$Unique_ID{COW04012}
$Pretitle{271}
$Title{Venezuela
International Cooperation on a New Basis of Shared Responsibility}
$Subtitle{}
$Author{Carlos Andres Perez}
$Affiliation{President of the Republic of Venezuela}
$Subject{international
debt
countries
problem
political
solution
development
financial
solutions
group}
$Date{1989}
$Log{}
Country:     Venezuela
Book:        International Cooperation on a New Basis of Shared Responsibility
Author:      Carlos Andres Perez
Affiliation: President of the Republic of Venezuela
Date:        1989

International Cooperation on a New Basis of Shared Responsibility

A view from the South

Statement of H. E. Mr. Carlos Andres Perez, President of the Republic of
Venezuela, before the open session of the Group of 77, at the United Nations
New York, March 31st., 1989

     I am honoured to be here at the United Nations to address the Group of 77
and representatives of other member countries of this organization in order to
outline some ideas and views on one of the most acute problems facing the
nations of the Third World: the problem of the debt. I would like to express
appreciation to the permanent representative of Malaysia, for having, in his
capacity as chairman of the Group of 77, convened such a distinguished
gathering.

     It is, regrettably, only recently that the desirability and necessity of
talking this phenomenon in an internationally concerted fashioned with
political vision have been recognized. Sufficient political will still does
not exist. Conviction have been slow in coming. Despite the increasingly
tragic, dangerous and costly consequences of continually postponing action
that everyone recognizes as necessary, the international community still
cannot make up its mind to take it effectively, fairly and equitably.

     The actors, creditors and debtors, which share responsibility in the debt
phenomenon, have chosen over the years to shirk such responsibilities, to a
greater or lesser extent. This is the only way in which an unbiased observer
could describe the sorry spectacle of repeated denial and evasion of
obligations in which the creditor governments, the multilateral financial
institutions and the international banking community have engaged.

     The result, in spite of isolated efforts to devise and apply sketchy
solutions, has been that the problem persists on a scale that makes partial
repairs no longer feasible on the part of debtors and creditors or, on the
political level, of governments and international institutions.

     It is not without significance that the Group of 77 at its last year's
ministerial meeting, in New York, echoed in its declaration the concept of
"adjustment fatigue", recognized by international financial institutions, to
explain the state of discouragement in which debtor countries find themselves.

     We are thus faced with a problem which calls urgently for concerted
action and political understanding as prerequisites for a solution, both at
the level of creditors and debtors, as well as among creditors on the
international level.

     The United Nations has taken the decision, at the initiative of the Group
of 77, to seek a concerted solution through a global strategy. The
contribution of the organization in this regard is a useful one since its
universal approach places it in the broad framework of development. Such is
the spirit of Resolution 43/198, which also requests the Secretary-General,
through his personal efforts, "to contribute to a common understanding on a
solution to the external indebtedness of developing countries in the context
of their growth and development".

     In accordance with this mandate the Secretary-General has given me the
opportunity to express my profound concern and my ideas about how to solve
this very serious problem. In this regard, it is also appropriate to note the
far-reaching importance that should attached to the special session of the
United Nations General Assembly on International Economic Cooperation and
Development, to be held in 1990, with the aim of contributing to a concerted
approach by North and South.

     The developing countries have maintained that the problem of external
indebtedness, both in terms of its origins and consequences and from the point
of view of designing any solution that would set out to address its
fundamental causes, is indissolubly linked to the prevailing International
Economic Order. The imbalances that it tolerates and even fosters demand that
the principles and mechanisms on the basis of which it has been operating, in
a increasingly disjointed and contradictory manner, be thoroughly revised. It
is true that is no widespread conviction of the need for this, and that the
trend is rather toward a casuistical treatment of the problems, as long as the
costs of such an approach do not involve any significant chance in the
status-quo. In the meantime, it will continue to be necessary to take
emergency measures to resolve the debt problem on an urgent basis.

     The international community cannot disregard the impressive mass of
pronouncements and diagnoses that has been generated in recent years in
representative fora and institutions. These have been made public, with the
constant aim of promoting dialogue and democratic debate and achieving the
necessary understanding.

