EXTERNAL DEBT PROBLEM IS 'ECONOMIC AIDS' OF LATIN AMERICA, REPRESENTATIVE OF DOMINICAN REPUBLIC TELLS SECOND COMMITTEE

15 October 1997

Press Release
GA/EF/2763

EXTERNAL DEBT PROBLEM IS 'ECONOMIC AIDS' OF LATIN AMERICA, REPRESENTATIVE OF DOMINICAN REPUBLIC TELLS SECOND COMMITTEE

19971015 Committee also Hears Calls For Expansion of Heavily Indebted Poor Countries Debt Initiative

The external debt problem was the "economic AIDS" of the Latin American community and it had dramatically limited its participation in the world economy, the representative of the Dominican Republic told the Second Committee (Economic and Financial) this morning as it continued its general debate on the world economic situation.

He said the region's external debt had grown almost 100 per cent between 1982 and 1995 and debt servicing continued to be an obstacle to development. It limited the accumulation of capital and the application of flexible financing policies to strengthen small and medium-sized enterprises, which were important in combating unemployment. Serious social problems, such as illiteracy and poverty, also suffered as a result of the debt burden.

The representative of Venezuela said the international community needed to rethink payment arrangements for highly indebted developing countries to reduce the debt and its servicing. It should also aim at reducing the conditions imposed on indebted countries looking to adjust and reschedule their debt.

South Africa's representative called for further measures beyond the Heavily Indebted Poor Countries Debt Initiative to increase the range of eligible countries and tackle the associated time lapse which so often frustrated highly-indebted poor countries in breaking through that vicious cycle. The representative of Australia called for the expansion of the Initiative so a greater number of eligible beneficiaries could be reached.

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Ecuador's representative, noting that the reduction of natural disasters was an integral part of sustainable development, said that according to recent forecasts, the affects of the current El Nino cycle should be devastating in the economic and social areas of many countries. The fragile eco-system of the Galapagos would apparently also be gravely affected. National and regional efforts would not be sufficient; therefore, international solidarity would be essential.

Statements were also made by the representatives of the Sudan, Pakistan, Lesotho and Singapore.

The Committee will meet again at 4 p.m. today to continue its general debate.

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Committee Work Programme

The Second Committee (Economic and Financial) met this morning to continue its general debate on the world economic situation.

Statements

MATHE DISEKO (South Africa) said the problem of abject poverty, gross inequality and social deprivation continued to afflict many countries, particularly the least developed countries, due partly to the hostile external economic environment which was frustrating some poverty-eradicating policies.

Those external factors included trade protectionism, heavy debt burden, the absence of a level playing field, the decline in official development assistance (ODA), the rising gap between poor and rich economies, the negative impact of globalization and liberalization and the spectre of marginalization hanging over poor countries, especially in Africa. Consistent with the Secretary-General's reform proposals, South Africa called for strong poverty eradication measures to address those problems.

Drawing attention to the urgency of the external debt problem, he called for further measures beyond the Heavily Indebted Poor Countries Debt Initiative to increase the range of eligible countries and tackle the associated time lapse which so often frustrated highly indebted poor countries in breaking through that vicious cycle.

The southern African region continued to respond to its environmental challenges, he said. The region was harmonizing national energy policies through a sustainable and equitable development of energy resources throughout the region through various protocols. The promotion of a balanced approach and sustainable management of water resources was encapsulated in the protocol on shared water systems. In recognition of the linkages among the problems of desertification, lack of water, and poverty, the region had set up a food security strategy framework to address the spectre of poverty and lack of access to food.

MUBARAK RAHMTALLA (Sudan) said peace and security were necessary for the achievement of the goals of sustainable development. Peace and development were two sides of a coin. Peace and development were indivisible. Improvement in trade, peace, security and development occupied a priority place in the Sudan.

The Sudan was in the process of establishing peace, he said, adding that the parties had indicated the need to establish permanent peace. Efforts were also being made to negotiate with the only faction that had not signed the ceasefire agreement. Peace, democracy and freedom were necessary for meaningful development to occur. He called on the international financial

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institutions to assist in consolidating peace in his country and to help alleviate the debt burden of the least developed countries.

