Central America Alert -- Organizational Sign-on Letter

December 7, 1998

This organizational sign-on letter is being organized with a very short time-line. We are trying to influence Brian Atwood, Administrator of USAID and the head of the U.S. delegation to the special Donors' Consultative Group meeting on Central American aid being held December 10-11 in Washington. (There are suggestions that Vice President Gore might attend, but even if he does Atwood will be the one with more substantive responsibilities.) We thus ask that endorsements be made by noon on Wednesday by contacting Soren Ambrose (see contact information above).

Attending the Consultative Group meetings will be governmental delegations led by the presidents of five Central American countries -- Nicaragua, Honduras, El Salvador, Guatemala, and Costa Rica -- and representatives of donor nations and the multilateral financial institutions to discuss assistance in the wake of Hurricane Mitch. This meeting can be expected to result in pledges of relief aid and supplies for the countries affected.

Such pledges, although extremely important for the hurricane victims, will be rendered meaningless unless accompanied by complete and unconditional cancellation of these countries' foreign debts. This sign-on letter seeks to put pressure on the head of the U.S. delegation to the meeting, asking that the U.S., as the host of the meeting and the most influential player in making such decisions, take the lead in urging cancellation of these debts.

Even as international relief pours in, Honduras is obliged to pay back more than $1 million each day to service its foreign debt, and Nicaragua nearly that amount. To rob these countries of their scarce resources at the same time we supply them with emergency relief is illogical and immoral. And long after the relief efforts end, the daily demand on these economies will persist. That means that actual recovery from this disaster, which has in one week robbed these countries of perhaps half their Gross National Products, will never happen. Re-scheduling the debt or a temporary moratorium would only postpone or draw out the pain. Full debt cancellation is the only solution.

Although Nicaragua and Honduras have qualified in the past couple of years for consideration for some "debt relief" initiatives, entrance into these programs is conditioned on these countries pledging to adhere to several additional years of strict structural adjustment policies. It is precisely these policies, however, that were responsible for the decimation of these countries' social services and infrastructure before the hurricane hit. Effective and sustainable reconstruction of the region is simply not possible within the context of increased austerity. Given the magnitude of the losses caused by the storm, recovery for these countries depends on the governments investing the savings reaped from debt cancellation into health care, education, infrastructure, and credit for small and medium agricultural producers.

December 9, 1998

Brian Atwood, Administrator
US Agency for International Development
1300 Pennsylvania Ave., N.W. Room 6.9
Washington, DC 20523
Fax (202) 216-3455

Dear Mr. Atwood:

On the eve of the meeting of the special meeting of the Consultative Group of Donors for Central America, called in response to the Hurricane Mitch catastrophe, we, the undersigned organizations, call for the immediate and unconditional cancellation of the external debt repayment obligations of Honduras, Nicaragua, El Salvador, and Guatemala.

In your position as leader of the U.S. delegation to this meeting, you are uniquely placed to shape the U.S. response to this catastrophe. Your position is all the more significant in light of how key the U.S. example is in determining the response of the rest of the international community, from other national governments to international institutions.

The disaster has ended the ability of these countries to repay external debt. All available resources must be used to address the needs of the population in this crisis. The reconstruction effort will cost billions and take many years. Commitments for relief aid and supplies made at the Consultative Group meeting should not be nullified by the continuing insistence on debt servicing by multilateral financial institutions and other creditors. Giving aid with one hand while taking payments with the other is not only illogical, but inimical to Central America's medium- and long- term hopes for sustainable development.

The bilateral debt of these countries owed to the United States should be canceled immediately. The promises made by the First Lady to release Honduras and Nicaragua from two years of payments are clearly insufficient. Many governments have pledged debt cancellation; Cuba and France have written off the entire debt of the two worst-hit countries. We feel that the U.S. should follow this example, and that it should urge debt cancellation in the multilateral institutions and international fora where it is so influential.

We strongly believe also that debt cancellation must not be conditioned on compliance with IMF structural adjustment programs or similar demands. Demands for government austerity are surely inappropriate in the face of sudden and massive homelessness, disease, and hunger. The existing programs under the IMF's Enhanced Structural Adjustment Facility (ESAF) must also be re-negotiated in light of the hurricane's impact.

This disaster will take the affected nations, already among the poorest countries in Latin America, decades to overcome. Broad coalitions in Central America have called for cancellation of debt. Half-measures such as debt re-scheduling or a "debt moratorium" are insufficient. Anything less than cancellation of the monumental, unpayable debt burden would extend and deepen the suffering of the victims.

Please do what is necessary at the upcoming Consultative Group meeting to make the United States a true leader in making recovery possible for the people of Central America.

Sincerely,