Conable Mildly Optimistic on Mexican Debt Problems

Barber B. Conable Jr., the new president of the World Bank, expressed cautious optimism on Wednesday that Mexico “will not be suicidal in its economic intentions” and eventually will work out a solution to its debt crisis.

But Conable, in his first meeting with reporters since taking over the bank post on Tuesday from his predecessor, A. W. Clausen, also cautioned against imposing economic conditions on Mexico that would be too harsh. A solution, he said, “must spring from Mexico itself.”

Projecting the same reasonable pragmatism that marked his 20-year career as a Republican congressman from New York, Conable stressed that the debt problems facing the Third World can be solved only through cooperation and coordination among the debtors, the developed countries and the lender banks and multilateral institutions such as the World Bank and the International Monetary Fund.

Conceding his lack of any experience as a banker, the 63-year-old Conable said: “I assume I was appointed because as a political figure I had a commitment to the collective resolution of difficulties and disputes.” He added that “I believe the World Bank is going to be increasingly important as a coordinating institution. In fact, I told my wife I expect to spend the next five years in meetings.”

Cites Internal Problems

Specifically addressing the problems of Mexico, whose foreign debt is approaching $100 billion, Conable conceded that the economic conditions imposed on that nation by the IMF in the aftermath of its debt crisis of 1982 had failed, but through no fault of the IMF. Rather, as a result of internal problems, including last September’s earthquake and the collapse this year in the price of oil, Mexico’s key export, there is a new crisis that can only be solved through policies to enhance growth, Conable said.

“Mexico obviously has a troubled economy for reasons we all know,” he said. “I think we are all aware of the problem, and the solution is going to have to be worked out in a collective decision in which many of the initiatives must spring from Mexico itself.”

The solution, he said, would require new economic conditions, whether negotiated with the IMF or in connection with the broader role set forth for the World Bank in the plan announced last September by Treasury Secretary James A. Baker III. Under that plan, the bank would take the lead in growth-oriented, long-term “adjustment” or “policy-related” lending to Third World countries with debt problems.

But “conditions imposed from outside will not be successful if they are not acceptable to the Mexican people,” Conable warned. “So I hope that Mexico will be forthcoming and make use of institutions like the World Bank. . . . I’m unwilling to face the possibility that Mexico would be suicidal in her economic intentions.”

But Conable firmly dismissed any suggestion that the bank under his guidance would participate in any program to ease the debt problem by getting commercial banks and other creditors to write down the loans as unserviceable.

“My position is that continuing payments is important,” he said. “How could the bank decide to write down some loans and not others? . . . I am very skeptical of any selective debt writedown.”

What the bank should be doing is developing longer-term programs, acceptable to debtor nations, to foster growth and stability, he said, so that commercial banks could then continue lending voluntarily.

The bank and the IMF were both set up by the Bretton Woods Agreement of 1944. The bank has financed commercial and infrastructure projects, mostly in developing nations; the IMF concentrates on lowering trade barriers and stabilizing currencies. The IMF, while helping developing nations pay their debts, usually imposes tough guidelines aimed at lowering inflation, cutting imports and raising exports.