Globalization was not a mirage but a reality and its benefits should be reaped by all, he said. The renewal and reform of the United Nations system should aim at creating a favourable environment for the least developed countries in their efforts to achieve growth and development. The developed partners were duty bound to integrate the developing countries into the global economic system through increased aid, the transfer of technology and better trade policies.

SYED YAWAR ALI (Pakistan) said the twin processes of globalization and liberalization had a mixed effect on developing countries. In some of those countries, investment flows had increased, exports had surged and per capita income had raised appreciably. Yet even in those few cases economic growth exhibited fragility, and the volatile capital flows constantly threatened to undermine economic gains. The liberalization of the world economy tended to prejudice the growth prospects of the developing countries by discriminating against the areas in which they could achieve comparative advantage. The liberalization of trade goods had proceeded more slowly in those sectors where developing countries were more competitive. Increased protectionist measures, such as non-tariff barriers and the imposition of restrictions disguised as labour laws, were meant to impair the competitiveness of developing countries.

Marginalization at the international and national levels was leaving the deprived and the debilitated on the sidelines, he said. An enabling environment, with full and effective participation of the developing countries in the process of decision-making, was essential for the success of globalization and liberalization. The United Nations had, to some extent, re- established its importance and relevance to social and economic development, but it had been more often in the area of standard-setting through conferences. The Organization should be enabled to move beyond that normative role. The United Nations was not divided into donors and recipients but into States with differentiated responsibilities. He urged the developed countries to fulfil their commitments and responsibilities.

JOSE MANUEL CASTILLO (Dominican Republic) said external debt was the "economic AIDS" of the Latin American community, which dramatically circumscribed its participation in the world economy. External debt grew almost 100 per cent between 1982 and 1995, from $317 million to $586 million. Servicing of the debt continued to be a grave obstacle to development in the region. It limited the building of capital and the application of flexible financing policies to strengthening small and medium-sized enterprises, which were important in combating unemployment. Programmes to address serious social problems, such as illiteracy and poverty, were undermined by the economic burden represented by debt for the battered economies of Latin America. His Government supported the creation of new democratic institutions

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to promote new kinds of relationships between the State and society to address the problem of external debt.

In the Dominican Republic, the amount of external debt had increased by a factor of 13 between 1964 and 1994, he said. While his Government was up to date with its payments to international creditors, debt servicing and interest payments comprised 20 per cent of the national budget. Looking at the region as whole, the relative growth achieved contrasted with the harsh realities of the subcontinent and revealed a great disparity among resources devoted to the social sector. Only $54 per capita was devoted to social programmes, which explained why relative growth had not been translated into opportunity for the people of the region. The issue of Latin American debt should hold a prominent position on the agenda of the Committee, which should strive to come up with recommendations for debtor countries so they could have greater resources available to them in the implementation of programmes for development.

PERCY M. MANGOAELA (Lesotho) said it was troubling that at the threshold of a new millennium the world was still plagued by the problems of inadequate infrastructure, poor human resource development, inadequate food security, malnutrition, hunger, epidemics, diseases, unemployment and under-employment. All these, in addition to conflicts and disasters, demean humanity.

Observing that the international community had for decades been grapling with the problem of poverty, he said poverty had continued to pollute the body and soul of humanity and that as long as humanity lived in poverty, it would be impossible to aspire to the higher ideals of self-fulfilment. The international community must eradicate poverty from the world. Poverty was a worldwide phenomenon. Small enterprise development had a crucial role to play in poverty eradication and it was in this way that the integration of women in development would be fully achieved.

NORMAN PINO (Venezuela) said the world economic environment should stimulate sustainable development and benefit all countries. If globalization was going to succeed, there needed to be a secure multilateral trading system based on clear, transparent and non-discriminatory rules. To that end, his Government fully supported implementation of the Uruguay Round agreements. It also rejected the repeated attempts to apply protectionist measures on the basis of labour or environment arguments. Environmental agreements should be grounded in principles of non-discrimination, transparency and predictability.

Regarding international cooperation to strengthen integration, he said the financial crises in certain developing countries were disparately greater than in the developed countries. Venezuela supported the initiative to hold a conference on development financing by the end of the century in order to foster healthy principles and practices. A stable financial environment was vital to increasing confidence and ensuring the financial flow of capital to developing countries. The conference would also provide the opportunity to

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consider new financing arrangements which would attract sources of private capital. In that context, the United Nations should strengthen cooperation with the Bretton Woods institutions while securing full participation in such a conference.

