Market Focus : Poles’ Debt Relief Plans Stir Envy Among Latins : Economically troubled countries are asking ‘What about us?’ now that the West has agreed to bail out Warsaw.

When you owe $420 billion, the words “debt forgiveness” tend to catch your attention.

And Latin America is indeed watching with considerable interest a plan by the governments of industrialized nations to forgive up to half of the debt Poland owes them.

Naturally, many Latin Americans are asking: What about ours?

At the urging of the United States, the so-called Paris Club of wealthy Western nations agreed in March to grant Poland special concessions in order to help it through a difficult transition from socialism to capitalism. Paris Club members forgave one-third of the debt Poland owes their governments and promised to increase the amount to 50% over four years if Poland fulfills specified economic conditions.

Now many Latin American officials are saying what’s good for Eastern Europe should be good for this region, as well. At a meeting of the International Monetary Fund late in April, Latin American representatives called for “similar efforts” to help other countries with exceptional financial problems.

The U.N. Economic Commission for Latin America and the Caribbean calculates that countries of the region have fallen behind by $30 billion in payments on their combined $423-billion foreign debt. Like Poland, many of the Latin countries are struggling to revitalize their economies with free-market principles, and some are in even worse economic financial shape than Poland.

Gert Rosenthal, executive secretary of the Santiago-based U.N. commission, said the Latin American country in greatest need of Poland-style debt forgiveness is Nicaragua, which is trying to reverse socialist economic policies as it recovers from a decade of civil war.

“I would be in favor of a big bailout for Nicaragua,” said Rosenthal, a Guatemalan, in an interview.

He said other countries that would probably benefit most from Paris Club debt forgiveness include El Salvador, Honduras, Guatemala, Haiti, the Dominican Republic and Jamaica.

Those are small, poor countries with heavy foreign debt burdens, much of which is owed to foreign governments. The plan for Poland forgives only “bilateral, official debt”--not debt to private foreign banks or international lending institutions such as the World Bank.

Latin America’s biggest debtors are Brazil, Mexico, Argentina, Venezuela, Peru, Chile and Colombia. But only small proportions of their total debts are owed to Paris Club governments.

By contrast, El Salvador, Honduras, Guatemala, Haiti, the Dominican Republic and Jamaica all owe between 24% and 45% of their foreign debts to other governments--mainly those of the Paris Club.

Rosenthal noted that those countries also have lower per-capita income than Poland and some have greater per-capita debt. “So it occurs to them to climb aboard the same car, get the same benefits,” he said. “In the long run, I think they will get them.”

The Paris Club’s policy for Poland is part of a new trend in dealing with foreign debt, Rosenthal observed. “Four years ago, debt forgiveness was not talked about. It was a taboo.”

Then France announced that it was forgiving the debts of poor African countries, and the governments of other industrialized countries offered to write off 30% of the principal owed by the poorest debtor countries in sub-Sahara Africa as part of a debt-rescheduling plan. That plan later was extended to Bolivia, South America’s poorest country.

Last June, in presenting his Enterprise for the Americas Initiative, President Bush offered to write off part of the debts owed to the U.S. government by Latin American and Caribbean countries if they participate in the proposed free-trade project.

The Polish plan is the most liberal debt-forgiveness offer so far. And while there is hope that similar relief can be extended to some Latin American countries, an American economist with the U.N. commission in Santiago said there probably will not be a flood of forgiveness.

“It does have a cost” to industrialized countries, said the economist, Robert Devlin. “I think the governments are very cautious in taking on new burdens.”

Japan is especially cautious. While Tokyo reluctantly went along with the Polish plan, it has indicated that it will not offer new credit to countries whose debts have been written off.

Some Latin American countries, in turn, are reluctant to seek debt forgiveness because they fear it will be a black mark on their future credit ratings. Chile, for example, has made it clear that its goal is to faithfully pay its $18 billion foreign debt.

Argentina, while behind in payments on its $65 billion debt, also shuns the idea of forgiveness. “It is not on the government’s agenda,” said Alieto Guadagni, an Argentine undersecretary of foreign relations.

Another Latin American diplomat who specializes in economics said there are two basic positions among the region’s officials on the issue of debt forgiveness:

* Some believe that their countries’ financial futures will be best served if they manage debt burdens through rescheduling, refinancing and buyback operations so that private foreign banks will be willing to give them new credits.

* Others feel that they are so deep in the red that their credit-worthiness cannot be improved, so it is better to go for forgiveness now and worry about new credits later. “The most important thing is to get the economy back in good shape and solvent,” these officials reason.

Ways of reducing debt principal other than forgiveness have become increasingly available in recent years. An important one is the Brady Plan, proposed in 1989 by U.S. Treasury Secretary Nicholas F. Brady.

So far, the plan has produced $30 billion in international public financing to help debtor countries buy back debts from private foreign banks at discounted rates, or to guarantee exchanges of debt for long-term government bonds. But the Brady plan is limited by under-funding, insufficient coordination, and “certain administrative rigidities concerning the financing of debt reduction,” according to a report by the Economic Commission for Latin America and the Caribbean.

More than half of Latin America’s total foreign debt is owed to private banks, but Executive Secretary Rosenthal said the banks do not willingly write off indebtedness because shareholders are understandably interested in profit, not philanthropy.

It has been proposed that the governments of creditor countries subsidize debt writeoffs by private banks, but “it is not a popular cause,” Rosenthal said. “Taxpayers are against it: Why should U.S. taxpayers bail out the banks? But the idea is a good one.”

Forgive Us Our Debts as You Do for Others When the so-called Paris-club of wealthy Western nations agreed to forgive one-third of the debt Poland owes their governments and granted Warsaw other concessions, the debt-strapped countries of Latin America, Mexico and the Carribbean took notice. According to World Bank figures, Brazil tops the list of debtors owing more than $111 billion. In billions of U.S. dollars

Total South American debt $289.8 billion 1 Argentina: 64.7 2 Bolivia: 4.4 3 Brazil: 111.3 4 Chile: 18.2 5 Colombia: 16.9 6 Ecuador: 11.3 7 Guyana: 1.7 8 Paraguay: 2.5 9 Peru: 19.9 10 Trinidad and Tobago: 2.0 11 Uruguay: 3.8 12 Venezuela: 33.1 Total Mexico and Caribbean 132.2 billion 13 Costa Rica: 4.5 14 Dominican Republic: 4.1 15 El Salvador: 1.9 16 Guatemala: 2.6 17 Haiti: .8 18 Honduras: 3.4 19 Jamaica: 4.3 20 Mexico: 95.6 21 Nicaragua: 9.2 22 Panama: 5.8 Source: The World Bank