"Great Hopes Are Gone"

Beneath an asthmatic fan, the pianist eases from a tired collection of pop tunes to Elgar's Land of Hope and Glory. It is a curious switch because there is hardly any glory in the seedy Kinshasa bar near the banks of the sluggish Zaire River and little hope for the country that bears the river's name. Though its debts are small on an international scale--only $5.1 billion--Zaire is a financial basket case, a country so broke, so mismanaged, so beset by the global recession and, ultimately, so corrupt that it should be a perfect warning to lenders. Since 1976, Zaire's debt has been rescheduled at least five times; last year only an estimated $250 million of $946 million due in debt service was paid, and the chances of full repayment are nil.

The picture was not always so gloomy. In the early 1970s, after nearly a decade of civil strife, the former Belgian Congo had achieved a measure of political stability under the dictatorship of President Mobutu Sese Seko. More important, the country was recognized as a treasure trove of gold, diamonds, oil, copper and cobalt. Banks rushed to extend credit. They were to rue the day. Notes one foreign banker in Kinshasa: "We did not do our sums properly."

Aside from export setbacks--prices for copper and cobalt dropped sharply--much of the loan money that flowed in was not spent wisely. Among Mobutu's development projects was a huge undertaking to dam the Zaire River and to build a 1,100-mile-long power line to the Shaba copper-producing region at a total estimated cost of about $1 billion. Eight months after the power was finally turned on in 1981, the current was switched off. Shaba province happens to be self-sufficient in electricity. Says one Western diplomat: "If ever there was a white elephant, this is it. Zaire needs the scheme as much as it needs a nuclear-powered submarine."

Worse still, corruption percolates through the regime. "It is widely accepted," a U.S. Senate Foreign Relations Committee staff report completed in March noted, "that he [Mobutu] has managed to amass a legendary personal fortune at the nation's expense." Kickbacks are the order of the day, with the President's cronies controlling significant slices of the economy. "It's the greed of a handful at the top that keeps this country in an economic mess," says one Belgian businessman. Complains one of Zaire's former financial advisers: "We had great hopes, but they are all gone. It is a country that makes people dream and then makes them go crazy."

Businessmen are not the only people to despair. In 1978, the International Monetary Fund sent Erwin Blumenthal, formerly a top official of West Germany's Bundesbank, to take over as the director of Zaire's central bank. TIME has obtained a copy of the secret report he wrote to IMF Managing Director Jacques de Larosiere early last year. In it, Blumenthal describes refusing high officials' requests for bundles of cash of up to $50,000, finding a government payment of $4 million to a Belgian professor who was the guardian of Mobutu's son, and uncovering a discrepancy of $32.6 million between what was supposed to be in the government's bank accounts abroad and the money that was actually there.

Blumenthal left Zaire in 1979. But he continued his investigations in Western Europe, obtaining from former Zairian Prime Minister Nguza Karl-I-Bond, now living in exile, the estimate that Mobutu's private fortune exceeds $4 billion. Most of it was said to be held in Swiss bank accounts, a point that may explain why the Swiss have been receiving fairly regular payments on loans owed them by Zaire.

The only factor that has kept Western bankers from calling a default is that large loans would have to be written off. "If Zaire were serious about sorting out its debt, it could be done in a matter of years," says one creditor. Explains a Western diplomat: "The Zairians are not worried about being a basket case. The elite always do well regardless of who is putting up the money." This file is automatically generated by a robot program, so viewer discretion is required.