Mexican Debt Crisis of the 1980s & Latin America

A debt crisis developed in the 1980s that engulfed many of the so-called developing countries. Banks in North America and Western Europe kept pushing surplus funds at high rates of interest to governments that primarily were pursuing economic populist policies. Within a few years, it became impossible for the debtor countries to make even the interest payments on the huge debt loads.

In August 1982, Mexico declared that it could no longer service its external debt. MexicoÆs admission marked the official beginning of the ôThird World Debt Crisisö and Latin AmericaÆs so-called ôlost decadeö. Chile, which had implemented so-called free market reforms in the 1970s, was not spared the misery that hit the Latin American countries (such as Brazil and Argentina) that had retained statist policies.

Transfers became a major headache. Much of the external debt loads afflicting the debtor countries was owed by private companies. In many Latin American countries, the private debt was transferred to the government, which, in effect, meant it was transferred to the ordinary citizens who would pay the cost (either through taxation or through devalued savings). Hyperinflation also resulted in a transfer of wealth those people

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h the Austral Plan in mid-1985, successive Argentine governments have implemented several economic stabilization plans. Each of the plans achieved some initial successes, but eventually failed. The plans successively became more austere in character, and, thus, tend to be highly unpopular with the general public. High rates of inflation and high governmental budget deficits had long characterized the Argentinean economy prior to the implementation of the Austral Plan. Nominal interest rates were exceptionally high, as they tended to track the inflation rate. Real interest rates were also high, as a consequence of governmental demands for capital to finance budget deficits. The Austral Plans were designed to correct ArgentinaÆs major and long-standing economic problems. In 1988, the Argentinean economic stabilization program began to come apart. The economic condition of the country deteriorated rapidly, and was instrumental in the election of Carlos Menem. Brazil also had its problems. Prior to the implementation of a new economic stabilization plan in Brazil in 1986, inflation had soared to an annual rate of 500.4 percent. Over the years, Brazil has implemented several plans and actions intended to solve its on-g
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Some common words found in the essay are:
Latin American, Plan Brazil, Convertibility Law, Argentina Brazil, Hugh Chavez, Lourdes Sola, Federal Reserve, Lula Brazil, Economic Populist, United Argentina, exchange rate, debt crisis, latin american, economic populism, latin american countries, external debt, american countries, economic restructuring, economic populist, stabilization plans, risks associated, governmental budget deficits, currency exchange rate, cruzado plan brazil, maintaining price stability,
Approximate Word count = 2235
Approximate Pages = 9 (250 words per page)

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