SENIOR INTERDEPARTMENTAL GROUP ON INTERNATIONAL ECONOMIC POLICY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-01156R000200210011-1
• Release Decision: RIFPUB
• Original Classification: C
• Document Page Count: 8
• Document Creation Date: December 21, 2016
• Document Release Date: October 29, 2008
• Sequence Number: 11
• Publication Date: April 26, 1983
• Content Type: MEMO

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 OFFICE OF THE SECRETARY OF THE TREASURY
WASHINGTON, D.C. 20220
UNCLASSIFIED
(With Confidential Attachment)
MEMORANDUM FOR THE VICE PRESIDENT
THE SECRETARY OF STATE
THE SECRETARY OF DEFENSE
THE SECRETARY OF AGRICULTURE
THE SECRETARY OF COMMERCE
THE SECRETARY OF INTERIOR
THE SECRETARY OF TRANSPORTATION
THE SECRETARY OF ENERGY
THE DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET
CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS
ASSISTANT TO THE PRESIDENT FOR
NATIONAL SECURITY AFFAIRS
ASSISTANT TO THE PRESIDENT FOR POLICY DEVELOPMENT
UNITED STATES TRADE REPRESENTATIVE
A6IRECTOR OF CENTRAL INTELLIGENCE
SUBJECT Senior Interdepartmental Group on International
Economic Policy (SIG-IEP)
Attached for background is a paper on country debt issues
for the SIG-IEP meeting to be held on Thursday, April 28,
4:30 p.m., in Room 4426, Main Treasury Building.
UNCLASSIFIED
(With Confidential Attachment)
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CONFIDENTIAL
SENIOR INTERAGENCY GROUP
April 26, 1983
o Argentina and the U.K. have yet to reach an accommodation on
the problem of blocked payments of profits and dividends to
U.K. firms in Argentina.
00 Failure to reach an agreement could jeopardize the con-
tinuing efforts to finalize a $1.5 billion syndicated
loan and rescheduling of public sector debt.
?? U.K. opposition could also impede the scheduled IMF dis-
bursements in June.
o We are discussing the issue quietly with both parties but
are not overly optimistic at this time.
BRAZIL
o Brazilian officials met in London on April 18 to discuss the
balance of payments and cash-flow outlook for the remainder of
1983.
?O Economists of major banks concluded that Brazil's forecasts
were too optimistic and that an immediate effort to restore
$1.5 billion in interbank deposits was essential.
00 U.S. banks met in New York on April 26 to discuss restoring
interbank deposit levels.
o The first meeting of the U.S.-Brazil Economic Working Group
was held Friday, April 22 at the Treasury Department.
00 Agreement was reached to undertake studies of the trade-
finance links between the two countries for completion
later this year.
o Treasury officials also met privately with Finance Minister
Galveas to discuss Brazil's current cash-flow position and
outlook.
00 Minister Galveas reiterated the position Qutlined earlier
in the week in London by the Central Bank and expressed
concern that the Central Bank's negative cash position
could deteriorate further to $-1.5 billion by July from
the end-March level of $-1.0 billion.
o At present, Brazil's Central Bank owes about $900 million in
foreign exchange to its commercial banks, resulting in late
payments on external obligations of about $600 million.
00 No formal "arrearages" exist, however, just "slow-payments"
15-25 days past due.
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o The emergency economic program announced on March 22 by the
Government of Chile (GOC) should return Chile to compliance
with its two-year IMF stand-by by end-September.
00 The plan centers on a debt restructuring program for
Chilean borrowers to be financed by the public sector
through higher tariff collections.
00 Chile's international competitiveness is also to be
enhanced through accelerated peso depreciation.
o The GOC's talks with its 12-bank Advisory Committee are well
advanced concerning restructuring of public sector and private
financial sector debt maturing in 1983 and 1984.
o The GOC has also requested about $1.25 billion in new bank
financing, which banks are reluctant to provide while Chile
is out of compliance with its IMF program.
o However, in view of the GOC's emergency economic program, the
twelve members of the Advisory Committee are willing to provide
$180 million ($15 million each) in bridge financing to help
get the GOC back on track, if official sources also contribute
to the bridging operation.
o Chile and the BIS are discussing the possibility of a $300
million arrangement.
Secretaries Shultz, Regan and Baldrige visited Mexico on April
18 and 19 for a meeting of the U.S.-Mexico Binational Commission.
The meetings were friendly and went very well.
00 The current Mexican economic situation, future economic
prospects, the effect of the drop in oil prices, bilateral
trade relations, the world and U.S. economic situations,
the prospects for recovery and the Williamsburg Summit
were among the topics discussed.
o The Mexicans said they needed no additional official assistance
at this time and do not expect to need further assistance --
commercial bank or official -- unless there were a sharp drop
in oil prices.
o The Mexicans mentioned their interest in a rescheduling of
official (including Eximbank) direct and guaranteed credits
to the private Mexican sector.
The U.S.G. is discussing informally with GOM Officials the
Mexican views on such a rescheduling.
