The Growth of External Debts in Latin America Between 1960 and 1990

In: Business and Management

Submitted By coolroc
Words 480
Pages 2
Many factors including: the cost of imported capital goods, the neglect of exports, government investment based on foreign loans, the use of petrodollars, and loan pushers, contributed to the growth of external debts in Latin America between 1960 and 1990. Additionally, floating and rising interest rates, and the rise of official corruption only exacerbated the debt crisis they were facing. Latin America had an inward-looking import substitution industrialization policy, neglecting exports, which led to inferior substitutes that were more expensive than products in the global market. In addition, the agrarian structure in Latin America and their under-utilization of resources led to higher manufacturing costs, large scale migration to urban areas, and urban unemployment. The build-up of inefficiency resulting from import substitution industrialization, as well as the problems caused by the agrarian structure in Latin America increased the appeal of looking outward for assistance. By the mid 1970s, the Organization of the Petroleum Exporting Countries had successfully organized their control on exports which led to a phenomenal rise in the price of crude oil. Oil shocks such as the one experienced in 1973 when OPEC quadrupled the price of crude oil meant that Latin America would need more money to satisfy its consumption. On the other hand, the OPEC countries had an abundance of petrodollars that they sought to invest. This lead to loan pushing, a technique used by international banks to sell loans to the Latin American and other governments in much the same way that a car salesman would sell a car; it was an eager sale. The banks took an aggressive and systematic approach to selling loans to Latin America with the belief that a government would never default on its loans. This ease in which to get loans, coupled with the intensifying need for them…...

Similar Documents

The Effect of External Public Debt in Developing Countries on Economic Growth - an Empirical Study on Argentina

...would discuss the effect of external debt on economic growth with four areas, the effect on private local investment, foreign direct investment, government expenditure and export growth. Three theoretical models are adopted, namely Debt Overhang Theory, Liquidity Constraint Hypothesis and Crowding-out Effect respectively. Two policy implications on debt relief and debt restructuring are analyzed. And finally, the paper will include the discussion on the necessary tradeoff with inflation and contractionary fiscal budgeting after debt servicing. KEY Words: Heavily In-debt Poor Countries (HIPC), External Debt/Foreign Debt) Sustainability, Debt-GNI Ratio, Debt-Export Ratio, Debt Service Ratio Word count (excluding table of content, tables and reference): 2974 Topic: The Effect of External Public Debt in Developing Countries on Economic Growth - An Empirical Study on Argentina Abstract P.1 1. Introduction P.3 1.1 Literature Review P.4 1.2 Structure and Magnitude of External Debt of Argentina P.4 1.3 Theoretical Relationship between External Debt and Economic Growth P.6 1.4 Research Question(s) and Framework P.7 2. Data Collection and Empirical Analysis P.7 2.1 The effect of external public debt on: ......

Words: 3688 - Pages: 15

Latin America

...| 2012 | | Core 8 [FOreign Policy in latin America](Paper taken to writing clinic: hannah) | | Every country’s foreign policy consists of self-interest strategies chosen by the state to safeguard its national interests and to achieve its goals within international relations. Its goal is to interact with other countries and non-state actors. Foreign policies are designed by the government through high-level decision making processes. The US has been involved in foreign affairs with Latin America for some time now. How are the US and Latin America with Foreign Affairs? Are Latin Americans’ Intellectual Properties being robbed? Are Latin American countries being restored and growing? There are many other questions to ask regarding the foreign policy issues concerning Latin America. One huge problem with Foreign Affairs/Policies is the Drug Trafficking from Latin America into the United States. Cuba is not necessarily a drug producing country but it is a transit one. In 1998 nearly 7.2 metric tons of cocaine were seized in Colombia on its way to Cuba. Also, there was a 50% increase in drug over flight, which includes people carrying drugs as mules on planes and the dropping of drugs into American water from Cuban planes heading to the States (House Government Reform Committee) Castro had once said that he did not want the United States interfering with Cuban drug relations. Most American government officials believed him to be the main cause of drug......

