INTERNATIONAL DEBT PROBLEM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89B00423R000300290008-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 3
• Document Creation Date: December 22, 2016
• Document Release Date: December 2, 2008
• Sequence Number: 8
• Publication Date: May 15, 1984
• Content Type: MEMO

Approved For Release 2008/12/02 : CIA-RDP89BOO423ROO0300290008-4
The DirectorWC li it81 Intelligence
Washington, D.C. 20505
National Intelligence Council
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
VIA: Chairman, National Intelligence Council %
FROM: Maurice C. Ernst
National Intelligence Officer for Economics
1. The attached memorandum summarizes the discussion at the Monday
SIG-IEP meeting on the international debt problem. There is a broad
consensus that aspects of the US strategy will have to be reexamined
after the Economic Summit. As I indicated in my memo of 26 April 1984, I
believe it will be essential to find ways of easing the pressure on the
IMF, through supplementary financing mechanisms and probably also by
easing some of the current conditionality requirements.
2. In some ways the LDC debt problem is in a stage of transition
from helping LDC debtors make ends meet to finding politically acceptable
ways of enabling them to resume economic growth. Some of the debtors,
notably Mexico, have all but eliminated payments arrears and improved
their foreign exchange position, mostly through import cuts, to the point
that they could begin to finance a moderate rate of increase in imports,
and consequently in economic growth. Yet these economies, including the
Mexican economy, are apparently continuing to decline well below what
their governments and the IMF had anticipated. The reason appears to be
that the public sector is continuing to contract, largely to meet
IMF-imposed conditions, while the private sector is not making up the
slack, so that effective demand is continuing to decline. This situation
may become characteristic of more and more countries in the course of
1984. If it continues for long, political pressure to stimulate economic
recovery by once again increasing government expenditures may become
irresistible in the debtor countries. Public sector lending growth in
turn would quickly come in conflict with IMF guidelines and with US
Government objectives. It would require some difficult policy choices.
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3. These changing problems have implications for CIA and
Intelligence Community analysis. Although there will be a continuing
heavy demand for detailed analysis of LDC debt and balance of payments
conditions and prospects, it will become increasingly important to
address the following questions:
o What are the political pressures and requirements for economic
recovery in the major debt-ridden LDCs?
o By what means could such recoveries be achieved?
o What economic policy trade-offs might be necessary in the debtor
countries?
4. Addressing these questions will require an even closer
examination of the factors that drive domestic income, expenditures, and
production in the debtor countries, as well as imports and exports, and
at the evolving politics of the debt problem in each country.
Attachment:
As stated
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