Common Folk Pay Price : Latin Debt Bears Down on Daily Life

MEXICO CITY —  From behind the glass partition, the infant intensive care ward at the National Institute for Pediatrics here appears to have all the trappings of modern mechanized medicine--incubators, respirators, a flashing, beeping digital heart monitor.

But a closer look reveals equipment that is outdated and broken down. Several 15-year-old incubators are crudely patched with tape and glue. Two others, donated by a private Los Angeles group after last September’s earthquakes, sit idle in a corner, lacking vital parts that the hospital cannot afford.

The heart monitor is up to date, but there is only one for a ward that holds a dozen sickly infants. For the other 11 babies--some are three months premature and weigh as little as two pounds--nurses must painstakingly record heart and breathing rates by hand every half-hour.

“The problems in this hospital are terrible,” said Dr. Miguel Rodriguez Weber, a neonatal specialist at the institute. “Almost nothing can be bought--incubators, respirators, monitors--because of budget cuts. Maintenance of equipment is very bad because we can’t afford the parts. In many other institutions, it’s the same.”

For the past four years, Western bankers and Latin finance ministers have argued over how to resolve Latin America’s crushing $370-billion foreign debt, acquired in a decade-long debauch of lending and spending, public waste and private enrichment. But the bill will not be paid in the mahogany offices of American and European banks or in the gilded corridors of Latin finance ministries.

The bill will be paid, in small daily installments for the rest of the century, by Rodriguez and his patients on the third floor of the National Institute for Pediatrics as the Mexican government slices health spending to save dollars needed to meet interest payments to foreign banks.

Eroding Salary

It will be paid in the Sao Paulo classroom of veteran teacher Maria Deusde’dite Giaretta Chaves, who is leaving Brazil’s public school system after watching the value of her state-paid salary steadily erode over the past decade.

It will be paid on the streets of Santiago, where Chilean youths who cannot find work or afford fast-rising college fees mount increasingly bloody protests against military rule and economic policies that seem to favor foreign banks over domestic welfare.

And it will be paid in the United States, by thousands of farmers and manufacturers who cannot sell their products to Latin American customers strangled by debt and a deepening economic crisis.

“The whole region is falling backwards,” said Gert Rosenthal, deputy executive secretary of the United Nations’ Economic Commission for Latin America. “Economies are stagnant or shrinking, while population is growing 3% a year. Unemployment is increasing. Social services are deteriorating. Governments are cutting back on spending for health, education. In 1990 versus 1980, you’ll see a marked deterioration in life in almost all these countries.”

The Latin debt crisis has barely begun.

Latin America’s current debt and economic troubles arose in part from an attempt to escape the region’s early history, a one-sided ledger of vast profits taken by foreign conquerors, slave traders, miners, fruit growers and industrialists. Foreign investment was discouraged in favor of the development of state-run domestic enterprises, which expanded rapidly on money borrowed from the great houses of European, American and Japanese capital.

In fact, the 30 years of impressive growth and social progress in Latin America between 1950 and 1980 may prove to have been an aberration, in which the Latin nations grew fat--at least for a brief time--on the table scraps of a rapidly expanding world economy and the profligate lending policies of banks flush with the deposits of Middle East oil states.

In this era, massive spending by Latin governments on roads, schools, ports, hospitals, power plants, communications and agriculture raised the living standards of all but the most unreachable poor and created a powerful middle class of professionals, technocrats and unionized workers.

Ambitious Programs

The spending was financed at first by taxes, domestic savings and foreign aid and investment. In the early 1970s, however, ambitious government development programs and the expensive tastes of the moneyed and middle classes were increasingly funded by short-term, high-interest loans from aggressive banks in the industrial world.

After Mexico’s dramatic announcement in August, 1982, that it could not make its loan payments, bank lending to Latin America all but stopped, except for loans granted as part of rescheduling agreements that allow Mexico or Argentina or Venezuela to meet current interest bills.

Cut off from foreign credit and beset by the region’s worst recession in 50 years, Latin governments must now turn to their own people to pay for the fiscal excess of the past 15 years.

According to the United Nations, cuts in Costa Rican social spending reduced by 20% the number of children who receive school lunches and doubled the number of children treated for malnutrition. In Peru, food aid for mothers fell by half and for children by 17% between 1981 and 1984; partly as a result, dysentery cases rose by 250%. More than 78,000 Bolivian school-age children do not attend classes today because of a 25% cut in overall social welfare spending.

