A/42/427
English
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19. The international community must realize that Africa cannot pull itself out of the planer's most serious economic and ecological crisis without much more long-term assistance than is currently envisioned. In addition, greatly increased external financing for development must be accompanied by policy changes that recognize the need to avoid environmental degradation.
2. Latin American Debt
20. Debt is an acute problem for many countries of Africa. But, because of the magnitudes of debt involved, it has had its most visible impact in some middle-income countries particularly in Latin America. The debt crisis remains a threat to international financial stability, but its main impact so far has been on the process of development, both in its economic and ecological aspects. Of the total world debt of around $950 billion in 1985, roughly 30 per cent was owed by four countries: Argentina, Brazil, Mexico, and Venezuela. Their debts constitute roughly two-thirds of the outstanding loans of banks to developing countries.[1]
21. In the 1970s, Latin America's economic growth was facilitated by external borrowing. Commercial banks were happy to lend to growing countries rich in natural resources. Then major changes in international conditions made the debt unsustainable. A global recession restricted export markets, and tight monetary policies forced up global interest rates to levels far exceeding any in living memory. Bankers. alarmed by deteriorating creditworthiness, stopped lending. A flight of indigenous capital from developing countries compounded the problem.
22. The ensuing crisis forced governments into austerity policies to cut back imports. As a result, Latin American imports fell by 40 per cent in real terms over three years.[2] The consequent economic contraction reduced per capita gross domestic product by an average of 8 per cent in the eight main Latin American countries.[3] Much of the burden was carried by the poor, as real wages fell and unemployment rose. Growing poverty and deteriorating environmental conditions are clearly visible in every major Latin American country.
23. Further, the lack of new credit and the continuing burden of debt service forced these countries to service their debts by running trade surpluses. The net transfers from seven major Latin American countries to creditors rose to almost $39 billion in 1984, and in that year 35 per cent of export earnings went to pay interest on overseas debt.[4] This massive drain represents 5 to 6 per cent of the region's GDP, around a third of the internal savings, and nearly 40 per cent of export earnings. It has been achieved by adjustment policies that impose severe and regressively skewed cuts in wages, social services, investment, consumption, and employment., both public and private, further aggravating social inequity and widespread poverty. Pressures on the environment and resources have increased sharply in the search for new and expanded exports and replacements for imports, together with the deterioration and overexploitation of
