Latin American Network Information Center - LANIC


PA080500 Havana PRELA in Spanish 0500 GMT 30 Mar 85 -- FOR OFFICIAL USE

["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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.