HENRY KISSINGER : Latin Growth, Not Debt, Is the Question

Q: We would like to start with your plan for dealing with the problem of debt in Latin American countries.

A: Fundamentally what is needed in the Western Hemisphere is economic growth. The United States needs growth in Latin America, too, because recessions in developing countries reduce America’s export potential. So philosophically, I would like to change the debate from how much interest on debt we can extract in each year to how much these countries can grow.

Let’s take Brazil. It is impossible for Brazil to service its debt when that service consumes such a large percentage of its export income and of its gross national product and when all the new money it gets has to be repaid in the form of interest . . . and for this reason I have suggested that we set an interest ceiling--let’s say 6%--related to the growth rate of Brazil. Hopefully, the interest rate will be more or less the same as the growth rate.

Then we have the problem of how to bridge the difference between 6% and the market rate. The best approach is to establish an international fund to which the banks contribute one-quarter, international institutions one-quarter and governments one-half . . . . Now $30 billion may sound like a lot (of capital for such a fund), but the banks are already lending more than $7.5 billion just for interest payments . . . .

Q: You have stressed the need for growth. Can you imagine headlines . . . that would talk of a trade war among Japan, Germany and the United States; another saying Congress had imposed more tariffs, and a third saying Brazil is near default?

A: That could happen, but I consider it extremely unlikely. We are living in a precarious world in which a lot of governments have been avoiding difficult decisions because there’s always an election somewhere and they always have a tendency to let the next man handle it. If a trade war breaks out, it would represent a total failure of Western leadership that would lead to a huge crisis in all our countries. I think it is my duty as an outsider to talk about a future we can achieve, which is within our capabilities.

Q: Are the recent proposals from (Soviet leader Mikhail S.) Gorbachev concerning the arms talks and reduction of short-range and middle-range missiles a change in his foreign policy or is the Soviet Union preparing a trap?

A: I believe that the present proposals, unfortunately, are objectively a trap. They do not improve the military situation in any significant way but they are creating in Western Europe a new form of anti-Americanism and neutralism. You have been in (West) Germany. You know what it has done to the CDU (Christian Democratic Party) in Germany. When the CDU stops being a pro-American party or moves to the nationalist/neutralist side and then the Socialists move even further in that direction. So we have paid a huge price in the internal structure of German politics for a minimum gain. Now, what makes it worse is that Gorbachev accepted our proposal, so you can’t really blame Gorbachev; our government is more to blame than he is. It’s a pity because Gorbachev is a highly intelligent man and the new leaders are more flexible than any I have seen. I wish we had a fundamental dialogue with them. I don’t know whether a fundamental dialogue would succeed. But you cannot tell from the present position what Gorbachev’s ultimate objectives are in foreign policy. And I would like to test it, it would be interesting.

Q: If you regionalize the international politics of the United States, would not the economic issues compel you to intervene against leftists, against anti-market policies?

A: I believe that we should oppose governments that cause us trouble in foreign policy, because that’s where our interest is. I think recent history shows that planned economies cannot work because they lead to stagnation. That’s not an ideological preference, that is what experience shows. I was struck when I was last in the Soviet Union by the fact that when the Soviet leaders, from Gorbachev down, explained their economy to us they were as critical as the most conservative American could be of the results of state enterprise managers colluding with the ministers. They can’t even find out what the real statistics are and they have no market to tell them what is happening because they have no incentive for innovation. So in this sense I think you need a market economy and you need incentives. But Japan and Korea have shown that with the right relationship between the government and the private sector you can have an industrial policy that is very creative and which does not exclude the government. Now, of course, when you start moving funds around you are intervening. But what I oppose is management of political affairs in foreign countries by the United States on behalf of either the right or the left. I don’t think we understand these countries well enough to manage their domestic affairs.