ABSTRACT
The international financial institutions (IFIs) must address two key issues as they confront the debt and development problems of Latin America. From being a significant source of financial resources, the multilateral lending agencies became a net drain on the region’s balance of payments. There are two basic ways to correct the IFIs financial performance: increasing the disbursement rate and altering the amortization schedule. In reality, industrial nations in need of finance have alternatives to the international monetary fund (IMF), including the greatly expanded private capital markets and swap arrangements among their own central banks. The World Bank is anxious to play a role in pioneering debt service reduction schemes as is IMF Managing Director Michel Camdessus, but the US Treasury Department has been a decisive restraint. The IFIs could provide partial or full guarantees for financial instruments issued by debtor nations that would buy back at a discount old debts owed commercial banks.
