Paraguay favours scrutinizing legality of foreign debt

Right: National Palace

December 3, 2008

mercopress.com

Paraguay announced this week it has a “sincere” desire to study in depth “the origin and legality of its foreign debt” over the last decades, when the landlocked country was ruled by the Colorado party.

“The issue is becoming part of the international agenda of the region” and Paraguay is willing to review the foreign debt of past decades said Paraguayan president Fernando Lugo, a former bishop who this year with his election managed to break six decades of hegemonic rule from the Colorado Party (1954/2008).

President Lugo said that many of the loans taken over the last decades never reached whom they were intended to benefit and therefore a big question emerges: “is that debt legitimate?”

The idea was floated Monday by Uruguayan economist Enrique Iglesias, for 16 years president of the Inter American Development Bank and currently chairman of the Ibero-American organization with seat in Madrid.

Iglesias suggested the creation of an international court of justice to manage foreign debt affairs in Latinamerica, as “well as mechanisms to concert public and private efforts”

“We have the Paris Club, but it only refers to public debt, (government to government). Anyhow we could open a debate on the issue which has become most pressing at global level”, added Iglesias.

Several regional countries, Venezuela, Bolivia and most recently Ecuador have begun questioning the origin and extent of international debt inherited from previous “non popular” governments, in Paraguay the corrupt Colorado Party.

Iglesias also warned that the recession will expand to the entire world, and will bring credit retraction, consumers’ lack of confidence, less investments and the loss of conventional instruments to address the new situation.