-DATE- 19850602 -YEAR- 1985 -DOCUMENT_TYPE- INTERVIEW -AUTHOR- F. CASTRO -HEADLINE- CASTRO DISCUSSES THIRD WORLD'S FOREIGN DEBT -PLACE- PALACE OF THE REVOLUTION IN HAVANA -SOURCE- FOLHA DE SAO PAULO -REPORT_NBR- FBIS -REPORT_DATE- 19850607 -TEXT- CASTRO DISCUSSES THIRD WORLD'S FOREIGN DEBT PY041102 Sao Paulo FOLHA DE SAO PAULO in Portuguese 2 Jun 85 pp 14-18 [By editorial staffer Joelmir Beting] [Text] Fidel Castro Ruz is 58 but looks younger. A health buff, he exercises twice a day in his office, has switched from rum to herbal tea, follows a strict diet, and advocates his own recipes for lobster and shrimp. He sleeps only a few hours a day and does not follow any kind of work routine, so much so that we met in the afternoon, at night, and even in the predawn hours of the morning. During our final meeting, in the company of six ministers we discussed the Brazilian economy and the foreign debt of the Third World from 2300 to 0600. All the meetings took place in his office at the Palace of the Revolution in Havana. Our first contact was on 9 May during a dinner held to honor Algerian President Chadli Bendjedid. Fidel told me: "I have invited you to come to Cuba not just as a journalist but also as a consultant. I would like you to tell me about the Brazilian economy and to discuss my ideas about the foreign debt. We will not talk about politics or about rapprochement toward Brazil, the Vatican, or Washington; will that be all right?" Fidel is currently concentrating on economic matters, leaving politics to the government and the Communist Party. Castro is well equipped and well informed, he has all the problems related to the foreign debt at his finger tips, and what be can tell about it would fill a book. He likes to talk, but he is not the kind of person who grants interviews easily. He told me that he has 156 requests for interviews from newspapers and magazines from all over the world on his waiting list. Concerning the debt, the subject which most prominently holds his attention at the moment, Castro has already talked to THE WASHINGTON POST, Mexico's EXCELSIOR, the Spanish News Agency EFE, and the Chicago magazine PLAYBOY. The first three have already been published, while PLAYBOY's interview will come out in August. This exclusive interview was recorded by Chomy Myard, the Cuban president's private secretary, who files all the tapes. Fidel explained to me: "I do this for all journalists. I like to compare what I tell them with what is published. It is the responsibility of a chief executive." Fidel gave me a cigar and said in a serious manner: "Now we will discuss how to save capitalism." FOLHA: According to economists, the 1980 world crisis is worse than that of 1930. Is the world plunging toward a catastrophe, or can it still be saved? Fidel Castro: Unless someone can prove otherwise, I would say that the world is plunging toward an abyss and that this abyss could well turn out to be bigger than the world. FOLHA: Cuba is not an island, it is part of the world. Won't socialism burn in the same bonfire along with capitalism? Fidel: What is bad for the world is bad for socialism. However, capitalism is to blame for the crisis, and it is up to capitalism to avoid the general catastrophe, its own included. FOLHA: President Reagan has said that the worst is over, that the doomsayers failed in 1930 and have repeated their gaffe in the 1980's. This was made clear at the Bonn summit. Fidel: That was the speech of the major beneficiary of the crisis of others, the one who makes the rules of the game. The apparent recovery of the U.S. economy is being financed by the rest of the world. From this comfortable position it is easy for President Reagan to say that everything is going well in the world. FOLHA: Better than next year? Fidel: The following must be clearly understood: We are living in the third world war, an economic war. This is an undeclared war, a war of extortive interest payments on the debt, a war of depressed prices for commerce. The world is already counting the corpses and walking through the rubble, and the aggressors in this war, still not confronted by their victims, maintain that this war does not exist and that the corpses are healthy. The aggressors are the rich countries, which in the past few years have become richer at the expense of the poorer ones, something which never happened before, not even during the capitalist depression of the 1930's when everyone became poor, some more than others. This is not the current case. Now the rich countries are sucking the blood of the poorer ones without consideration or remorse. FOLHA: A blood transfusion from the poor to the rich? A liquid donation of the poor's capital to the rich? That is the case of Brazil. Fidel: Yes, that is the case with Brazil, Mexico, Argentina, Africa, and Cuba. Cuba is included. We are losing capital even though only one-sixth of our trade is with the capitalist countries. Capitalist trade with Cuba, which should result in an addition, has become a loss. FOLHA: What are your losses? Fidel: Cuban losses can be accounted for by the rising costs of the foreign debt in convertible currency and by the deterioration of the trade terms with our capitalist trading partners. In trade accounting, for instance, we made a global profit of $40 million in 1983 but then we suffered a $66-million deficit in 1984. The important fact is that we went into the red despite selling.more and buying less, speaking in terms of trade volume. This means that we are giving more and more in exchange for less and less on account of the mechanisms of the free pricing system. The deficit is completely concentrated in our exchange with the so-called market economies. The disaster has not been worse because we are launching a tourist campaign. We received nearly 200,000 tourists last year, out of which 84 percent of them came from capitalist countries, including Latin America, Canada, and Japan. The greatest number of tourists came from Germany, Italy, and Spain, our leading trade partners. FOLHA: Let's go back to the state of war, the third world war, launched by the rich countries and led by the United States. The aggressors are walking toward an abyss, an abyss greater than capitalism. How will this happen? Fidel: It can and will happen in the midst of the current international economic disorder, which is more financial