CITY AND SUBURBAN
The world's bankers tell Nicholas Brady: we'll say we've won, and go home
CHRISTOPHER FILDES
ThWashington ese annual talkfests and liver function tests, officially the meetings of the Interna- tional Monetary Fund and World Bank, have two themes — the one which every- body expects and bones up in advance, and the one which pops up at the meetings and turns out to matter. This year the nominal business has been quotas — the IMF's capital, how much it should be, who should provide it, who should be leapfrogged by the Japanese. . . fun if you like that sort of thing. The real business turned out to be debt. For the first time, the big commercial banks have stood up to governments and told them that the official plan would not work, because they would not play. The plan bears the name of Nicholas Brady, President Bush's friend who is Secretary of the US Treasury, though neither the plan's nor the administration's financial master- mind. With Mexico as the first test case, the plan gave the banks the chance to get out of their loans at a loss (in total, $15 billion) or to lend more, or both. Put it like that, and the banks prefer to cut their losses and stay out. They see Mr Brady's idea of debt forgiveness as a signal to their debtor countries not to bother to pay. Dr Walter Seipp of Commerzbank was heard to say at last year's meetings that he would not lend a pfennig to Latin American governments whose ministers would recy- cle it into their private accounts in Zurich or Miami. This year he is saying that $250 billion has escaped from Latin America to be invested in the United States alone. These countries have in effect sold them- selves short and sent the bill to the banks. The Venezuelans have private assets abroad worth more than their external debt — on which they now have the nerve to ask for write-offs of a third or a half. The bankers will not play with Mr Brady, and have even turned down invitations to tea and persuasion from Mr Bush. They prefer the line which an earlier President took on Vietnam: say we've won, and go home.
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