Word: third world
(lookup in dictionary)
(lookup stats)
Dates: all
Sort By: most recent first
(reverse)
...willing to continue the seemingly interminable cycle of stretched-out loans and infusions of cash that have so far characterized the debt tango. At the same time, Citicorp's move could jar the Reagan Administration's so-called Baker Initiative to ease the international debt problem by encouraging moderate Third World growth through measured dollops of additional loans. Citicorp's decision to set aside funds puts pressure on other heavily exposed U.S. banks to do likewise. That policy, in turn, could help push up interest rates as the institutions seek to recover the costs of their set-asides...
Treasury Secretary James Baker gave Reed a more tepid endorsement. Said he: "I venture that all in all it will be seen as a positive step." Baker, who presumably had concerns that Citicorp's actions might discourage other banks from participating in his Third World initiative, nonetheless expressed hope that the bank will continue lending in Latin America, where it has $14.8 billion in loans outstanding. Citicorp is particularly exposed in Brazil ($4.6 billion), Mexico ($2.9 billion), Argentina ($1.5 billion) and Venezuela ($1 billion...
...Third World countries, government officials were loath to criticize Citicorp's new hard-nosed policy. Brazil's Finance Minister, Luiz Carlos Bresser Pereira, said he saw the bank's move as a prudent shoring up of its foundations. Said a top Argentine official: "It's the first sign that U.S. ^ banks are prepared to share the burden of the debt crisis." Other foreign moneymen welcomed Citicorp's action because it might mean that all U.S. banks will start treating Third World debt under the same terms as Japanese, West German and Swiss banks, which have already established substantial loss reserves...
What Reed was doing could perhaps best be described as preventive medicine. The youthful chairman could see that Citicorp's hefty Third World commitment, which forms more than 10% of the bank's total loan portfolio, posed a severe threat to the bank's future prosperity. The income from those loans was dwindling because of all the concessionary terms -- lengthened repayment schedules, lowered interest rates -- that creditors worldwide have been granting to Third World debtors in order to keep them from defaulting. Then the entire international credit edifice was badly shaken last February when Brazil announced an indefinite moratorium...
Revenue from Third World loans in the past has made up an important share of Citicorp's profits. In 1986 the bank earned $257 million, or about 24% of its total income, on loans to countries in the Caribbean and in Central and South America. The growing threat to the bank's welfare was therefore extremely dire; at the same time, the potential for default on these debts was depressing Citicorp's reputation on Wall Street...