But a leading Welsh business figure warned that companies would stop trading with poorer nations altogether if commercial contracts were not honoured.

The frozen food company and its parent outfit, the Big Food Group (BFG), has ended suddenly a multi-million pound compensation claim against the South American country of Guyana.

BFG, which has its headquarters on Deeside, in North Wales, was facing increasing pressure from campaigners to drop its £12m demands.

The Jubilee Research Group said other UK companies should now take their cue from BFG and contribute to efforts to end Third World debt.

Guyana's debt dated back to 1976, when it nationalised huge sugar plantations, owned then by Booker, which is now part of the Big Food Group.

Guyana, one of the world's poorest countries, was unable to pay the compensation it promised.

An economist with Jubilee Re-search, Romilly Greenhill, said the amounts owed by developing countries to private companies can often be relatively small in terms of the turnover of multinational firms.

Yet the debts could have a huge impact on the economies of small countries, where as much as 20pc of Government revenue could be spent on paying off overseas loans.

She said, "It's our view from a moral perspective that debt to Third World countries should be cancelled.

"The Heavily Indebted Poor Countries Initiative (HIPC) has agreed debt cancellation for 26 countries, but it will eventually be a total of 38 countries that are considered to need debt cancellation.

"The way the initiative works is that it's supposed to be debt cancellation by both governments and international organisations like the World Bank and the IMF, and private companies are also supposed to participate.

"The reason why we were so outraged by the Guyana case is that the Big Food Group should have been providing that relief under this internationally-agreed initiative."

Miss Greenhill admitted that BFG was not obliged to cancel the Guyana debt, but said the agreement could only work if all organisations played their part in relieving developing countries of these burdens.

"The way that debt reduction generally works is that everybody has to pitch in and provide their share of debt relief, otherwise it's not fair on the people who are providing debt relief."

The director of the Confederation of British Industry in Wales, David Rosser, rejected Jubilee Research's calls for all UK businesses to cancel Third World debt, saying this would undermine trade with developing countries.

"It's important that when companies do business overseas, whether with governments or companies, that they can have every confidence in the business transaction being carried out.

"If overseas countries develop the habit of not paying debts, or not honouring commitments, they will find that nobody is willing to trade with them in the first place.

"Both from the financial perspective of the countries involved and also from the viewpoint of wanting to encourage trade between First World and Third World countries, it's important that commercial transactions are honoured on both sides."

The Jubilee Debt Campaign had been urging the BFG to drop its claims and had planned a series of protests, in London and at BFG's Deeside offices.

A spokesman for the BFG said the matter had been reviewed in the context of the firm's "corporate and social responsibility".