ter," says Wesson, "is the foreign debt." Wesson charts the growth of the debt from the 1970s onward. In the earlier years, Third World countries borrowed heavily so as to finance rapid and extensive economic growth and development. But in the latter years, i.e., the current period, debt service obligations have become largely impossible to pay.
As borrowing swelled in the latter 1970 it gave a flush of prosperity, which showed up in glowing statistics but was rather superficial; and loans led to excess imports, inflation, speculation, corruption, fiscal irresponsibility. But as the 1970s came to an end, the supply of loan money began to shrink and interest rates rose, while commodity prices fell as the industrial countries moved toward recession. Payments due piled up, the more rapidly as loans were generally for rather short terms. It became increasingly necessary to borrow to make payments. From 1981 Latin America began suffering a net capital outflow, reaching about $30 billion in 1985 and continuing around that level until it has recently fallen because of nonpayment.
Corruption, political instability or incompetence, and persistent problems of poverty as against fabulous wealth among social and political elites is a commonplace of Latin American commentary, and the debt burden has increased, not decreased the problem. "The ability of Latin American governments to collect taxes has always been limited, deficits have been chronic, and inflation has long been severe," says Wesson. According to Wiarda, meanwhile, "most analysts agree by now that the debt cannot and will not ever be paid." With special emphasis on the Latin American picture, Wiarda continues,
The sheer size of the debt is staggering: about $450 billion, larger than the (old) Pentagon budget by another 50%! About $45 billion is added to the debt each year in the form of new interest and loans, although with the recent steps toward "debt forgiveness" the figures...