Words: 4057 - Pages: 17

Latin America

...LATIN MUSICAL INSTRUMENTS LATIN MUSICAL INSTRUMENTS WIND INSTRUMENTS WIND INSTRUMENTS STRING INSTRUMENTS STRING INSTRUMENTS PERCUSSION INSTRUMENTS PERCUSSION INSTRUMENTS LATIN -AMERICAN MUSIC LATIN -AMERICAN MUSIC LATIN AMERICAN MUSICAL STYLES LATIN AMERICAN MUSICAL STYLES Tango Tango During the "belle epoque" (1890s), the working class of the "Boca" of Buenos Aires (Argentina) invented a new rhythm, the tango. Tan-go was the name given to the drums of the African slaves, and the music was influenced by both the Cuban habanera and the local milonga. The choreography originally devised in the brothels to mimick the obscene and violent relationship between the prostitute, her pimp and a male rival eventually turned into a dance and a style of music of a pessimistic mood, permeated by a fatalistic sense of an unavoidable destiny, a music of sorrow enhanced by the melancholy sound of the bandoneon. When lyrics were added, they drew from "lunfardo", the lingo of the underworld (the term originally meant "thief"). Tango was embraced enthusiastically in Europe and landed in the USA in the 1910s. The Viennese waltz and the Polka had been the first dances to employ the close contact between a male and a female. The tango pushed the envelope in an even more erotic direction. One of the earliest hits of tango was pianist Enrique Saborido's Yo Soy La Morocha (1906). By that time, tango had already established itself as a major genre among young Argentinians.......

Words: 1370 - Pages: 6

Standard Bank Strategy in Latin America

...  INTERNATIONAL SCHOOL OF  MANAGEMENT        Ph.D. Professional Assessment  Evaluation I    Standard Bank´s expansion strategy  in Latin America          Andrea Valenzuela Rivas    Abstract  After the 2008 crisis, Standard Bank needed a strategy to continue  with  its  grow  being  truthful  to  their  emerging  market  presence  vision.  This  paper  analyzes  the  opportunity  for  the  bank  in  a  developing region, Latin America; considering the opportunities and  challenges its countries face.    Emerging  markets  have  institutional  voids  that  need  to  be  filled,  Latin America is no exception; it needs expert companies to provide  value added services that bring customers and suppliers closer. For  Standard  Bank  is  crucial  to  identify  itself  as  an  aggregator  and  distributor,  and  provide  innovative  distribution  and  product  development to improve its chances of success in Latin America.    I. ‐ Introduction  The 150 years history of Standard Bank has proven its vision to be a major competitive financial  organization in emerging markets throughout the world. The bank is based in Johannesburg, South  Africa and it has representation in 17 Sub Saharan countries and also in 16 countries that have an  emerging market view (Standard Bank, 2009).    Barriers for trade and investment have been coming down in the last 25 year and the volume  for  exports  and  investments  have  grown,  forming  a  single,  interdependent  and  global  economic ......

Words: 4454 - Pages: 18

Inequality in Latin America

...Although Latin America has faced many social, political, and economic issues within the last three centuries, inequality remains one of the most important, historical, and omnipresent aspects of the region’s culture. As Europeans took over Latin America during the time of colonization, they implemented many elitist social structures that have held strong and are evident today (Harris). Income inequality is the most visible and greatest disparity that the region faces; yet inequality between gender, ethnicities, and education remain strong and significant problems with a necessity for improvement. Inequality of wealth and disparity of power and influence are Latin American’s greatest curses and are at the root of many of the developmental, social, criminal, and political problems that continue to plague the region (De Ferranti). Since inequality has pervaded into every feature of Latin American society, it is important to measure inequality accurately in order to obstruct the causes of the discrimination and prevent new ones from beginning. The Gini Coefficient is an effective way that people indicate the inequality of a country by measuring a frequency distribution of income or wealth. Using the "Gini Index" of inequality in the distribution of income and consumption, the researchers found that Latin America and the Caribbean, from the 1970s through the 1990s, measured nearly 10 points more unequal than Asia, 17.5 points more unequal than the 30 countries in the......

Words: 3191 - Pages: 13

Latin America

...Latin America Midterm I. Brief Identifications: 1. Indio’s- the Pre-Columbian inhabitants of North and South America. Also known as Pueblos, they are Spanish speakers and usually indulge in hunting and gathering as their tradition. 2. Creoles- an American-born Spaniard in Spanish colonies, descended from the original French settlers of the southern United States, especially Louisiana. II. General Identifications: 1. Conquistadors- A conqueror, the 16-century Spanish soldiers who defeated Indian civilizations of Central America. 2. Sapa Inca- the Inca was the powerful emperor and leader of the Inca people, which basically means emperor. 3. Cannibal Law 1503- In 1503 Queen Isabella of Spain, created a law that prohibited the arrest or capture of her new children stating further that, no harm or evil was permitted against their person or possessions. 4. Royal Fifth- An old royal tax that reserves to monarch for metals acquired by subjects as treasure or extracted mining, instituted in Muslim states. III. Specific Identifications: 1. Hernan Cortes- Spanish conquistador, who defeated the Aztecs and conquered Mexico, led an expedition and brought large portions of mainland Mexico. 2. Hernando De Soto- Spanish explorer and conquistador while leading the first European expedition into territory of the modern-day United State. 3. Montezuma II- Last Aztec emperor in Mexico and was overthrown and killed by Hernando Cortés. 4. Francisco...

