However, various G8 Summits have seen promises of billions in debt-write off, but almost hardly are carried out, or contain a lot of spin. For example, a lot of debt relief promised may include moneys previously annouced for such purposes, thus creating an impression of enormous write-offs. Bilateral debt relief also does not typically release actual money to be used for other purposes. Multilateral debt relief, however, could.
Debt repudiation, in the sense of a unilateral cessation of repayment, occurred in a number of countries: Bolivia, Brazil, Costa Rica, Dominican Republic, Ecuador, Honduras, Nicaragua, Panama, and Peru. With the exception of the Peruvian cessation, however, most of these actions have been taken with assurances that the stoppages were only temporary. Peru announced that it was unilaterally limiting its debt repayments to a percentage of its export earnings; and since Peru took this action, other nations have indicated that they will act similarly. There have been no serious proposals for a widespread and coordinated repudiation of global debt.
Repudiation would seriously disrupt global economic relations, probably far beyond the immediate losses of the debts themselves. Retaliations would follow, because it would be politically impossible for lenders not to react, and because there would be a conscious effort to warn other potential defaulters against similar action. The escalation of economic warfare would have the effect of sharply reducing international economic interactions in trade, investment, and exchange. Such an outcome is in no one's interest. There is nothing to guarantee that the countries won't simply get into debt all over again and continue to owe more allegiance to first world elites than to their own people. Repudiation also let's off the hook the World Bank, IMF and commercial lenders who created these injudicious loans in the first place.
Another option would be to cancel debt with conditions. Part of the cycle is that as countries get deeper in debt and grow more impoverished as they try to repay, the lenders impose a whole new range of what they say are anti-poverty and anti-corruption conditions, but which most often have other agendas, such as opening up poor countries to multi-national companies.
Therefore a proactive proposal that meets several criteria needs to be developed in order for this method to be successful. The proposal must reduce the debt payment burden that is draining much-needed foreign exchange that could otherwise be used by debtor countries for health care, education, housing and other needed services. It must address the crying need for capital and empowerment at the grassroots in developing countries and interrupt the cycle of debt payments and new debt that links the interests of first world elites and third world elites. Up till now, conditionality has been a tool used by first world elites to impose structural adjustment on third world governments to ensure profitable access of global capital to the workers and natural resources of third world countries. This approach further assumes the repayment of debts on terms that are essentially dictated by the creditors. No lender is obligated to accept any one of these possibilities. Moreover, the opportunities for swaps and buy backs are limited: there are, after all, a relatively small number of investment opportunities in poorer countries, and the debt crisis itself has further limited those possibilities. Finally, some of these swaps can actually increase the drain on the capital of a country, particularly if profit remittances on successful investments turn out to be very high.
Debt reduction could reduce the incentive for debtor nations to make economic changes that could lead to greater efficiency. Or, it could set a precedent that would have the effect of reducing, or even eliminating, the possibility for any future bank lending for economic development projects. Finally, debt reduction could have the effect of saddling public lending agencies, like the World Bank, with enormous burdens, thereby vitiating their future effectiveness
The debt "crisis" is only a symptom of an international economic system that tolerates growing and abysmal poverty as a normal condition. This need not, and should not, be the case. The developed countries have a responsibility to create conditions whereby the poorer countries can interact more productively in international economic activities: their single most important contribution to this end might be in the area of reducing trade restrictions on the products of poorer countries. Similarly, the developing countries have a responsibility to see that money is more effectively utilized within their own borders. The obscene personal profits accumulated by such leaders as Marcos of the Philippines and Mobutu of Zaire should not be fostered by the strategic interests of other countries. The banks should also face up to the fact that their single-minded pursuit of profits almost led them to the brink of bankruptcy. The lesson to be learned from this experience is that for economic growth to be sustained, close attention must be paid to the mutual interests of all parties involved. Only after sustained economic growth returns to the heavily indebted countries can the international community even begin to determine manageable rates and methods of debt repayment.
