U.S., Donor Groups Pledge More Central America Aid

The Clinton administration and international donor organizations, heeding a warning from four Central American presidents that the ravages of Hurricane Mitch are endangering democracy in their countries, pledged more than $1 billion Thursday in relief and interest-free loans to the devastated region.

“You are our neighbors, our friends, our partners,” Undersecretary of State Stuart E. Eizenstat said during an emergency meeting of the visiting presidents and a group of donor organizations. “When you suffer, we suffer. When you hurt, we hurt with you. When you need help, we are there to help.”

It was not clear, however, whether the promises of aid would match the enormous need.

Describing the extent of the horror six weeks ago, President Carlos Flores of Honduras said Thursday that the storm “destroyed 50 years of efforts to build an infrastructure and stole away assets of two generations of Hondurans.”

It has been estimated that Honduras, which bore the storm’s fury, suffered economic losses of $1.2 billion. Nicaragua’s government has estimated that reconstruction, including the cost of building improved homes, roads and bridges, will come to $1.5 billion.

Mitch, which was a tropical storm by the time it made landfall, left more than 9,000 people dead across Central America.

All the Central American presidents struck a similar theme when they warned that their devastated populations, if not given considerable help, could turn on their nascent democratic governments.

“If special, large-scale external support is not forthcoming,” Nicaraguan President Arnoldo Aleman said, “risks will be posed for the still-fragile and vulnerable framework of democracy.”

Overwhelmed by the costs of relief and reconstruction, the governments of Nicaragua and Honduras insist that they are unable to pay the interest on their foreign debts. Nicaragua owes a total of $6.3 billion to outsiders, while Honduras owes $4.1 billion.

Help was promised on the debt burden, but the extent was unclear. The Paris Club, an organization of rich industrial lender nations that includes the U.S., is asking the International Monetary Fund to work out programs of debt relief with the countries.

Eizenstat said the U.S. is prepared to forgive 90% of Nicaragua’s debt and 67% of Honduras’ debt. But these debts--U.S. loans of $144 million to Honduras and $94 million to Nicaragua--are only a small part of the total foreign debt of these countries. In addition, the debt relief would have to be approved by Congress.

World Bank President James Wolfensohn said the bank has created a new Central America Emergency Trust Fund to help the affected countries make interest payments on their debt to international loan agencies. Eizenstat said the United States would make “a significant contribution” to this fund “or some other parallel effort.”

As for the overall U.S. program, Eizenstat said the United States has already spent $283 million on Mitch disaster relief and that the U.S. Agency for International Development will reallocate $120 million for additional immediate relief.

Wolfensohn said the World Bank will provide $1 billion to Honduras and Nicaragua in interest-free loans over the next few years for reconstruction. The World Bank has already rushed $200 million to Central America for relief after the storm.

Officials of the Interamerican Development Bank said it has approved $353 million for Honduras, Nicaragua, Guatemala and El Salvador for relief and reconstruction. In addition, it is speeding up disbursement of $430 million in loans that had been approved earlier.