Words: 601 - Pages: 3

Agricultural Growth and Development in Latin America

...An Essay on Agricultural Growth and Development In Latin America Ismael Reyes Jr. ismaelreyes001@mail.fresnostate.edu 105336757 Econ 114: Economic Development of Poor Nations Dr. Antonio Avalos December 2, 2013 MWF 11:00am- 11:50am Fall 2013 It is said that by the time we reach the year 2050, the United Nations estimates the population to have reach 9 billion people globally. Causing the demand for food to double, with much of that demand in developing countries such as Latin America.  The development of the agricultural sector in Latin America was been going on since its been colonized, with most of its economy being largely based off of agriculture. So what is stopping Latin America from becoming a food superpower? Although with agricultural production continuing to rise around the world, Latin America’s progression has ben uneven having a lack of appropriate technological innovation and government regulation. Latin America has always have a problem with its timing. After independence became a new trend in Latin America, these countries were left to fend for themselves and develop their own economic strategies. Unfortunately, the development of these strategies took too long and happened too late for them to be able to follow the international trends in trade. Since independence, there have been three phases of economic development in Latin America: export-led growth, inward-looking development, and the promotion of nontraditional exports. During......

Words: 368 - Pages: 2

Lessons Learned from Latin America and European Debt Crisis

...Does history really repeat itself? After reading the article on “Surviving A Debt Crisis: 5 Lessons for Europe from Latin America” by Samuel George from Bertelsmann Foundation, it seems very convincing that European leaders may have an opportunities to learn from the Latin American on how to handle and survive a debt crisis. The fundamental causes of these two debt crisis are highly similar. When the global economy was in good shape, massive lending was made to countries with unstable macroeconomic histories. Investors saw the lucrative opportunities to achieve high returns in some low-credibility nations but decided to take risks since there were no signs indicating any sort of recession. However, the second oil shock in 1979 led to spike in oil prices. As a result, the US went into recession, which drove commodities prices down significantly. Latin America countries import oil and export commodities, a deteriorated international trade situation slowed down their GDP growth. They were not able to pay for their loans which associated with floating interest rates. In 21st century European, the global financial crisis trigged a series of events. The Greek government had to spend heavily through debt to subsidize shipping and tourism industries which were harmed by the business cycle. Real-estate bubble in Spain and Ireland forced their governments to bailout private banks via national debts. It is, therefore, clear that in "sunny days", countries should be......

Words: 1078 - Pages: 5

Effect of External Debts on Economic Growth

...Södertörns högskola | Department of economics Magisteruppsats 30 hp | Vårterminen 2013 The Effect of External Debt On Economic growth – A panel data analysis on the relationship between external debt and economic growth. Av: Dereje Abera Ejigayehu Handledare: Joakim persson Handledare: [Handledarens namn (teckenstorlek: 12p)] Abstract The impact of external debt on economic growth is a debatable issue between scholars since the onset of the debt crisis in 1980’s. This thesis examines whether external debt affects the economic growth of selected heavily indebted poor African countries through the debt overhang and debt crowding out effect. This is carried out by using data for eight heavily indebted poor African countries between 1991 to 2010.The result from estimation shows that external debt affects economic growth by the debt crowding out effect rather than debt overhang. Moreover, in an attempt to mark out debt servicing history, the thesis found the selected countries are not paying (servicing) more than 95% of their accumulated debt. Key Words: External Debt, Debt overhang, Debt crowding out, debt servicing and Table of Contents CHAPTER ONE .....................................................................................................................................1 INTRODUCTION ..................................................................................................................................1 1.1 Background of the study.............

