Debt cancellation for poorest Latin American countries

The Inter-American Development Bank has agreed to cancel debts being paid by Bolivia, Guyana, Honduras, Nicaragua and - eventually - Haiti, ensuring that these countries will get a similar level of debt cancellation as the poorest African countries.

Inter-American Development Bank

The decision, made on 17 November by the Inter-American Development Bank (IDB), will see between $1.6 billion and $3.5 billion of debt cancelled for the five countries. (The final details of the debts to be cancelled have yet to be decided.) Campaigners including Jubilee USA are lobbying hard to ensure that as much debt as possible is included in the final deal.

The provisional agreement has come after campaigners and politicians in the poorest Latin American countries protested at the exclusion of these debts from the cancellation deal agreed after the G8 summit in Gleneagles in 2005. The G8-sponsored deal - now known as the Multilateral Debt Relief Initiative - offers cancellation of World Bank, IMF and African Development Fund debts to the poorest countries which also complete the Heavily Indebted Poor Countries initiative. So far, 20 countries have already qualified for this debt cancellation - of which 16 are African and four are Latin American. Another 20 countries could qualify in future: 17 in Africa, one in Latin America, one in Asia and one in central Europe. However, no debts to the Inter-American Development Bank, the Asian Development Bank or the European Bank for Reconstruction and Development were included in the deal - meaning that the non-African countries benefited far less. The difference has been particularly acute for the Latin American countries, a large portion of whose debt was to the Inter-American Development Bank.

Once the details of the cancellation are agreed, it will come into effect immediately for Bolivia, Guyana, Honduras and Nicaragua. Haiti, however, will first have to go through the Heavily Indebted Poor Countries iniative, with all the damaging and undemocratic conditions it includes. Campaigners are arguing for Haiti - and all other countries with illegitimate and unpayable debts - to get debt cancellation now, without externally-imposed conditions.

The only other concern about the deal is whether it will affect the level of new funding that the countries affected, and other poor Latin American countries, get from the Inter-American Development Bank. Agreeing to debt cancellation must not be an excuse to cut aid.

Overall, campaigners welcomed the move as a step forward.