Latin American Crisis of the 1980s “The Lost Decade”. Econ. 462 Nov. 24, 2009 Edward Kulow John Magallanes Yojasi Lomas. Conditions Prior to the Crisis. History of L.A. Debt Crisis. Post WWII Under Bretton Woods Agreement (1944) - International Monetary Fund (IMF) Economic Policy
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Nov. 24, 2009
- International Monetary Fund (IMF)
- Import Substitution Industrialization Model
Private Financing by Commercial Banks vs. IMF
- 33% of all financing by 1973
-~50% of all financing by 1976
- 70% of all financing by 1980
- Petro – Dollar
- Petro – Dollar
- Inflation -U.S. Interest Rates
Between 1973-1983 external debt rose from $48 billion to about $350 billion (see graph)
(about 58% of Gross Regional Product)
- Mexican Finance Minister Jesus Silva-Herzog
- $12 Billion in 1975
- $66 Billion by 1983
- Lending Freezes
- All loans due immediately!
- Domino Effect by Oct. 1983 (16 Nations)
- Big 4 (Mexico, Brazil, Venezuela, Argentina)
owe about $176 Billion (50% of debt)
- $37/$176 Billion owed to 8 largest U.S. banks
(representing 147% of capital reserves)
- Permitted countries to pay interests only!
- Transfer of loan to another bank or 3rd party
- Extension of terms or payment schedules
- Brady Plan
- 1989 Nicholas Brady U.S. Sec. of Treasury
- Converted loans into bonds backed by U.S.
T-bonds (available to general public)
(from Import Substitution Industrialization Policy to Export Oriented Trade Policy)