than commercial in nature. The warning must be sounded that the poor countries have nothing more to lose. The collapse that is drawing near will topple the U.S. and European banks, which are the creditors of a bankrupt world, The banks are the physical foundation of capitalism. FOLHA: The Midas syndrome: The system will die of hunger and thirst on top of the mountain of gold taken from the indebted. Is this what you mean? Fidel: Of course, the creditor cannot kill the debtor. This is a basic rule I learned in a boarding school run by priests where I spent 12 years of my life with vacations Only during Holy Week. FOLHA: Any program for the solution of the "debt crisis" is therefore a program for the salvation of capitalism. Does Cuba want to save capitalism? Fidel: Yes, the other capitalism, the capitalism of the indebted, even speaking in the humanitarian sense. The guided missiles of the interest rates and the terms of trade are killing millions of people in the plundered world. They are being killed by starvation, sickness, unemployment, and crime. As if the massacre by debt and trade were not enough, the indebted countries are being monitored by external decisionmaking centers on matters regarding the economic "adjustments" of a recessionary character, just like a well-meaning physician who forces the weak patient to observe a regime to lose weight... FOLHA: Is the physician in this case, the IMF, a mad scientist? Fidel: The IMF itself should be saved as a decisionmaking forum for governments, not of the banks, but it will have to review its methods, its doctrine, its statutes. On the contrary, the IMF will continue to treat the sickness of the poor countries with medicines prepared to cure the sneezes and allergies of the rich countries. This is a double error of diagnosis. It is so absurd that it seems like a contrived case. First: The disease is different. Second: The patient is someone else. FOLHA: How can the IMF be tamed, considering that the votes are cast by the law of the more wealthy, the power of the bigger partners? Fidel: The distortions created by the IMF are a by-product of the bigger crisis, the disorganization of the monetary system, the undiscipline of the financial system, and the truculence of the practices in international trade. Without a new order negotiated from the bottom to the top, all international institutions of regulation and promotion, not just the IMF, are doomed to failure, even if they still manage to do something about the situation under the jackboots of the capitalist powers. The U.S. Government rules the world economy, and the world economy simply reflects the I.Q. of the U S. Government. FOLHA: How can the world, economically dominated and politically disunited, change the rules dictated by the White House and induce the U.S. Government to adopt a new standard of behavior? Fidel: The process is complicated. It will have to begin with a firm reaction on the part of Washington, the world leader in trade, and the EEC, not to mention Canada, which today only sells $66 billion per year on the U.S. market, more than Japan, which is content with selling $60 billion. The Europeans should not be happy with the endemic unemployment that has already beset them for a decade nor should they be content with the devastation caused in the currency exchange market by the super-dollar. The reaction of these privileged partners, which are not at a disadvantage in capital (they are creditors, not debtors, of the United States), but are deprived of sovereignty over internal decisions, began to emerge at the recent Bonn summit, especially on the part of Mitterrand. France showed that the United States does not rule GATT as it does the IMF and the IDB. The Europeans are inclined to be less insensitive to the human tragedy of the Third World, which sees itself in the cross fire of interests on the debt and terms of trade. Deep down, I believe in the good sense of men, and I believe that ideas do not create crises but crises spawn ideas. FOLHA: The European contribution, let's call it that, doesn't seem sufficient. Fidel: Obviously, but let's go step by step. Human selfishness does not abide by the laws of reason and even less of ethics. Its modification can be brought about by the impact of disaster or by the implosion of privileges. A regime of privilege creates its own condemnation. I believe that economic theory has an explanation for this: When only one side profits, the best business in the world gives out. Last year, Latin America gave the creditors, without creating a scandal, $37 billion in interest and $20 billion in trade losses. Sugar, for instance, is sold by Cubans and Brazilians at one-third of its production cost. Doesn't this clash with the vaunted rationality of the market economy, which is supposedly self-regulating? Is this in line with the rationality of political relations based on cooperation and mutual respect? In 1980, Latin America traded 1,000 for 1,000 with the industrialized countries. In 1984, the same goods were traded 1,000 (purchases) for 780 (sales). To manage to obtain a surplus in order to service the debt, the debtor countries must export at a loss, a loss internally covered up by the inflation that impoverishes the poor even more. This does not take into account the lateral losses caused by the artificial revaluation of the dollar or the flight of foreign currency from destabilized economies to the coffers of the creditor countries. The rise of the super-dollar, the pride of President Reagan, draws the blood of the indebted both through losses in trade and through the cost of the debt. What is worse, the rise of the dollar feeds the rising interest rates, which in turn reinforces the rise of the dollar... FOLHA: This reminds one of the ticking of a time bomb. Fidel: A time bomb all the more powerful because the senselessness of the interest rates and the dollar exchange rate are in relation to the stupidity of the trade protectionism of the Americans and the Europeans, with the damage caused to debtor countries that must earn dollars at whatever price. The U.S. trade deficit itself, through imports of $1 billion per day, can be explained by the external appreciation of the dollar, which today can buy half the world with a forged currency. FOLHA: The deficit brings on protectionism and the protectionist barriers make no