companies involved in the production of weapons, reaped the benefits of the increased buying power of their oil-producing customers. Many technological innovations were implemented and many measures to conserve fuel were adopted. Old and new energy sources were used. Waste was decreased considerably. Only nonoil-producing developing countries experienced chaos in all senses of the word; they were the victims of an unequal trade system that emerged. The cancellation of the Third World foreign debt would be much more just and economically beneficial to all countries. It would be much more important and much less costly vis-a-vis the benefits reaped by oil exporters. For the majority of Third World countries, those benefits will only be fully justified and a balance achieved when their basic exports receive equal treatment. The new international economic order should contemplate trade relations that are just to all Third World countries. This would imply that industrialized and rich powers would have to make sacrifices in order to waste fewer resources on weapons. It is not fair to pay extremely low prices for cocoa, tea, coffee, cashew nuts, peanuts, coconut, fibers, which are collected leaf by leaf and grain by grain, as well as minerals and fiber raw materials in order to build aircraft carriers, battleships, strategic rockets, nuclear submarines and to defray the cost of "star wars." All those resources should be invested in the war against hunger here on earth. If Latin American and Third World countries adopt a firm and united stand, then for the first time, they will have an actual (?opportunity) to achieve [words indistinct] regarding the foreign debt. Should a total absence of understanding force them to make unilateral decisions regarding the debt, the industrialized countries cannot threaten us with cutting off trade, because they would not be able to exist without trading with the Third World. They would not be able to do without our fuels and raw materials. They would not even be happy without our coffee, tea, cocoa, shrimp, lobsters, or other delights from our tropics. Today, it is absolutely impossible to block the Third World economically or to intervene in those countries over debt matters, as was done during the first decades of this century in Haiti, the Dominican Republic, and other countries. Today, it would be impossible to again divide the world to ensure the supply of raw materials and markets as was done in the past. The new Latin American leaders have a great responsibility. I reiterate my conviction that there will be great social unrest if a solution is not found for the foreign debt problem, if payment is demanded at all cost, and if the ill-fated IMF formulas are used. I do not foresee any risk of the return of a wave of rightist, repressive, and fascist military coups d'etat, which could only occur in isolated cases in some countries. Quite the contrary, I foresee that should great social unrest occur in some countries, leaders with a patriotic spirit and a sense of reality about the situation, who are willing to promote social change, will emerge from the military ranks. In much less critical circumstances, figures who emerged from the military ranks such as Omar Torrijos of Panama and Velasco Alvarado in Peru, were the standard-bearers of national demands and social reform. A struggle as rational as the solution of the foreign debt and the achievement of just economic relations between the Third World and the industrialized world is so essential to the survival and future of the peoples of Latin America that it would undoubtedly be supported by all social classes. It would generate a great internal unity in all countries and it would surely generate great unity among all Latin American countries. Furthermore, the Third World would have the firm, enthusiastic and unwavering support of all developing countries of Asia and Africa. There is no doubt in my mind that many industrialized countries would also support this appeal. Also, I do not doubt that the ideal and constructive thing to do is to solve these problems via political dialogue and through negotiation. That would be the appropriate way to solve major problems in an orderly fashion. Should this not happen, there is no doubt that a group of countries, carried away by a desperate situation, would be forced to adopt unilateral measures. This is not desirable, but should this happen, there is no doubt in my mind that this group would be joined by all other countries in Latin America and the rest of the Third World. -END-