External Debt Repayment Policy

South Answana is a Third World country with one of the world's largest external debts. The government of that country, through a combination of external economic factors, internal economic mismanagement, and apparent fraud by high government officials has consistently been unable to meet both principal and interest payments on a substantial portion of the country's external debt.

The leader of South Answana, a virtual dictator who serves with the blessing of that country's military, is strongly considering the adoption of a policy which would suspend payment of principal and interest on major portions of the country's external debt. The importance of such an action is greater than the direct effects of a South Answanian default, because of the stature among other Third World countries of South Answana's political leader. The fear in western countries, particularly the United States, that such an action

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oring for some of the economic benefits enjoyed by the residents of the developed countries. At that same time, commercial banks in the developed countries were awash in money. The successful strategies of the Organization of Petroleum Exporting Countries (OPEC) in the 1970s has resulted in the transfer of enormous volumes of money from the developed countries to the OPEC countries. The OPEC countries required safe havens for their newly acquired capital, and banks in the developed countries provided those havens. The banks in the developed countries, after acquiring the OPEC money, needed borrowers for massive amounts of capital. The union of OPEC money and LDCs, with western banks as marriage broker, thus, appeared to be heavenly sent. The banks, in their eagerness to loan money, made the most optimistic assumptions possible with respect to sovereign risk, with the result that (1) they loaned too much to risky borrowers, and (2) many countries borrowed too much. OPEC, all the while, was relatively safe, because (1) the western banks were responsible for OPEC money invested with them, and (2) LDC obligations were to the western banks. In their eagerness to earn a fee, the western banks, as marriage broker, assumed respons
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Some common words found in the essay are:
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Approximate Word count = 2111
Approximate Pages = 8 (250 words per page)

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