G8 leaders announced the cancellation of debt for 18 poor countries, four of which are Latin American: Bolivia, Honduras, Nicaragua and Guyana. The debate on poverty is now focused on aid to Africa. Without a shadow of a doubt, African countries need to be taken into account. Notwithstanding, the widespread poverty in Latin America also calls for immediate action and in this sense this announcement seems quite insignificant.

Haiti is the poorest country in the Western hemisphere and has been constantly excluded from debt cancellation initiatives of the international community. As it was described by Beverly Keene, of Jubilee South, after his visit to the country, Haitian people live in extreme poverty and 80% are unemployed. Classified by the UN as a “country in rapid economic regression”, it has been militarily occupied for more than a year now.

As stated by Camille Chalmers, Professor of Economics at the University of Haiti, one of the main causes of the economic collapse is the implementation of structural adjustment programmes and trade liberalization measures imposed by the United States and the International Monetary Fund, as of the 1980s. These policies contributed to intensify even more the declining process, annihilating the production of sugar cane, fruits and rice and turning Haiti into a food importer country.

In this context, debt payment becomes increasingly difficult; on account of which in early 2004 Haiti was declared in default on the World Bank and the IADB. Today, Haiti’s debt stands at some U$S 1.4 billion and debt servicing is calculated at approximately U$S 70 million annually.

It seems then that poverty is a necessary condition but not a sufficient one to become a “beneficiary” of debt cancellation. The fulfilment of requirements(1) to qualify for the HIPC initiative(2) is more important in this case.

As analysed by Gail Hurley, of Eurodad, when in 1996 (and in 1999) the international community drew up the list of countries eligible for debt relief (HIPC initiative), they decided to exclude countries such as Haiti, Kenya, Angola and Nigeria. At the present time, these countries are left without a solution to their crisis and Haiti is an extremely poor country living in conflict and misery and yet it is excluded from the list.

Beyond the eligible countries, an important feature of Latin American countries is the strong incidence of debts to the Inter-American Development Bank and bilateral debts - mainly to European countries - on Latin American economies.

In Honduras, for example, 40% of the external debt is owed to the IADB; and in Nicaragua, this debt amounts to 26%.

On account of this, truly effective actions for Latin America should consider the cancellation of debts owed to the IADB and, in many cases, to private creditors.

Anyway, for those considered as “beneficiaries”, the G8 proposal does not suppose a way out for their debt problem since it implies the implementation of structural reforms that in practice renew the terms of the Washington Consensus, even more than 10 years later.

In this occasion, the Latin American situation has been forgotten by G8 leaders, who also failed to acknowledge the real urgency in the African continent.

Related Informatio:

Haiti needs freedom from debt NOW (Jubilee South)

The debt cancellation brings about more debt and dependence

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(1) In order to be able to classify, those countries with unsustainable debts must fulfil the conditionalities imposed by the IMF and the World Bank, for a period of three years, until reaching a decision point at which debt relief is agreed. After another three years of structural adjustment, they reach a completion point at which further debt relief is agreed. If a government fails to persuade IFIs that their guidelines are being followed, the structural adjustment period countries should undergo before becoming eligible for total debt relief is prolonged further.

(2) The initiative for heavily indebted poor countries was launched in 1996 as a joint effort between the World Bank and the International Monetary Fund. This project created a framework for all creditors, including multilateral creditors, to provide debt relief, thereby reducing the constraint on economic growth and poverty reduction, imposed by the debt build-up in these countries. In 1999, the international community praised this initiative, modifying its basis on three key areas: a) Deeper and broader relief. External debt thresholds were lowered from the original framework. As a result, more countries have become eligible for debt relief and some countries became eligible for greater relief; b) faster and strengthened delivery of relief. A number of creditors began to provide debt relief immediately at the decision point. Also, the new framework permitted countries to reach the completion point faster; c) stronger link between debt relief and poverty reduction. Freed resources were to be used to support poverty reduction strategies developed by national governments in consultation with civil society.

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