distinction between creditor or debtor countries, rich or poor countries, surplus-carrying or deficit-carrying countries. Everything is wrong, isn't it? Fidel: Yes, everything is wrong. So much so that in Cuba we already have a model to separate the legitimate from the nonlegitimate portions of the foreign debt of Cuba, Brazil, and Latin America as a whole. FOLHA: For instance? Fidel: Last year Latin American had to pay a total of $70 billion to creditors. By our model to evaluate the bill we are paying, the creditors received a legitimate sum of $25 billion and an additional illegitimate sum of $45 billion. FOLHA: Just like the restaurants that add to the bill the table number, the date and the time one has waited for the food... Fidel: I do not understand. FOLHA: It is just a Brazilian joke. What does Cuba understand as an illegal debt? Fidel: An illegal debt is made up of usurious interest rates, which does not mean that we believe in the Muslim concept that no interest should be charged. In our opinion, interest rates higher than 8 percent a year applicable to current contracts signed at the time when the market was satisfied with just 6 percent constitute a spurious debt because it is a clearly usurious rate, considering that the economies of the creditors have to deal with inflation rates of less than 4 percent. Equally illegitimate is a debt that results from declining terms of trade that creditor countries have forced upon the debtor countries through the apparently innocuous mechanism of free trade. This exploitation can be measured in kilograms, liters meters, or dollars. The artificially highly rated dollar itself is responsible for a portion of the illegitimate debt. FOLHA: What you mean is that last year a $45-billion swindle was perpetrated through interest, trade, and exchange rates? Fidel: Having no reserves at all, Latin American had to assume an additional debt of $45 billion to compensate for the exploitation disguised as a free market. Not one single dollar of this amount was used to finance projects, production, or employment. Is the free market, the market economy to blame for this? What wonderful advertising for the market economy the rich countries are making at the expense of the daily suffering of debtor countries... FOLHA: The bankers blame high interest rates on the budgetary problems of the White House, financed through successive issuance of public bonds. The bankers swear this race, after savings on the financial market, is inflating interest rates. Fidel: Then the blame lies with the holders of savings accounts, the investors, the brokers, the patriots who are not satisfied with financial returns below 12 percent while the inflation rate is under 4 percent. Isn't that so? FOLHA: Unless you can lower savings interest rates you cannot lower lending interest rates; this is applied physics. Fidel: My apologies to applied physics. This is totally illogical; it falls in the realm of collective madness, political fiction. In this case, the foundations of capitalism-rest on mud, not rock. The structure will end up falling apart. If the savers do not want to avoid the catastrophe, it will have to be defused by the takers, especially the exploited Third World debtors who have nothing to do with the profits of people or corporations in the United States, Western Europe, or anywhere else. Will it be necessary for the debtors to break the contracts to lower the rate of profits of the savings holders? FOLHA: Private banks do not accept lowering interest rates or stretching out terms of payment and demand that the debts be serviced according to contracts and at the going market rate. On the speculative market, the interest rates have already been as high as 21 percent per year. The governments of creditor banks wash their hands of the whole business and the governments of the debtor countries pay the bills in the name of national dignity and to show that they are well-behaved members of the credit union. Is there any way to break this system? Fidel: We are in the middle of the third world war, as I have said. In this war the aggressors do not want a peace or truce. The wealthy countries are not interested in saving capitalism. They believe that capitalism is not in jeopardy, at least not their capitalism. Not very long ago a high-ranking official of an international financial institution stated in Basel that indebted countries do not deserve any sort of help or respite because they have gone into debt owing to their own incompetence and corruption, with a good part of the loans received going to engross personal accounts in the very same banks that granted the loans. Other governments have borrowed money to purchase arms for domestic or foreign use, like Chile and Argentina, respectively, according to the banker. This is a moral judgment passed by the creditors on the debtors. However, the exploitation through interest rates and unfavorable terms of trade is not included in this moral judgment because for this banker it is not a crime. FOLHA: Does this kind of charge, which may have some grounds in isolated cases, morally undermine Third World demands? Fidel: Naturally, that is its objective because it undermines the morale of the debtors and assuages the conscience of the creditors. However, an objection could be made at this point. Nations have moral responsibilities that cannot be foresaken at will. However, when one is speaking of a nation, one should not mistake the people for a government. In any place and under any circumstances the people are the ones who pay the bill, be it for a well-used loan or for mismanaged or pilfered money. In Latin America or in Africa, the people pay for the loan with lower employment rates, lower salaries, greater misery, and more violence. FOLHA: In January, Tancredo Neves said that Brazil would not pay its debt at the expense of making the Brazilian people go hungry. Fidel: Can a system that makes the holder of idle savings richer at the expense of impoverished debtors be considered moral? Have the Latin American people benefited from each and every dollar out of the $360 billion of their debt? How much of this debt has been devoured by incompetence and corruption? How much of this debt has been contracted to pay the escalating interests of the initial debt? I do not want to question, once again, the legitimacy of the debt