Deeper Pain to Come

Bad as these problems are, they are merely precursors of deeper pain to come. Child abandonment is on the rise, as are crime and delinquency. Literacy gains have stalled. The incidence of infectious diseases, after years of decline, is increasing. Underweight infants tend to become unhealthy and underproductive adults.

The United Nations estimates that the current economic crisis will result in an additional 20 million Latin Americans living in absolute poverty at the end of the century.

“This is going to persist for a very long time,” said Rosenthal of the Santiago-based U.N. economic commission. “It must be a hell of a time to be an adolescent in Latin America.”

Giaretta Chaves, 43, the teacher at the Alfredo Bresser elementary school in the working-class Pinheiros district of Sao Paulo, is discouraged, for herself and for her students, whose ages range from 10 to 12.

Although Brazil is widely praised abroad for the way it has managed its $102-billion debt, the nation is forced to impose painful internal measures to conserve foreign exchange to meet a $9-billion annual interest bill. The policies, aimed at limiting government spending and increasing dollar income from exports, hit the middle class especially hard.

Giaretta Chaves said school lunch programs have been cut and the state has been providing fewer and poorer teaching materials. Some of the shortfall has been made up by donations from parent-teacher organizations, but the quality of instruction has suffered, she said.

She also complained that the value of her paycheck has been shrinking in the decade since the mid-1970s, a period of raging inflation and heavy government borrowing. Today, she makes about $360 a month, which barely covers the essentials. After 20 years of teaching in Brazil’s public schools, she is leaving to seek a more lucrative job in a private academy for the children of the wealthy.

Falling Income

“When I started teaching, a teacher was considered a rich person,” she said. “We had status; we could afford a car, to send our children to the best schools. Today, a teacher’s status is lower, not only on the economic level, but on a social level, too. The profession is attracting less qualified people, and the training is worse. As a result, the students are less well taught. This is very bad for Brazil.”

Chaves’ falling income and flight from the public sector illustrate the costs of a process described by Chilean human rights lawyer and social commentator Jose Zalaquette as “the povertization of the middle class.” A decade of broadening wealth and opportunity has been followed by broken dreams, he said.

“There was a period of rising living standards for the middle classes, a period of cheap imports, a lot of cars being bought, people given the possibility of buying consumer goods on generous terms on installment,” Zalaquette said.

“When the crisis hit, the process of povertization of the middle class began, with people sliding down toward the lower classes, into unemployment or semi-employment. At the same time, there have been reductions in (state) expenditures. Health programs have been curtailed severely. There are no safety nets anymore.”

Manuel Campos, a 55-year-old Santiago taxi driver, has his own foreign debt problem. Seven years ago he bought a new taxi, a 1979 Argentine-assembled Peugeot, with a dollar loan, the easiest way to finance a car in Chile at the time.

The payments on the original contract were $60 a month, relatively painless when business was brisk and Campos could buy a dollar with 39 Chilean pesos. Today, after several devaluations, the peso is trading at 190 Chilean pesos to the dollar, business is down and competition keeps taxi fares low. So Campos has to work much harder to meet his loan payments, which have been stretched out by the bank. Today, despite never having missed a payment, he owes nearly as much as he did two years ago.

Borrowed Billions

Campos’ problem is the same as that faced by all of Latin America: Governments and businesses must repay loans in dollars while most of their income is in steadily weakening local currencies. Loan reschedulings reduce today’s payments but ensure a decade or more of crippling indebtedness.

Billions of dollars were borrowed to build the massive Itaipu dam and hydroelectric plant in Brazil, nuclear power stations in Argentina, Brazil and Mexico, the Majes irrigation project in Peru, the high-rise Parque Central government office complex in Caracas, Venezuela, as well as luxury apartments and shopping centers throughout the region.

Billions are still owed on these projects, all in dollars. But--like Campos’ taxicab--none earns dollar income.

Juan Canas, 45, a grave tender at Mexico City’s Dolores Civil Cemetery, is lucky by the standards of the Latin American poor. He works for the Mexican government, which provides job security and a guaranteed minimum wage.

But sadly for Canas, the minimum wage has not kept pace with inflation and the falling buying power of the Mexican peso. His current pay--a little more than $3 a day--is about 50% less in real terms than when he started working at the cemetery 17 years ago. Meanwhile, transportation and food costs have risen sharply and he has had to abandon his dream of owning a home. He shares a small house in the outskirts of Mexico City, an hour by bus from work, with his three brothers, their wives and their eight children.

In real terms, he is hurting.