     In all its fora, whether formal or informal, technical or political,
Latin America has made a strenuous effort to come to grips with the problem.
No segment of our societies parties, parliaments, governments, universities,
trades unions, business associations, has failed to take a stand and to
demand, with every right, solutions that provide guarantees of stability and
progress; that will enable them to build on their achievements and
contributions to economic and social development and permit their national
societies to advance toward the ideal and the democratic undertaking that
binds them all together.

     No democratic government can run counter to its own raison d'etre. If
rectifying mistakes and correcting internal imbalanceswere all that was needed
for a lasting solution; if a country's own resources were sufficient; or if
its own policies and good will were enough, debt would not be an international
problem. To a large extent, the inability or unwillingness to work towards
concerted solutions with the degree of urgency that has become necessary is
causing the balances of domestic politics to be pushed to the extremes.
Radicalization as an option is gaining ground, and this is a symptom of
political unease and of destabilization.

     It is no longer simply a matter of restoring balances of payments or of
reducing fiscal deficits or curbing inflation. Nor is it any longer a question
of paying attention to banking system balances, share prices on the stock
markets or the distribution of dividends; nor of a taking corrective or
austerity measures imposed from without. The debtors countries have
demonstrated and are continuing to demonstrate that they are fully prepared to
shoulder their responsibilities, but we need the assurance that it will be
possible to boost development processes and attain to higher levels of
well-being and progress.

     At the same time, the adjustment process in our countries cannot be
reduced to the imposition of a simplistic restriction on the role of the
state. It should also involve thorough reform of the role of private business,
and of relations between the state and society as a whole. Moreover,
adjustment cannot be limited to a model of development that makes human beings
serve statistics. It should be properly understood that solutions without
social content are doomed to failure since the justification for economic
policies is meeting the essential needs of individuals and society as a whole.

     The parameters according to which multilateral organizations assess the
performance of developing countries should incorporate more comprehensive
development indices including, above all, the social aspects of development.

     It has become evident that it is not good enough to give preference to
temporary or partial solutions, as has been the case up to now. It is
essential both to avoid social and political damage in the debtor countries
and to counteract the vulnerability of the world financial system while also
engaging in systematic international cooperation, worked out jointly by all
the parties involved, with the express objective of progressively eliminating
the spiral of indebtedness and the negative transfer of capital, with the
inflation and recession that they entail.

     In Latin America we are fully mindful of these considerations. It is we
who are primarily and most deeply concerned. But we also recognize that it is
not possible to seek autarchical solutions, and that the problem of external
debt is related to other major and complex problems of the grave international
economic situation. Hence our resolve to listen to and propose specific
formulae, so that discussion can begin and ultimately yield solutions
satisfactory to all concerned.

     We lay claim to no monopoly over initiative, and we welcome the fact that
a number of different fora have come up with assessments and proposals for
ways of reducing debt and of stimulating fresh flows of finance. We are aware
that the problem goes beyond the traditional logic of the public and private
financing system and that neither the rules governing that system nor its
operating machinery were designed for situations such as the present one. At
the same time, we believe that is unjustifiable for such lack of provision to
be remedied by means of excessive demands on the economies of the developing
countries, by punitive restrictions on a access to the financial markets, by
paying off debt with more debt in the form of payment-of-interest loans or by
making them subject to austerity policies that the demands of the debt, make
it impossible to guarantee. It is therefore necessary to move away from the
fragmented approach and piece meal measures that the international community
has put forward as the correct way of attacking the problem and whose actual
effect has been negative and the cause of dramatically increased poverty among
the populations concerned.

     The one need of Latin America, as of the rest of the fraternity of
nations in the developing world, is to resume a process of healthy and
self-sustaining growth and development. It must make a qualitative leap
forward if it is to set its vigorous political process firmly on the path to
democracy and to reshape its socio-economic structures almost from the bottom
up, correcting errors and eradicating corruption, so as to be in a position to
participate and compete in the international economy.

     Nothing in the course of its history has been more perjudicial and
damaging to these aims than the stagnation and drainage of capital associated
with the debt problem. For this reason, it is in the political area that a
solution must be sought. It will not come from the financial sphere.

     Latin America proposes to enter the 21st., century in peace, democracy
and development, and financial matters must take second place to political
concerns.