itself. I would rather question whether it is possible to pay the debt. It would seem that as far as this is concerned all of us Latin Americans agree, as evidenced by the diplomatic contacts within the Cartagena Concensus: The foreign debt is an essentially political problem and, therefore, the solution will have to be political. The effects of the debt, that is, a social explosion of the people and a political implosion of the governments, will not be averted through standard banking approaches or financial statements. FOLRA: What is the political solution for the physical collapse of the debt? So far, a lot more is being said than done. Fidel: It could not be otherwise. The indebted countries do not speak the same language nor row in the same direction. They play into the hands of the creditors' bloc and prefer to believe in bilateral solutions, in the so-called case-by-case approach. It is true that each case is different, and each account number has a name. So far, so good. However, it would seem that someone has forgotten to tell this to market interest rates, which currently make no difference between a computer plant in California, a hospital for burn victims in Colombia, or a farmland irrigation project in Brazil. In the same manner, U.S. and European trade protectionism makes no differentiation between products "Made in Brazil" and those "Made in Japan." It seems that Japan owes no one and has the greatest trade surplus in the world. Where is the special treatment favorable to Brazil or Argentina? Is the case-by-case approach only applicable to summary payments of the debt? The exploitation through interest rates and trade affects the entire bloc, but the bloc cannot renegotiate the debt jointly. FOLRA: So far we are still in the diagnostic phase. Where is the political solution for the debt deadlock? Fidel: Bloc renegotiation at government level. A renegotiation that must begin politically by separating the legitimate debt from the illegitimate debt. The legitimate debt must be paid, but the illegitimate debt must be written off. FOLHA: Is that your proposal, to simply erase more than half of the debt of the Third World, which now totals close to $1 trillion? Fidel: I am not dreaming aloud, nor have I had too much rum. I have a mature, well-thought out, well-planned, and perfectly viable, not to say urgent and unique, scheme. This scheme will. save the banks, not only the members of the credit union. This is a proposal to save capitalism from the collapse that is looming on the horizon, due to arrive in 1988 at the latest... FOLHA: In 2 years? Fidel: The countdown for the time bomb called the "debt crisis" [preceding phrase in English] could reach zero in 1988. The indebted countries will not be able to pay their bills in 1986, even if they manage to pay the interest due in 1985. The cracks will then appear in 1987, and the palace will collapse on the king in 1988. This is not just my forecast, it has also been stated by some U.S. economists and certain European bankers. One of these economists just visited Havana. I do not know whether or not he is a good prophet, but be has been awarded a Nobel Prize in economics. FOLHA: Is there still time to disconnect the timer on the bomb? Fidel: That is the problem. It will take time to organize the political aspect of the project because international institutions that have not yet been called upon or even remembered will have to be set in motion to handle the debt problem, such as, among others, the Latin American Economic System, SELA; the Economic Commission for Latin America; the Organization of African Unity, OAU; the Socialist International; the Group of African Unity, OAU; the Socialist International; the Group of 77; the Nonaligned Movement; and UNCTAD. We must set into motion forums that have decisionmaking power in economic affairs where each country has a vote. Through this operation the world must not only seek to remove the shambles of the foreign debt but also to reorganize the world economy by linking monetary and trade mechanisms. For example, the IMF and the GATT, placed on a new footing, must make joint decisions. FOLRA: So far they have been pulling in different directions. Fidel: The United States, in particular, is not interested in mixing the debt with trade, as though currency and GDP were different compartments of the so-called market economy... FOLHA: Very well. All of a sudden, by the waving of a magic wand, the world goes to a summit in Geneva or the Vatican called by the United Nations to take the final vote on your proposal. The legitimate debt is cancelled and Latin America no longer has to pay $50 billion over the next 12 months...and the banks go bankrupt one after another? Fidel: Are bankruptcies a problem? Then let's save the banks. The uncollectible debt of the Third World would be paid by the banks' home governments, with the approval of the congresses, through a simple budgetary transfusion, in small annual installments. A small slice of the military budget would be transferred to the financial system, which is the foundation of capitalism, the foundation of national defense. In this way the capitalist democracies of the Third World would be saved, which is a question of international security. The political instability of the Third World provokes the arms race, which is financed by the U.S. taxpayers. The U.S. taxpayers would like to see a tenth of that money invested in a more lofty cause. The hunger of the poor is the trigger for the third world war, the last one, the war of final annihilation. This catastrophe can be touched off by the servicing of the foreign debt. In Latin America, the legitimate and illegitimate payments may reach, by accumulation over the next 10 years, the apocalyptic sum of $500 billion, a fantastic sum drained away from domestic development. This vision does not disturb my sleep simply because Latin America will not be able to perform such a feat, and the system will have to be reformulated one way or another before the 1980's are finished. FOLHA: In the wake of the Cuban revolution, President Kennedy wanted to donate $20 billion over a 10-year period to his allies in Latin America under the Alliance for Progress. This $20 billion in assistance was not disbursed in the 1960's. What is happening is a bleeding of $400 billion in the 1980's, exactly 20 times the $20 billion but in the reverse direction. Is this picture valid? Fidel: That is a good recollection. President Nixon brought back the rethoric in the 1970's: More trade, less aid. However, up to now, Latin America is losing trade and receives no aid. Are Argentina and Brazil satisfied with the price of soybean? FOLHA: Brazil is not even satisfied with the price of the aluminum that it has began to export below cost. However, if the creditor countries dictate the interest rates and the prices, should the solution to the foreign debt include unilateral moratoriums, not to say outright cheating? What will be the reprisal? Fidel: Moratoriums and cheating are extreme resources, if there is no alternative. The alternative of renegotiation does exist, and it should be explored to the end. Aren't we sovereign countries? Reprisals cannot be taken into consideration. Commercial, financial, and political reprisals by one or more creditor countries against a single debtor country can be accepted, but not against the debtor countries as a bloc. The industrialized countries need our raw materials and our markets. The multinational companies are not multinational just by chance: They have duly infiltrated the economies of the debtor countries. This strategic point should not be left out of consideration. Europe and Japan, especially, depend on the Third World, even for the chocolate and the orange juice they drink in the morning. FOLRA: Does that mean that the decision can be simply moved from the creditor bloc to the debtor bloc? Fidel: Yes, provided the debtor bloc believes in that and gets organized for that. The reprisal is a way to frighten unruly boys. In imperial Rome, which had a senate as democratic as that of the United States, the debtor who did not honor his debt was automatically made a slave, in conformity with Roman Law. Could the U.S. Senate, which votes on questions of foreign relations, decree the slavery of 4.2 billion people spread throughout the world? The slavery lies in the payment of an injust debt, not in its technical, ethical, or political renegotiation. FOLHA: What would the creditor bloc gain by that? Fidel: It would gain the respect of civilized men. It would also gain the preservation of affluent capitalism, not just the redemption of the oppressed capitalism. It is worth repeating that the greatest risk of collapse hovers over the creditor bloc, no longer over the debtor bloc, which is losing everything, including its decisionmaking sovereignty on economic matters. FOLHA: What are the economic advantages, as far as the creditors are concerned, of a partial amnesty on the Third World's debt? Fidel: The advantages are in the fact that the indebted countries will have to reorganize their internal economies. For the industrialized nations it will mean recovery of the structure that supplies them with raw materials, more trade with developing countries, which will start to grow once again, and continuing business for multinational corporations in currently indebted nations that import capital and technology. Latin America will be able to purchase twice the amount it currently purchases on the U.S. market. This will help reduce unemployment in the United States, the main political drawback of Reagonomics [preceding word in English]. According to my estimates, the purchasing power of the Third World on the European, Japanese, and U.S. markets would grow by almost $100 billion in the next 12 months; not a negligible figure by any means. FOLHA: This amount would be with held from the banks, regardless of whether or not it is legitimately theirs. What would be the bankers' reaction? Fidel: That of an ostrich. They do not want to invest in correcting the system. They believe that they are passengers on a different ship or inhabitants of a different planet. Now, we are not proposing bankruptcies; what we are doing is indirectly trying to save the banks, as I have already said. First of all they would receive from their respective governments, o the taxpayers, the illegal portion of the debt that would have been "erased" by the international bodies. A 10- or 12-percent reduction in military expenditures, which are excessive anyway, would bring about a miracle without weakening national defense, without increasing taxes. Achieving peace on the interest rates means securing the peace of the missiles. One-tenth of military expenditures would pave the way for international detente. FOLHA: In the final analysis, the whole thing would be resolved through a simple accounting operation, is that right? Fidel: The tragicomic aspect of the debt is the fact that a mere distortion of accounting procedures has made the lives of more than two-thirds of humanity sheer hell. The solution is equally simple. However, simple things are not taken into account. My proposal, taken by itself, would mean going against the terrible alliance of bankers and generals. The former do not want to change the rules of the game, and the latter do not want to pay the bill. FOLHA: Would the debtor countries, Cuba included, also make proportionate cuts in their military expenditures? Fidel: In an atmosphere of internal relaxation and external detente, yes. FOLHA: President Reagan claims that he has saved the U.S. economy and that he will save the economy of the entire world, of course without changing the rules of the game. Wouldn't this proposal, as utopian, shall we say, as yours, prevail, resulting in the shelving of the Cuban scheme of renegotiating the debt and reorganizing economic relations on a global scale? Fidel: First of all, the project is not Cuban because we do not have a monopoly on common sense. In the second place, if my proposal is regarded as utopian by foolish men, President Reagan's project for the recovery of the world economy is based on a beautiful fabrication, not to say an elegant lie. FOLHA: What is Reagan's fabrication? Fidel: Of believing himself capable of reenacting Roosevelt's prowess of streamlining the economy and of extricating the United States from the grip of a crisis much worse than that of the thirties. In fact, the U.S. economy has grown by 6 percent while inflation has remained at less than 4 percent. The growth of the GDP while prices remain stable is the greatest achievement of any administrator. FOLHA: Where is the lie? Fidel: In the mirage of the oasis in the desert, in