Public external debt, with a high level of dispersement involved in servicing it, was another problem that needed the attention of the Organization, he said. Debt diverted significant resources that could be used in development. The international community needed to rethink payment arrangements for highly indebted developing countries in order to reduce the debt and its servicing. It should also aim at reducing the conditions imposed on indebted countries looking to adjust and reschedule their debt.

ALAN MARCH (Australia) said there was compelling evidence that tangible development and economic goals were being attained by countries that had made economic policy adjustments and that had enhanced the openness and effectiveness of their governance mechanisms. There had also been strides made to those countries that embraced credible macroeconomic settings; addressed the social dimension of development in tandem with the pursuit of economic growth; fostered domestic private sector development; and pursued representative, open and accountable governance. As the World Bank recently reported, all of those aspects should be addressed in order for a country to attain sustainable development and economic growth.

The benefits of globalization had not been evenly shared, he said. Serious obstacles to development remained for some developing countries, including the least developed countries. Debt servicing requirements were onerous in several instances, and the positive and effective interventions under the HIPC Initiative to address those cases were welcome developments. His Government echoed the calls of earlier speakers and advocated the expansion of the Initiative so a greater number of eligible beneficiaries could be reached.

Climate change was one of the most important issues on the international agenda, he said. Consistent with commitments made at the Rarotonga meeting of the South Pacific Forum, his Government was expanding its efforts to reduce greenhouse gas emissions. It was also committed to providing assistance, through its aid programme, by funding programmes and projects which helped to abate greenhouse gas emissions and facilitate adaption to climate change, while simultaneously assisting developing countries to reduce poverty. The Australian aid programme also supported a wide range of projects to improve environmental management in sectors such as energy, forests and land resources. Those activities indirectly enhanced the ability of developing countries to address climate change.

KENNY REBEIRA (Singapore) said it was imperative that countries become internationally competitive to meet the demands of a global economy. Countries that decide to shut themselves out in the fast moving global market place would lose in the long term. Singapore had made the difficult decision to liberalize and plug into the global economic environment for its own survival as a small island State dependent on world trade.

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Concerned that many developing countries had not benefited from multilateral trade negotiations under the Uruguay Round, he said protectionism and tariffs remained high in developed countries. A lot remained to be done to ensure that the developing countries also had a stake in the multilateral trading system.

Restating Singapore's opposition to the convening of an international conference on migration and development, he said there must be clarity about the root cause of international migration so that informed discussions on the problem would lead to appropriate action. The root cause of migration was lack of development. Pure economic logic and market needs dictate migrant flows. The United Nations already had an existing institutional and legal framework to deal with that problem.

FABIAN PALIZ (Ecuador) called on the United Nations to take effective action in the areas of elimination of poverty and development. The United Nations system, Member States, international agencies and non-governmental organizations had the responsibility of assuring full compliance of the International Decade for the Eradication of Poverty. The chief function of the Organization was fostering international cooperation, and in the context of the globalization of the economy, States were becoming increasingly interdependent. He called for the adoption of a declaration on economic cooperation and the development of an international development strategy to boost the well-being of all people in all countries of the world.

There needed to be external and internal adjustments in development strategies to optimize benefits of globalization and to reduce risks and costs, he said. Ecuador, among other developing countries, was committed to modernizing its economy and was laying the basis for attracting capital flows. It was necessary to promote the right conditions for national and international development to secure stable and predictable flows of capital and investment in the long term. One of the necessary key elements was open and transparent international markets. His Government had taken tangible steps in that direction and hoped its efforts would be matched by developed countries and not by protectionist measures aimed at restricting free trade.

The United Nations had recognized that the reduction of natural disasters was an integral part of sustainable development, he said. The costs, especially in developing countries, called for solidarity on the part of the international community, and specific measures should be taken by the United Nations system. According to recent forecasts, the effects of the current El Nino cycle should be devastating in the economic and social areas of many countries in the region. The fragile eco-system of the Galapagos would apparently also be gravely affected. National and regional efforts would not be sufficient; therefore, international solidarity was essential.

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