Section 5. Relations with Developing Countries



1.  North-South Problem


The economic situation surrounding developing countries was not generally favorable in 1986. Under such circumstances, some new movements were seen regarding the North-South problem.

First, international support for Africa facing critical economic conditions had gathered momentum during the past few years and this resulted in the convening of a special U.N. session on Africa in May 1986. At the special session, an action programme for the reconstruction and development of the African economy was adopted by consensus. This deserves a special attention because there had rarely been any concrete result in the "North-South" dialogue in recent years.

Second, against the background of the deteriorating debt situation, in particular in Central and South America, developing countries submitted draft resolutions by the 41st session of the U.N. General Assembly on the debt problems of developing countries and the net negative transfer of resources. Both resolutions were adopted. As for the resolution on the debt problems of developing countries, it was initially considered very difficult to reach an agreement because there was a wide difference of views between developed and developing countries. However, both sides eventually succeeded in adopting a resolution by consensus containing general elements that should be taken into account for the lasting solution to developing countries' debt problems. This resolution is expected to serve as a basis for the discussion of the debt problems at the United Nations in the years ahead.

Also at the 41st session of the U.N. General Assembly, the United States stressed the importance of the role of the private sector in the development of developing countries, while the Soviet Union and East European countries brought up again the concept of an international economic security. These developments also deserve close attention.

As for the United Nations Conference on Trade and Development (UNCTAD), a decision was made on the convening of the seventh session in Geneva in July 1987 and full-scale preparatory work for the session was launched.



2.  Accumulated Debt Issue


The World Bank estimates developing countries' accumulated external debts exceeded $1 trillion in 1986. Though it has been possible to tide over the current crisis thanks to coordinated efforts of parties concerned, the debt issue has been hobbling the sound development of the economies of developing countries.

Throughout 1985, no improvements were made regarding the debt issue amid slumping exports of developing countries against the background of the sluggishness of the economies of developed countries and falling prices of primary commodities. No major improvement was seen in 1986 either in the international economic environment surrounding debtor countries, except a decline in interest rates. In particular, a sharp fall in crude oil prices made repayments of debts by oil-producing debtor countries more difficult.

It became clear that Mexico, one of the biggest debtors is facing serious difficulties in repayment of its debt, and concern was expressed on the development of Mexico's Negotiations with the IMF on an economic reconstruction program and new loans. But both sides reached basic agreement in July 1986, which calls for the extension of an international financial support package totaling $12,000 million to be provided by the governments of creditor countries, international financial institutions and commercial banks. A crisis was thus avoided at least for the time being. It is worthy to note that the financial package provides for the supply of new funds in keeping with changes in the economic growth rate and crude oil prices, for a cut in the spread on loans whose payments are rescheduled and for other flexible responses by commercial banks.

With regard to international responses to debt issues, U.S. Treasury Secretary James Baker proposed a "Program for Sustained Growth" in October 1985, which later won a basic approval of parties concerned. The realization of the Mexican rescue package can thus be called an achievement on the part of the parties concerned on the basis of the Baker initiative.

Also at the Tokyo Summit in May 1986, leaders of seven major industrial democracies reaffirmed the basic strategy calling for cooperation among the parties concerned on the basis of the Baker initiative and case-by-case approaches as well as the importance of developed countries' efforts to realize an international economic environment that would facilitate debtor countries' adjustment efforts.

As stated above, a near-term crisis involving the debt problem has passed. But a favorable cycle of the restoration of creditworthiness of debtor countries the promotion of economic adjustments by debtor countries and the stepped-up spontaneous flows of developed countries' private funds has yet to take root. In the circumstances, there is concern about the emergence of countries taking a tough stance toward the repayment of debts as exemplified by Brazil's declaration in February 1987 that it will suspend interest payment on loans extended by commercial banks. Therefore, the parties concerned must step up their cooperation and efforts.



to table of contents