the illusion not only of the President of the United States but of a good segment of the U.S. public and of a good number of economists and politicians, both inside and outside the United States. The essence of this illusion resides in the building of a magnificent sand castle a few feet from the sea. The U.S. recovery is only a facade. Its basis is not secure, and the internal process is a repressed volcano as is the nature of the monetarist economic thinking with which the capitalist administrator has been brainwashed. This can first be verified from the outside: The U.S. recovery, which has some impact in Western Europe, is taking advantage of the extortive profits on interests on exported capital and of the unfair gains on the relative prices of imported and exported goods, gains that are multiplied by the artificial appreciation of the dollar at the expense of the artificial rise in interest rates.... The super-dollar is buying more and more with less and less. And not only is it buying foreign goods and services, but it is "internalizing" them at a lower cost, deflating internal consumption. The order of magnitude, in this case, is $1 billion per day since January. This means that the United States exports inflation in its interest rates and its prices while importing deflation in relative prices and real interest rates. FOLHA: Where is the eruption of the repressed volcano? Fidel: The U.S. public sector is carrying the largest deficit in the world in absolute terms, and it is trying to set a record in relative terms. The gap between the revenues and expenditures of the central government is projected at $210 billion in the next 5 years. The public debt expressed in government securities, which are sold precisely to finance the public deficit, is heading toward the $2 trillion mark, which to me seems beyond imagination, more like science fiction. I grant that I do not understand how it can be administered, even from. the accounting standpoint. But I know through my economic advisers that the U.S. Government is, technically speaking, the holder of the largest foreign debt in the world.... FOLHA: By how much? Fidel: I don't care. The U.S. Government has a callable debt almost as large as that of the Third World. This must be thought about in economic, political, and military terms. In a few words, the Government of the United States, the greatest power in the solar system, owes its soul to the domestic and foreign financial market. A simple accounting problem, certainly.... FOLHA: In plain terms, thanks to Bretton Woods, the United States owns the world mint. It can afford the luxury of operating the world's economy with a forged currency, printing the universal dollar without national backing.... Fidel: Unbelievable, isn't it? The manager of that fantastic machinery is the IMF. In 1972, Nixon started the project rolling. He ended the gold backing of the dollar, by telephone. He did so because the gold backing is an accounting asset that depends on a physical asset the evil metal of which the Soviet Union, the pariah of the monetary planet, is the largest producer. FOLHA: Let's keep the skein of thread in our hands. Is the economic recovery of the United States under Reagan a mirage of the Mojave Desert, the desert of death, and why? Fidel: The Mojave is well remembered. The rattlesnake of the world economy is the so-called FED [Federal Reserve Bank], the central bank of the United States. The FED president, who is not accountable to the President but to Congress -- which seems to me a wholesome democratic rule -- dictates the monetary policy which, in turn, sets the limits of the budgetary policy. The fiscal effect of the budgetary policy has an impact on the foreign exchange as part of the monetary policy -- and there the manipulation of the world economy begins. Through the FED monetarists, the White House strategists decree the rates of inflation, unemployment, and the discontent of the rest of the world. FOLHA: Do you mean the rest, literally? Fidel: Yes, because the market that includes the socialist orbit also suffers from the vagaries of crazy capitalism. We are passengers on the same ship. FOLHA: Before going on to that subject, that of the interdependence of the countries and their respective systems, I would like to resume the discussion of the thesis of Reagan's fantasy. Is the U.S. fabricated recovery of the world economy nothing but a bluff? Fidel: The true bluff begins with the existence of that universal currency called the dollar, which has been financing the economy of the United States, both internally and externally, since the postwar reconstruction. What was the military adventure in Vietnam financed with? What is financing the deficit of the U.S. Treasury, a debt that reaches nearly $1 trillion, with rollovers guaranteed by securities that are worth only the paper they are printed on? Have you imagined the political advantage of waging war without taxes, of a deficit without taxes, of the conquest of space without taxes, of the star wars plan without taxes? Have you imagined how easy it is to govern that way, carrying out projects without paying the bills? FOLHA: The latest White House budget has reduced expenditures at the expense of social security.... Castro: Yes, this was a move to disguise other expenditures, However, the fiscal savings obtained through a reduction in the investments in education, health, and social security is far from compensating for the increased expenditures for weapons, ammunition, and military research. The 1980 military budget during Reagan's first administration was slightly in excess of $135 billion. The current military budget already totals $277 billion and is on the road to the $314-billion mark in the next fiscal year, with a "strong dollar" to boot. The military budget more than doubled over a 5-year period. Precisely over this 5-year period the interest rates on exported capital more than doubled and, if the dollar quotation in foreign countries is also calculated into that perverse equation, the relative prices on trade involving the importation of goods and services have dropped to one-half. FOLHA: Is the United States exporting revolution? Fidel: Yes, they are exporting revolution in the form of inflation, recession, rebellion, and subversion. And in that fierce destabilization campaign against friends and