Latin American debt crisis
When Latin American debt crisis (also Latin America crisis ) is defined as the debt crisis of Latin American countries, which took place mainly in the 1980s, but began in some countries already in the 1970s. The phase is often referred to as the "lost decade" because the countries of Latin America reached a point during this period where their external debt was far higher than the economic strength of their economies and they had thus survived beyond their economic means. The consequence was the suspension of debt servicing to foreign creditors . After the collapse of the fixed world monetary system at Bretton Woods , the Latin American crisis was the first major international financial crisis .
Origins
In the 1960s and 1970s, many Latin American countries, particularly Brazil , Argentina and Mexico , borrowed large sums of money from international creditors to advance their industrialization . At this point in time, these economies were showing excellent growth rates and good prospects, so that creditors were more and more willing to provide new loans . Between 1975 and 1982 the total claims of commercial banks on Latin America increased by 20.4% annually. This led to a quadrupling of the Latin American foreign debt of 75 billion US dollars (1975) to more than 315 billion US dollars in 1983, thus 50% of the gross domestic product of the entire region. Annual debt servicing (i.e., principal and interest payments ) rose even faster, reaching $ 66 billion in 1982 (from just $ 12 billion in 1975).
Beginning of the debt crisis and effects
When the world economy fell into recession in the 1970s and 1980s and the price of oil began to skyrocket (see oil crisis ), this marked a turning point for many countries in the Latin American region. Many developing countries suddenly found themselves in an extreme liquidity shortage because they ran into financial difficulties due to rising raw material prices. Oil-exporting countries, on the other hand, were flooded with funds due to the increased oil prices and invested the money in international banks, which in turn invested it in the form of loans in Latin America (so-called petrodollar recycling ). As a result , the foreign debts of these countries accumulated dangerously over the years. The debt crisis then began when the international capital markets realized that Latin America would no longer be able to repay its debts.
This happened in August 1982 when Mexico's finance minister, Jesus Silva-Herzog, publicly announced that Mexico would cease servicing its debts and declare partial national bankruptcy . In the wake of Mexico's moratorium on payments , most commercial banks either sharply reduced their Latin American exposure or at least stopped granting new loans. However, because many of the Latin American receivables were short-term loans, the crisis only intensified when the banks refused to refinance them (prolongation) and the loans were therefore made due. Suddenly, billions of billions of loans that were otherwise extended at any time were due and payable immediately - a snowball effect .
As a result of the crisis, the development strategy of structuralist economic policy was abandoned and for a time an economic policy based on the Washington consensus demanded by the International Monetary Fund and the World Bank was pursued. This was later replaced by a neo-structuralist economic policy .
The massive outflow of capital that began ( capital exports mainly to the United States ) led to the Latin American currencies depreciating sharply and thus real interest rates and inflation rising sharply. The real growth rates of the gross national income were in the period between 1980 and 1985 at only 2.3 percent per year; per capita there was even a decrease of -9 percent.
The Brady Bonds were created at the end of the 1980s to settle the distressed bonds of these countries .
The debt crisis in Latin America is one of the essential exogenous elements that helped bring down authoritarianism and dictatorships in the region, including the military regime in Brazil and the bureaucratic-authoritarian regime in Argentina .
supporting documents
- ^ Fernando Ignacio Leiva: Toward a Critique of Latin American Neostructuralism . In: Latin American Politics and Society . tape 50 , no. 4 , December 2008, p. 1–25 , doi : 10.1111 / j.1548-2456.2008.00028.x .