We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

1980s Latin America Debt Crisis - Essay Example

Comments (0)
Summary
Latin American countries followed a heavy reliance on debt finance. First, increases in foreign debt in these countries were higher than the revenues they had derived from their annual exports. In 1976, Mexico exported oil which paved the way for excess imports since cheap loans can be readily tapped…
Download full paper
GRAB THE BEST PAPER
1980s Latin America Debt Crisis
Read TextPreview

Extract of sample
1980s Latin America Debt Crisis

Download file to see previous pages... Latin American countries followed a heavy reliance on debt finance. First, increases in foreign debt in these countries were higher than the revenues they had derived from their annual exports. In 1976, Mexico exported oil which paved the way for excess imports since cheap loans can be readily tapped. Brazil implemented a program of industrial expansion. Argentina and Chile established an overvalued exchange rate policy as an integral part of anti-inflationary strategy. Diverse government policies led these Latin American countries to defective exchange rate policies and excessive dependence on external capital flows.Another factor for the persistent debt problem was the fact that state enterprises became the conduit for absorbing external resources. The government guarantee provided for foreign denominated loans was attractive to external lenders who had no information on the real risk profile of the debtors. Public enterprises implemented programs of investment which guaranteed direct control over the foreign exchange proceeds to the national government. (Wesson, 9)In the years after 1983, these countries suffered from capital outflows and from the persistent slide in primary commodity prices. From 1983 up to 1986, Latin American terms of trade declined by 15 percent. Increased exports were negatively affected by falling prices. Countries. Argentina and Peru were especially hard hit. Mexico went into crisis due to falling oil prices in 1986.The lingering imbalance in the U.S. balance of payments contributed to the disadvantage of Latin America. The United States buys manufactured imports from Asian Countries (NICs) while shutting off capital flows from Latin American countries. Japanese and European surpluses were sent to the United States to get higher rates of investment.
Economic growth in Latin America was supported by an import-substitution industrialization which protected the domestic industrial economy by means of high tariffs, import duties, and government subsidies. The initial arrangement benefited the economy but by the late 1960s, it was beginning to negatively affect agriculture which provides the needed foreign exchange. The industry had expensive domestic inputs that resulted in making major Mexican agricultural exports uncompetitive. Government policies which controlled domestic food prices also discouraged the increase of food production.
As the population increased, consumption rose, reducing the amount of food available for export. It became necessary either to generate more resources to satisfy the demands of the population, or to control or decrease such demands without undermining the peace of the ruling party.
By 1970, Lus Echeverra Alvarez, was elected president. He implemented the policy of stabilizing development. Stabilizing development is the economic strategy which emphasized growth over equity. The assumption had been that these resources would trickle down to the poor. The Echeverra administration opted for a strategy of shared development. This policy would emphasize equity and growth by policies that channel a greater share of economic gains to Mexico's lower classes. Echeverra encouraged more aggressive trade unions and he rued that foreign investors and domestic businessmen for exploiting the country. As conflict increased and confidence in the administration's policies declined, capital flight began. The government was forced to devalue the Mexican peso twice.
Echeverra's anger and dismay led him to expropriate vast tracts of private agricultural land to give them to landless peasants. The president's attempt to spend his way into growth and equity had clearly failed by 1976, when Jos Lpez Portillo succeeded him. Portillo assumed a conciliatory approach in the face of problems. He then decided to secure foreign funding using the vast petroleum reserves of Mexico. Finally, commercial bankers were lining up to lend Mexico money in an attempt to reinvest billions of petrodollars that Arab governments had placed on ...Download file to see next pagesRead More
Comments (0)
Click to create a comment
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Regionalism in Latin America
Regionalism has revived and changed dramatically in the 21st century following the decline in theory and practice of the globalization in 1970s. Currently, it seems to have overtaken the emerging potent of globalization, especially in the Latin America. Regionalism is a component of globalization but it may be a cause of threat to the globalization too.
10 Pages(2500 words)Essay
Medical school Application essay
Due to accidents I gained another point of view on life, from both sides, the one of inflictor and the one of affected person, having a contradictive experience, such as driving my mother’s car and hitting another driver in his car at the same time. It’s because of this danger, that my mentality started changing and I started thinking in a different way.
2 Pages(500 words)Admission/Application Essay
Debt Crisis
Ultimately, cheap credit was easily available to banks for borrowing. Details of the Crisis Shadow Banking comprises of financial institutions such as investment banks which do not come under the category of commercial banks and hence were not regulated by the US federal government.
4 Pages(1000 words)Essay
The 1980s Crisis
Introduction: The 1980’s Crisis The crisis in the 1980’s was a financial crisis in the Latin American countries where they came to a point that could no longer repay their foreign debts as the total amount that is payable to their loan exceeded their capacity to pay.
8 Pages(2000 words)Essay
Why was the Washington consensus irresistible in Latin America
Name Date Professor’s Name Course Section/# Title: The Washington Consensus: An Analytical Discussion and Review of Why This Particular Approach was Readily Integrated within Latin America Introduction: The international political economy is a complex study which seeks to understand the means by which economic decisions and agreements from various stakeholders are able to impact upon the way in which economic growth, stabilization, recession, depression, integration, and a litany of other factors come to take place within a given nation or between a groups of stakeholders.
13 Pages(3250 words)Essay
Why was the Washington consensus irresistible in Latin America
Why the Washington Consensus Was Irresistible in Latin America Customer Inserts His/Her Name Grade Course Tutor’s Name (18 December 2013) Outline Outline 2 Introduction 3 Why the consensus was irresistible to Latin America 3 Loss making in state enterprises 3 Distortion of allocation of resources 5 ISI programs 6 Low foreign investment 7 The debt crisis 9 The role of the IMF and Bretton Woods Institutions 11 Effects of globalisation 16 Conclusion 17 References 19 Why the Washington Consensus Was Irresistible in Latin America Introduction The Washington consensus was a series of neoliberal policies that arose from the US and diffused across several developing nations including Latin American
15 Pages(3750 words)Essay
International Debt Crisis
The topic of "International Debt Crisis" has raised risen a lot of discussions in recent decades.; Tthe cause of the crisis was complex; andit rooted in the 1970s and 1980s which when the Organization of Petroleum Exporting Countries (OPEC) quadrupled the price of oil.
5 Pages(1250 words)Essay
The International Debt Crisis

The author states that commercial borrowing increased sharply and was one of the main reasons behind the huge debt accumulation. The private sector was partly or mostly responsible for the debt crisis because of their extensive borrowing of short-term loans with higher interest rates from foreign countries and banks.

5 Pages(1250 words)Essay
The factors responsible for Mexican debt crisis in the 1980s
This was day that Mexico’s Secretary of Finance flew to Washington, DC to announce that Mexico was in danger of defaulting because its foreign debt was unmanageable. Some external debts were falling due yet Mexico could not raise a loan
11 Pages(2750 words)Essay
Some the schemes used to solve Latin America Debt Crisis of the 1980s can be use to the current EU Crisis
The economists’ Baker and Brady devised the strategies on behalf of the US treasury (Brauch 50). The schemes devised are effective in solving the crisis that is facing the European Union. This is because the challenges of the EU are
3 Pages(750 words)Essay
Let us find you another Essay on topic 1980s Latin America Debt Crisis for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us