Latin American debt crisis

As Latin American debt crisis ( crisis and Latin America ) refers to the debt crisis of Latin American countries, which took place mainly in the 1980s, however, in some countries as early as the 1970s began. Often the phase is referred to as the "lost decade " because the countries of Latin America in this period reached a point where their foreign debt was far higher than the economic strength of their economies and hence they were living beyond their financial circumstances. The result was the setting of the debt service to foreign creditors. After the collapse of the fixed world monetary system of Bretton Woods, the Latin American crisis was thus the first major international financial crisis.

Origins

In the 1960s and 1970s, many Latin American countries, especially Brazil, Argentina and Mexico had borrowed large sums of capital from the international creditors to advance their industrialization. At this time, these economies reported from excellent growth rates and good prospects, so the creditors willingly always presented new loans. Between 1975 and 1982, the total claims of commercial banks on Latin America has increased by 20.4 % annually. This led to a quadrupling of Latin American foreign debt of 75 billion U.S. dollars (1975 ) to more than 315 billion U.S. dollars in 1983, thus 50 % of the gross domestic product of the entire region. The annual debt service (ie principal and interest payments) rose even more rapidly, reaching in 1982 an amount of 66 billion U.S. dollars ( after only 12 billion U.S. dollars in 1975 ).

Beginning of the debt crisis and the impact

When the world economy went in the 1970s and 1980s into recession and oil prices began to skyrocket (see oil crisis ), this marked a turning point for many countries in the Latin American region. Many developing countries found themselves in an extreme liquidity crunch because they could no longer pay the rising commodity prices. Oil-exporting countries, however, were flooded with finance owing to the rise in oil prices, and invested the money in international banks, which in turn these funds in the form of loans in Latin America docked (so-called petrodollar recycling). While the external debt of these countries over the years accumulated dangerous, the debt crisis began only when the international capital markets became aware that Latin America 's debt is no longer able to repay.

This happened in August 1982 when Mexico's Finance Minister, Jesus Silva - Herzog, publicly announced that Mexico adjusts its debt service and the partial state bankruptcy declared. In the wake of Mexico's moratorium, most commercial banks reduced their strong Latin American exposure, or at least stopped new lending. But because many of the Latin American demands constitute short-term loans, the crisis has only exacerbated as their refinancing ( rollover ) was refused by the banks and therefore the loans were made ​​due. Thus suddenly were many billions in loans that were otherwise extended at any time, immediately due and payable ( snowball effect).

As a result of the crisis, the development strategy of the structuralist economic policy was abandoned and for a time operated a by the International Monetary Fund and the World Bank demanded, the Washington Consensus oriented economic policy. This was later replaced by a neostrukturalistische economic policy.

The now beginning the process of massive capital outflows ( capital export esp. in the United States) led to the Latin American currencies depreciated sharply and thus real interest rates and inflation rose sharply. The real growth rate of gross national income was in the period between 1980 and 1985 at only 2.3 % per year, per capita we even recorded a negative growth of -9 %.

For the settlement of the debt of these countries notleidenen Ender 1980s, the Brady bonds were created.

The debt crisis in Latin America is one of the main exogenous elements that helped to bring the authoritarianism and dictatorships in the region to case, such as the military regime in Brazil and the bureaucratic- authoritarian regime in Argentina.

Documents

• Financial crisis
• Economic crisis
• 1980
• 1970
• Economy (Venezuela )
• Economy (Chile)
• Economy (Mexico)
• Economy (Brazil )
• Economy (Argentina )
• Economy (Costa Rica)
• Public debt