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00 The U.S. has also sent a cable to other creditor countries
reporting on discussions to date.
00 In addition, U.S. officials plan to meet with other-creditor
countries in Washington on April 28 or 29 on the fringes
of the Development Committee meeting to discuss their views
on a rescheduling.
o Mexican arrears to foreign official institutions have-been dis-
cussed in the Paris Club in February, March and April.
o On March 27, the Government of Venezuela (GOV) modified the
three-tier exchange rate system to provide coverage of most
private sector external debt, including that of multinational
corporations, at the preferential rate of Bs 4.3/$l.
o The GOV has deferred until July 1, 1983, payment of principal
on financial and nonfinancial public sector short and medium-
term financial credits to allow time for refinancing of $10
billion of short-term debt and $2 billion of maturing medium
and long-term debt.
00 Banks are concerned that Venezuela's oil export earnings
are likely to fall at least $2 billion in 1983 to $13.5
billion.
00 Although banks are encouraged by the GOV's recent steps
to limit 1983 imports and its decision to expand private
sector access to the preferential exchange rate, they are
likely to insist upon an IMF stand-by program as a condition.
00 Foreign reserves have continued to dwindle, adding greater
urgency to successful negotiations with the banks.
o Article IV consultations with the IMF have been completed.
00 Venezuela will probably use its SDR holdings ($427 million)
and IMF reserve tranche ($817 million) shortly.
o In a meeting with Secretary Regan on April 21, Finance Minister
Sosa said the GOV would like to arrange an IMF standby for
end-1983 or early 1984.
o Finance Minister Rodriquez-Pastor will be in Washington on April
28 and 29 for the Development Committee meetings and will be meet-
ing with Treasury officials.
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00 Peru may request a Paris Club rescheduling in the near
future.
o An IMF mission returned from Lagos in mid-April with the sense
that there is a general willingness in the Government to hold
serious discussions, although this is still a long way from
hard negotiations.
?? The IMF team did not have a mandate to negotiate, having
been invited by Nigeria to reiterate previously ignored
advice. Fund staff members feel that Nigerian officials
were listening attentively this time.
00 The Nigerians are still concerned about the August elections,
but are considering the public relations aspects of Fund
negotiations.
Further discussions are taking place on the fringes of the
April 28-29 Development Committee meetings and may be
followed by another IMF mission.
o A meeting of bankers in London on April 11-12 to discuss
Nigeria's debt and arrears ended inconclusively.
?? Several British banks made a strong pitch for a restructuring
of arrears. This was strongly resisted by other British
banks and U.S. banks.
00 Sympathetic British banks evidently have indicated to the
Nigerian Central Bank that American banks are being un-
cooperative.
o A draft options paper on the possibility of USG bilateral
assistance is circulating to SIG agencies for staff level
comment prior to future SIG discussion.
YUGOSLAVIA
o The Yugoslavs invited the IMF, banks and governments to a
meeting in Switzerland on April 16 to see if impediments to
the financial packages could be overcome.
?O The meeting concluded on a positive note, and the out-
come, though procedural, should get the Yugoslav exercise
moving again.
00 The governments maintained a solid front and refused
to consider reopening their $1.36 billion package or to
negotiate as a group with the banks regarding the content
and quality of their package or burdensharing between
them and the banks. The banks accepted this.
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?O The governments agreed to provide information regarding
implementation of their pledges to the Swiss for distri-
bution to the IMF and the banks by April 30.
As a result of the positive conclusion of the meeting,
the BIS disbursed the government backed portion of its
loan ($300 million) to Yugoslavia on April 20, 1983.
The gold-backed portion ($200 million) is still in
abeyance pending waiver of negative pledges by Kuwait and
French Banks.
The Yugoslavs have told the BIS they expect the Kuwaiti
problem to be resolved shortly. The BIS has advised the
Yugoslavs to talk to the French Government.
POLAND
o The Paris Club met April 12, 1983 to discuss Polish debt.
?O The U.S. delegate reiterated our analysis that Poland
would not be able to pay credits close to what it owes,
even assuming a reasonable debt rescheduling and the $800
million in new credits the Poles expect to receive from
the west in 1983.
00 All countries except Canada and the Netherlands indicated
a desire to enter into debt rescheduling discussions with
the Poles. The neutrals were the most insistant, feeling
that talks should begin now.
00 It was decided at the meeting to establish a working group
to evaluate Polish performance under the 1981 rescheduling
and the status of information on the Polish economy. The
working group will report its findings to the Paris Club
in May.
00 We expect the May meeting to focus on the working group's
report and to then consider how to procede.
o The NSC met on April 8, to discuss a State/NSC options-,paper on
Polish debt rescheduling. It was decided to work out a phased
step-by-step approach to a rescheduling that would be linked
to political/human rights measures by the Polish Government.
00 Treasury and State are jointly working on such an approach.
We expect to complete it soon and to circulate it to the SIG-IEP
members for their comments.