“We’re buying less food. Times are hard,” said Canas, who supplements his pay by doing odd jobs, including cleaning crypts for families of those buried at the cemetery.

Rising Costs

Across town, in Mexico City’s prosperous Polanco district, 23-year-old Trini Lopez works three days a week as a maid in the apartment of a bank executive, earning the minimum wage of 2,000 pesos ($3.14) a day. She takes the subway to work, which until this month cost only 1 peso each way. Public transport is heavily subsidized in Mexico City; the 1-peso fare did not even cover the cost of printing the ticket.

Under pressure from the International Monetary Fund (IMF) to cut expensive state subsidies, Mexico raised the subway fare to 20 pesos on Aug. 1. Now Lopez’s weekly transportation cost has jumped from 6 pesos a week to 120. The difference is the cost of three pounds of tortillas.

In the Chilean foothill village of Los Andes, Maria Aranda, 71, waits in line for her monthly social security check. Despite inflation averaging more than 20% a year, her pension has not been increased since last fall. She collects 8,000 Chilean pesos a month, worth about $42 at the current exchange rate. With that, she must support herself and two grown epileptic sons who live with her.

In Mato Grosso do Sul state in Brazil, cattleman Flavio Teles de Menezes is forced to sell fattened steers for less than he pays for young calves because of a government anti-inflation program that freezes meat prices. The Brazilian economic program is designed in part to divert government resources to exporting industries in order to earn foreign currency for debt payments.

No Money, No Work

“The government has to get these revenues from somewhere,” said Teles de Menezes, who also serves as president of an association of Brazilian agricultural producers. “So they get it from us. We are paying this debt.”

In Laredo, Tex., Esperanza Ley picks through a small mountain of rags at the Laredo Rags and Wipers warehouse in search of wearable clothing for herself and her five children. She came from Nuevo Laredo, across the Rio Grande in Mexico, with a single dollar she had saved for the trip, enough to buy three or four pieces of someone else’s discards.

Her husband is an electrician who has had no work for more than a month.

“Nobody has any money to pay him,” she said.

“Everything is much more expensive now: clothing, water, light, food. I used to be able to buy new clothes, new shoes for the kids. But now I have to buy here.”

Spray-painted on an outside wall of Argentina’s central bank in Buenos Aires are the words, Fuera la patria, financiero --Get out of the fatherland, banker. At a Buenos Aires rally in June marking the first anniversary of an Argentine economic program imposed to stem spiraling inflation and improve the country’s credit worthiness, a large banner hoisted by labor union members read, “While the IMF celebrates, the people suffer.”

Ill feeling toward bankers who are trying to collect Latin America’s debts is turning to a more generalized hostility toward the developed world and its perceived instruments of economic oppression: the IMF, the World Bank, the Paris Club of creditor governments and the economic policy-makers of the United States, Europe and Japan.

Peru and Brazil have already served notice that they will not sacrifice domestic development and social order to pay the banks and have announced unilateral steps to limit debt payments. Mexico has issued similar threats. In coming months and years, as recession brings more pain and internal pressures build, other nations are likely to follow.

Resentment Growing

“There is a strong undercurrent of resentment against the debt,” a Western diplomat stationed in Santiago said. “There is resentment at their own governments for allowing the debt to grow. There is resentment at foreign banks for pushing the money out and resentment that the banks are now in a position of leverage over their countries.”

Antonio Cafiero, a Peronist member of the Argentine Congress, recently wrote in a local journal that the “debt is immoral, moreover, perverse, because of its regressive economic effects . . . immoral because it only served the interests of powerful sectors of world finance.”

Cafiero compared Latin America’s plight to that of the heroine and victim in the short story, “The Incredible and Sad Tale of Innocent Erendira,” by Colombian author Gabriel Garcia Marquez, who won the 1982 Nobel Prize for literature.

Erendira, a 14-year-old girl whose unhappy life was devoted to serving her selfish and obese grandmother, accidentally destroyed the grandmother’s house in a fire.

Sold Into Prostitution

To repay the million-peso debt decreed by her grandmother to atone for her error, Erendira was sold into prostitution, forced to serve an unending line of sailors, smugglers and evil-smelling foreigners at 50 pesos a man.

“My poor child,” the grandmother sighed. “Life won’t be long enough for you to pay me back for this mishap.”

Wrote Cafiero, his bitterness aimed at the bankers and political leaders of the industrial world:

“We should not have to accept the fate of Innocent Erendira, forced to give her body 11 1/2 times a day to pay her soulless grandmother a debt imposed in an arbitrary and despotic form.”