foes alike, even to a greater extent against its friends than against its foes, it is using the "austerity policies" of the IMF, an international or transnational organization that has assumed the role of a task force for U.S. interests in all the economies of the world. I used to say that the IMF is the Aladdin's lamp of the White House, so much so that Reagan reelected himself with more production and less inflation, besides the largest military budget in history, without a tax increase.... FOLHA: If the submissive world is the foundation of the castle, I feel that the foundation is firm. Where does the risk to the Yankee system lie? Fidel: It lies in the illusion of impunity. The capitalists say that there are no free lunches. Well, then, the United States is having free lunches at the expense of others. We even have available the exact amount of their unpaid bills. In this case, it is the public internal and foreign debt of the treasury, totaling approximately $1.5 trillion, which is on the road to the $2-trillion mark. . . . One-third, a fiduciary liability totaling $650 billion, is in the name of foreign savings account holders. Who will honor such a commitment? The illustrious government mint will, because that martial debt will be "rolled over" by using printed paper. It will not be paid with production, with hardship, with recession, with inflation, with unemployment, or with poverty. Overnight, the modern printing machines of the U.S. Treasury pay off debts worth billions. This is how "Reaganomics" is supported. The public debt of the U.S. Government needed 205 years to reach the first trillion and less than 5 years to reach the second trillion.... FOLHA: Even so, the world will continue paying the bill. I repeat, where does the risk to the system lie? Fidel: In the material fatigue of that magic model. The public debt of $2 trillion in this decade cannot be eliminated by decree. The recourse to "rollovers" using printed paper inflates the interest rates universally. The financial cost of that public debt, although it is merely an accounting item, refuels the budgetary deficit, which this year has been placed at $222 billion. At least the growth of that deficit goes through the sieve of Congress and catches the attention of the voters and taxpayers. Besides the accounting discomfort there is a physical constraint, that is, the surging trade deficit, which is getting closer to $500 million every day, nearing almost $13 billion per month. How many unemployed does it take to make up a trade deficit of $150 billion? FOLHA: According to Robert Watkins of the Department of Commerce, there are nearly 380,000 men, just in the automobile-producing industry alone. Fidel: Imported automobiles have already seized one-quarter of the U.S. market and are on the road to the one-third mark. FOLHA: The U.S. market is the most open in the world. According to projections made by the Department of Commerce, the United States will be importing 43 percent of its cars in 1988, 34 percent of which will be Japanese. Fidel: Within the rhetoric of free trade, the United States is demanding that the Japanese market open to U.S. made automobiles. Well, Japan has just done that. Prime Minister Nakasone appeared on television and asked the Japanese people to please buy automobiles "Made in the U.S." How many automobiles have been sold through reciprocal "marketing"? FOLHA: None. Fidel: As a result, whoever does not practice reciprocity with the Japanese and the Europeans, who are jetting the best returns from productivity, quality, and pricing, winds up decreasing tariff barriers against the raw materials and the manufactured products of the Third World, who are precisely the partners with dollar debts. How does that short-sighted protectionism harm Brazil? FOLHA: A surcharge on 24 percent of our products affects 42 percent of our sales to the United States, not to mention the European protectionist chain reaction.... Fidel: This is, undoubtedly, a magnificent endorsement for socialism. Since when does retaliatory protectionism rule the market economy? My judgment on this is as follows: 85 percent of Cuban trade is carried out with the socialist countries, under CEMA regulations. Reciprocity is guaranteed by medium- and long-term reference prices and quota contracts. The remaining 15 percent of trade is carried out with capitalist countries with which we sustain losses, particularly in the case of sugar, which is the most debased product in the world economy. The so-called free market does not even pay for a third of its cost. FOLHA: With the sugar trade, Brazil loses $1 million per day. Fidel: Who is the terrorist, then? The German beets, the American corn, or the British diet products? The terrorists are the irrational subsidies to producers, which are paid by the taxpayers, who, in turn, are the consumers themselves. The rulers are violating the market laws, which are the essence of free enterprise. They make donations with the people's money and they are applauded by the people themselves for this.... Then, on the international front, they impose barriers and surcharges on their capitalist trade partners, and afterward they deliver speeches in defense of the free market economy, and blame their ideological opponents, who are blackmailed as promoters of the arms race, for all the evil things in the world. This arms race, which has been transformed into a new economical and technological "frontier," is financed by the indebted, plundered, and native countries. Japan may be the next victim. FOLHA: In what sense? Fidel: Well, the Japanese do not make bombs or missiles. They work hard, with discipline, and manage to have the world's second largest GDP. For an island that was pulverized by Truman's atomic bombs, they are at the vanguard in managerial techniques and bravely compete on the "front" of high technology. Japan adopted a capitalist system that turned out to be successful, one that can be regarded as an example. But bow long will Japan be able to sustain its trade surplus, which is growing toward a $50-billion bilateral trade with the United states yearly? It is a surplus obtained with hard work and efficiency. Let me say more: Considering that Japan is a bad commercial example for the United States, Will Brazil be able to repeat Japan's success in the future? No. It has been decreed: It is