Background information on debts of impoverished countries in Latin America and the Caribbean.

On July 8, 2005, G-8 countries called for the cancellation of multilateral debt - debt to international financial institutions - of impoverished countries. Although Bolivia, Guyana, Honduras and Nicaragua are among the countries eligible, they will not experience full debt cancellation because much of their debt is owed to the Inter-American Development Bank (IDB). The IDB has not joined international efforts to cancel 100% of impoverished countries' debt. The Social Justice Committee calls for complete debt relief for these four countries, as well as Ecuador and Haiti. 

Bolivia:

Bolivia is one of several heavily indebted countries in the Latin American and Caribbean region, and is recognized by the UN as the poorest country in South America. Since 1978, Bolivia's GDP has grown at a meagre rate of 2 percent and presently has a low per capita income of $2,800. Approximately 64 percent of the population live below the poverty line, of which 90 percent reside in the rural areas. Its public expenditure on education represents only 6.3 percent of GDP, while public expenditure on health is 4.2 percent. WHO's data collection resources state that only 45 percent of the total population in urban areas and 23 percent in rural areas have access to improved sanitation. 
Bolivia's heavy debt service obligations compromise its efforts to reduce poverty. Bolivia's external debt increased from $4,275 million to $5,684 million between 1990 and 2003. 90 percent of this debt is owed to multilateral lending institutions. Having met the conditions of the IMF and World Bank-led Enhanced HIPC (Highly Indebted Poor Countries) Initiative, Bolivia's external debt has been reduced by 50 percent. Yet in 2006, Bolivia continues to face a total of $344.6 million in debt service obligations, of which approximately $126 million, or 36.5 %, is due to the IDB. The IDB still holds $1.6 billion dollars in Bolivian debt stocks, and although some plans have been proposed to provide some debt relief to Bolivia, the proposal falls short of making a meaningful difference for the country. 

Ecuador:

Ecuador's economy has experienced very slow growth, with an annual real GDP growth rate of 1.6 percent between 1990 and 1999. Poverty rates actually increased from 40 to 45 percent during this time, and per capita growth rates were low and even negative in some years. Poverty is still widespread, with 40.8 percent of the population living below $2 a day.
Since 1983, Ecuador has sought bilateral debt relief from the Paris Club, but continues to hold high levels of debt stocks. Ecuador's external debt currently exceeds $15 billion dollars, representing 68.8 percent of their GDP in 2004. The funds used to service these debts have been diverted from improving health and educational services. Government spending on health has declined since 1990 as a result of the financial crisis in Ecuador during the late 1990s and the adjustment programs that followed. According to the UN, debt payments accounted for 8.9 percent of Ecuador's GDP in 2003, more than five times its public expenditure on health (1.7%) and almost nine times its public expenditure on education (1.0%). The declining funds for social services have resulted in unimproved child mortality rates from treatable illnesses such as acute respiratory infections, and low school enrolment rates. The average number of years of schooling in Ecuador remains low, at 7.6 years in 1999. 
The Inter-American Development Bank (IDB) is Ecuador's single largest creditor, holding 18% of the country's total external debt. In 2006, Ecuador will pay over US$200 million to the IDB, well above the Official Development Assistance it receives in one year, which in 2003 was US$176.2 million. 

Guyana:

Over one third of Guyana's population lives below the national poverty line, and 19% live in conditions of extreme poverty. 70% of the population lives in rural areas, which exacerbate problems with declining social services. Less than 15 percent of low-income households complete a secondary level of education. Guyana's economic situation has become of increasing concern - the GDP growth rate fell 3.3% annually between 1982 and 1990, and income per capita has plummeted from US$600 to US$350. 
Guyana's public sector and economy have suffered under the adoption of debt payment policies from multilateral institutions. The public sector resources have decreased as funds have been redirected towards debt payments, leading to a deterioration of public health and educational services and a rise in the levels of poverty and crime. The country's projected debt service in 2006 is US$34.7 million. Its debt service to the IDB this year is estimated at $20.6 million, which represents 59.3% of its total debt service obligations.

Honduras:

Honduras' economic situation is dire. The country's low GDP growth rate is falling further, significantly affecting living standards and household welfare. 54% of the total population lives in extreme poverty, and in rural areas, 66 percent of the population lives below the national poverty line. Honduras' high poverty levels are linked to a lack of access to proper education and healthcare services.
Despite the severity of the country's socio-economic situation, Honduras is expected to meet its financial obligations to multilateral creditors. Honduras is struggling to eliminate its increasing total external debt, financed by reducing funding for the public sector. This situation has compromised the quality and availability of health services, education, sanitation, water and housing. Public expenditure on health represents only 3.2 percent of the GDP, and only 20 percent of the population have access to improved sanitation. 

Recently, there has been a proposal under the HIPC Debt Initiative from several of Honduras' creditors to cancel US$1 billion of the debt burden. The IMF has deemed Honduras to be successful in its structural reform and thus is eligible for debt relief. The Inter-American Development Bank, however, has yet to participate in debt cancellation for Honduras. In 2006, Honduras will pay an estimated $78.7 million in debt service to the IDB, which represents 55.4% of its total debt service.

Nicaragua:

In Nicaragua, 45 percent of the population lives in extreme poverty and harsh living conditions. Currently, over two thirds of rural population and one third of urban population live under the poverty line. Payments for social services have shifted increasingly from the public sector to private households. As health centres decline, the distance that must be travelled to obtain medical services have increased. Almost 600,000 of the poor in Nicaragua are unable to consult health care services. The quality of other public services is also waning; less than half of homes in rural areas have access to safe water and improved sanitation, and one in five of all Nicaraguan children are malnourished (this figure is twice as high in rural areas). Education also plays a crucial role in reducing high poverty levels as well as raising household welfare and living standards. However, in Nicaragua, a decline in public spending has led to insufficient funds for the education sector; there is a lack of teachers and school attendance rates are low. Over one third of Nicaraguans between the ages of 13 to 18 do not attend school and on average, Nicaraguans spend less than 5 years in school. 

With a low GDP growth rate, Nicaragua has been forced to make further reduction in funds for public services have been required to finance the country's debt service to creditors. 
Nicaragua's multilateral creditors have discussed the issue of debt relief for Nicaragua. Under the Enhanced HIPC Initiative, the IMF and World Bank have promised the cancellation of approximately US$4.5 billion of debt over time. However, the Nicaraguan government continues to face pressure by multilateral institutions in terms of the scheduling of its surplus debt payments. Nicaragua's projected debt service for 2006 is still an overwhelming US$101.1 million, of which US$59.7 million (59%) is owed to the Inter-American Development Bank (IDB). 

Haiti:

The United Nations recognizes Haiti as the poorest country in the Western Hemisphere. Haiti's GDP annual growth rate has remained at a meagre 1% from 2000 to 2004. 84 percent of the population lives in the urban slum, and 66 percent of total population lives below poverty line. 47 percent of the population are undernourished, 44 percent of urban population and 23 percent of rural have access to improved sanitation. In such conditions, life expectancy of Haitians remains at only 52 years. 
Haiti is the only nation in the Caribbean/Latin American region to be considered for debt relief the IMF/World Bank Enhance HIPC Initiative, because of its excessive debt burden. However, Haiti still faces a total external debt of US$1,316 million. Haiti is in need of immediate debt cancellation in order to increase poverty-reducing expenditures, such as healthcare, sanitation, housing and education.