Fiscal Sense

U.S. support for the idea of an inter-American development bank caused hopeful smiles to blossom in every Latin American capital last week. Even more hopeful were signs in some" of the hemisphere's key countries that free-handed spending might be replaced with tight budgeting, that careless deficits would give way to more careful planning. The results promised to solve many of the new bank's problems before they become problems--and even before there is a bank.

Brazil. When tough-minded new Finance Minister Lucas Lopes took charge eight weeks ago, he found that his predecessor had run up a record six-month deficit of $168 million. Clanking presses were turning out inflated new currency at top speed (2.5 billion cruzeiros in both April and May, 1.8 billion in June). Lucas Lopes trimmed nearly $75 million from the current budget and even managed to take a symbolic batch of 7,204,800 cruzeiros out of circulation. He revamped the ruinous coffee-price-support program by making only token payments for low-grade coffee. Despite complaints from the growers, he sold 260,000 bags of four-year-old surplus coffee at about 7-c- to 10-c- less than the pegged price--and thus earned Brazil an unexpected $15 billion.

Venezuela. Last week the government announced that it had negotiated a $289 million loan from a consortium of U.S., British and Canadian banks to put part of the burdensome $1.4 billion debt left by ousted Dictator Marcos Perez Jimenez on a businesslike basis.

Argentina. A month ago, President Arturo Frondizi shattered his country's traditional go-it-alone oil policy by announcing that nearly $1 billion worth of oil development contracts were closed or nearly closed with a long list of foreign oil companies and investors. Argentina has an estimated 2.3 billion bbl. of oil in underground reserves, but snail-slow development forces the country to spend about $300 million a year for imported petroleum and petroleum products.

Colombia. As in the case of Venezuela, Colombia was run heavily into debt by its own ex-Dictator Gustavo Rojas Pinilla. By careful penny pinching, the post-revolutionary junta surely and steadily paid off much of the debt.

The three nations most plainly in need of the kind of help the new bank can offer are Bolivia, Paraguay and Chile. But Bolivia's President Hernan Siles Zuazo has been backing a stern anti-inflation program with everything from hunger strikes to threats to resign, and there are hopeful signs of recovery. Paraguay's President Alfredo Stroessner, reinaugurated last week, has stabilized the currency, balanced the budget and held the rise in cost of living to a low (for Paraguay) 1% per month. And Chile's President Carlos Ibanez has sacrificed his personal popularity to back tough economic reforms, made even tougher by a deep slump in the world price of copper, the country's main export.

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