prohibited from becoming a success. The 30 million unemployed on both sides of the North Atlantic are charged on Japan's and the Third World's account, not to the administrative obsolescence of the industrialized economies, an obsolescence that is covered up now with progress in robotics. FOLHA: Will capitalism be poisoned by its own venom? Fidel: No. I still believe in the reasonableness of the people. If it is true, as I said before, that crises are the seeds of ideas, the IMF is now planting a huge crisis at the bottom of the international financial system, inasmuch as it does not let the indebted work to pay the debt. Here we pick up the thread of the skein: The "debt crisis" will reach its climax in 1988, and at that time, the idea should sprout in the form of some sort of opening or solution. Things will have to change, for good or for bad. This is a law of nature. In 1988 at the latest, the utopian or fantastic proposals of renegotiation of the foreign debt outside the bank offices will function as lifesavers on the cresting waves wrecking the ship. FOLHA: The wrecking of the Titanic... Fidel: Yes, the Titanic, the financial system, which is vaunted as unsinkable. On that day, we will stop paying the illegitimate portion of the debt, and we will negotiate, from a position to strike a bargain, the honest repayment of the legitimate portion by reshuffling rates and payback periods within the limits of solvency of the nearly 120 borrowers spread over the planet. The project is simple in this case: reestablishing the terms that were used until 1979. The banks for more than a century had been lending money at 6 percent per year, regardless of the variation in internal prices. In 1978, when the West was already hit by the oil crisis, the interest rates still remained below the rate of inflation in the credit-exporting countries. Why not save the rich and the poor by reestablishing the rules of the capitalist game? Am I dreaming of an utopia? But I will go even further: Will it be necessary to see the explosion that is in the offing to realize that the service of the debt is linked to the trade balance? The payment of interests will have to be in relation not only to the value of exports, but with the formation of a liquid balance in trade because the debtors need to make essential imports. Of course, superfluous purchases would not be entered in the calculation of the liquid balance. And why not involve the IMF and GATT in the same statute, by sponsoring preferential trade tariffs in creditor-debtor relations? Foreign debt can only be paid with GDP converted into the creditor's currency, right? FOLHA: The mounting crisis of the debt plays the role of an "iceberg" [preceding word in English] on the course of the financial system dubbed the Titanic. The collision course is set for the "crash" [preceding word in English] in 1988. The solution to all the evils of the world will appear just as the ship is sinking. Must we wait for disaster to strike? Fidel: No, we must avert the disaster. Prevention is cheaper than treatment. Using your own description I would say that the "iceberg" that is threatening the creditors is rudderless, impelled by its own momentum. It is up to the creditor's Titanic, equipped with sophisticated controls and capable of navigating by instruments, to avert a collision... FOLHA: As long as the captain can read the instruments properly. Fidel: That is where the problem lies. I do not believe that the bridge crew is fully qualified. The alarms have been sounding since 1982 and we are now half way through 1985 without any change of course having taken place so far. As far as the captain of the ship is concerned, the sea is calm, the night is clear. This is what they said just now in Bonn at the summit of the seven powers. The radar of the Willy Brandt Commission has not been taken on board, it was not part of the Bretton Woods project, and it did not even cross the minds of the bankers, the guests in the ballroom. FOLHA: Is the captain really deaf and blind, or does he play dumb for reasons of his own? Fidel: I would not like to suggest hidden intentions; I would prefer to assess what I can see from my own point of view. I am not a banker, nor am I chief executive of a capitalist country. The reorganization of international monetary and trade relations affects Cuba's short-and long-term interests. The placing of the system on rational or fair foundations is, as far as Latin America is concerned, a way out of the debt deadlock. For Cuba it would mean the possibility of borrowing money, that is, gaining access to additional savings that would allow us to carry out plans for fast growth in keeping with the guidelines of our third 5-year plan. FOLHA: Have your ideas on multilateral renegotiation of the Third World debt been offered to the bankers, if not to President Reagan himself? Fidel: I am sending copies of my projects to Latin American, African, and Asian heads of state. Just the other day I received an answer from Tanzanian President Julius Nyerere, who speaks for the Organization of African Unity. In March President Nyerere spoke at The Hague Institute of Social Studies and at the Royal Commonwealth Society in London. He established the connection between debt and misery, a debt contracted to put an end to misery. It seems that he managed to arouse the feelings of the listeners. I have just discussed this issue with the Algerian president, who is visiting us. I am planning to send the material to President Sarney or at least to ministers Joao Sayad, Dornelles, and Setubal. FOLHA: Before or after relations are resumed? Fidel: The urgent nature of the crisis allows us to waive formalities. Brazil and Cuba share the same interests in this matter. Furthermore, my thoughts on this issue and related material are set forth in a 240-page book which was originally submitted to the seventh conference of Nonaligned Movement countries held 2 years ago. I repeat that I have been concentrating on the "debt crisis" [preceding word in English] since 1982. I am fully convinced that breaking the debt deadlock is a "sine qua non" prerequisite of resolving world problems. Thus, this debate is of interest to all men of goodwill, to all nations, to all systems, to all corporations, to all governments. We are all passengers on Noah's ark and the deluge is into its 39th day. -END-