     In the context of this next approach, reference should be made to the
work already accomplished by the Ministers of Foreign Affairs of the Group of
Eight at their last meeting in Ciudad Guayana, Venezuela, in mid-march. The
document "Towards a solution to the external debt problem of Latin America",
commissioned by the presidents of the permanent consultation and political
coordination machinery at the Uruguay Summit, contains our thinking and
suggestions, both for reducing debt servicing and for ensuring sustained
financing.

     Debt reduction is fundamental, and this is where the proposal's emphasis
lies. It will also be necessary to take parallel measures to guarantee stable
and increasing flows of financing.

     Debt reduction alone will not guarantee an effective transition to
financial solvency; neither will it ensure that structural changes take place
in our economies. We have also presented a series of options aimed at securing
new flows of finance. They have all, to a large extent, been dictated by the
experience of recent years. They are approaches rather than formulae, and the
way in which they would be applied in practice is open to discussion, in a
candid spirit of readiness to engage in constructive dialogue.

     We are not seeking radical or improvised solutions. We are confident that
the experience acquired over these years of crisis will bear fruit and that
all the actors involved have the same objective in mind. It is now time for
action on the basis of new formulae, since partial attempts to resolve the
problem have proved to have limitations and counter-productive side-effects.
But we must insist on the sense of urgency.

     Every government and institution has developed its own understanding of
the situation and its own recommendations for ways of dealing with it. We do
not a priori deny the validity of any of these. All of them in some respect
undoubtedly complement one another and deserve to be discussed by all
interested parties.

     The procedures that the international community has gone alone with to
date have failed.

     As far as the debtor countries are concerned, despite the shared
political perceptions that we have been developing, we have been unable, until
very recently, to draw up a proposal which combines all those elements that we
regard as fundamental to a solution, and even now we have yet to have the
opportunity to explain it to our counter parts on the other side and to public
opinion on both sides.

     The creditor countries each feel varying degrees of responsibility. Some
are impelled to put forward general initiatives while others feel bound to
offer resources without taking on any leadership responsibility.

     The private banks take the view that it is not their job to make
international financial policy since that is the responsibility of states. In
practice, however, they do set the operational limits of the exercise, covered
by local rules governing the operations of financial intermediaries. The
multilateral institutions, lastly, have no authority to undertake a
responsibility that is outside the scope of their regular activities and the
purposes for which they were set up. At the same time, however, they do take
it upon themselves to introduce new operating practices without providing or
lending support to any stable solutions. The fact is that most countries of
the Third World are facing an even more acute crisis than before, no longer a
crisis of debt alone but one also involving development and political
stability.

     It is only right that this situation be rectified, as a matter of
urgency. There will be no magic formulae; nor -even less likely-will there be
a single solution. In our region, to mention only the area with which I am
most familiar, the approach advocated for countries heavily in debt to private
commercial banks is not the same as that proposed in the case of the
lowest-income Caribbean and Central American countries whose debt is primarily
with multilateral financial institutions. Solutions must be found for both
categories of countries. And the same is true of the African and Asian
countries.

     Unfortunately, in action and for bearance seem to be luxuries that we
cannot afford. Time is not on our side. I have said before, and will say
again, that 1989 should be the year that sees a solution to this problem,
which has been with us now for nearly a decade.

MR. CHAIRMAN,

     Today the United Nations and the Group of 77 are both engaged
in important processes of renewal in their commitment to the cause of
international cooperation. This year the Group of 77 will celebrate its 25th.,
Anniversary, and that occasion has been chosen as a timely opportunity to
convene a special ministerial meeting with a view to revitalizing the group's
active and constructive presence on the international scene, a meeting which
my government, ever committed to the group's cause, is deeply honoured to be
hosting in Caracas this coming June. The United Nations, for its part, is
experiencing a reaffirmation of the international community's recognition of
and confidence in its capacity to contribute to the solution of pressing
international conflicts, a capacity attested to by its contribution to the
solution of the conflicts in Afghanistan and Southern Africa and the Iran-Irak
war.

     We can and should avail ourselves both of the strengthened solidarity of
the Group of 77, which is in turn essential to the strengthening of the
international community's solidarity, and of the upsurge indetermined action
on the part of the United Nations to reinforce the spirit of international
cooperation that the present international situation calls for imperatively
and without delay. In this task, the solution to the North-South problem,
perhaps the most complex and explosive political issue confronting today's
world, must at last be addressed resolutely, just as the conflict between the
superpowers and the regional politic-military problems to which I have
referred have been tackled.