Words: 12805 - Pages: 52

Debt and Gdp Growth

...o d Regime-switching effects of debt on real GDP per capita the case of Latin American and Caribbean countries Tsangyao Chang ⁎, Gengnan Chiang Department of Finance, Feng Chia University, Taichung, Taiwan a r t i c l e i n f o a b s t r a c t In this paper, we try to investigate how the debt and real GDP per capita relationship varies with indebtedness levels and other country characteristics in a balanced panel of 21 developing Latin American and Caribbean countries over the period 1992–2006. The empirical results indicate that there exist two threshold values of 32.88% and 55.89%. The latter is lower than the Maastricht criterion and Stability and Growth Pact of a total external Debt per GDP ratio at 60% in the OECD countries. Both thresholds divide our panel into three regimes. In the middle (stimulus) regime, the Debt per GDP ratio has a positive impact on real GDP per capita, which is consistent with the stimulus view (Eisner, 1984). However, the impact becomes negative and consistent with the crowding-out view (Friedman, 1977, 1985) in the left and right (crowding-out) regimes. Based on our findings, we find no supportive evidence for Ricardian view (Barro, 1989). Therefore, our empirical results have important implications for fiscal policymakers in these Latin American and Caribbean countries. © 2011 Elsevier B.V. All rights reserved. Article history: Accepted 13 June 2011 JEL classification: C4 E6 H3 H6 Keywords: Debt per GDP ratio Real GDP per capita......

Words: 4689 - Pages: 19

Latin America

...Latin America is more than just an exotic travel destination for Americans or any travelers from around the world for that matter. Though Latin America is filled with several breath-taking wonders of the world; including their crystal clear waters and beautiful sandy white beaches, tropical rain forests, and ancient historical landmarks. Latin America’s tranquil atmosphere should not be underestimated as the little more than underdeveloped sibling. After examining the history, politics, and economic stand point of the countries in Latin America, they have many similarities with the United States and several differences that should be taken into consideration when dealing with United States foreign policy with Latin American countries. What is Latin America? Where is Latin America? What countries are considered to be a part of Latin American? These are the initial questions a person thinks about when Latin America comes into a discussion. Around the world people will have their own ideas and stereotypes about Latin America, but here are the facts. The term Latin America is used to describe the countries in the sub regions of the Americas that were once the old colonies of European nations. The reference to Latin corresponds to the fact that as product of the colonization from the European nations the languages now spoken in these countries are Latin based. The languages spoken are derived from the so called “Romance tongues” of Spain, Portugal, and France. Latin America...

Words: 2616 - Pages: 11

Gdp Growth in Latin America

...Research project: The relationship between: the annual growth rate of GDP per capita and the public expenditure in Latin America. F29 F33 F43 O19 My goal for this research project is to examine the relationships that exists in between the annual growth rate per capita and public expenditure in Latin America. What I wanted to see is if a higher growth rate of GDP meant that a higher percentage was spent in the public sector. Data was gathered from the ECLAC, The World Bank and also the International Monetary Fund. Introduction The reason I was very attracted in this research is because as someone born in South America and lately Latin America has been doing better than before, and visiting South America the past year I have seen how infrastructure has improved lately so I was very interested in seeing how big of a role public expenditure plays in countries that are developing. Expenditure on welfare, health and education are an essential part of what governments do to enhance the quality of life of their citizens and the human capital base of their societies. My focus on public and social expenditure in Latin America is mainly guided by the concern of how Governments utilizes existing policies and seeing how these theories and policies have helped increase Latin America’s GDP. In Latin America we find a great variation in social policy regimes; ranging from Uruguay and Argentina, where a large majority of the population is covered by social policy and has......

Words: 2169 - Pages: 9

Latin America Essays

...What is the current state of Latin American international relations, particularly relations with the United States? What is unique or “new” about the present situation? How much have we seen before? Make sure to discuss both economic and geo-political/security dimensions, and make reference to at least two historical periods, whether identified by particular doctrines, presidencies, or regimes of international relations. Current state of Latin Ameican international relations with the US— * Emerging independence from US—US is no longer the immediate partner of choice. Regional resentment of US perceived self-serving exercises of power * Economics: * Increased intra-regional economic integration—ALBA, UNOSUR * Expanding economic partners outside the hemisphere—China * Security: * States worry about subordination to the “gringos.” Address problems themselves or with immediate neighbors, rely less on US— * LatinAmerican presidents joined together to defuse tension between Colombia and Ecuador/Venezuela after Colombia’s March 2008 raid inside Ecuador * South American Defense Council (2008)—aimed at institutionalizing and coordinating “defense and security policies in the region while preventing and mediating conflicts within South America * United States: * Economic dependence on the region on the rise— * 50% of US energy imports (largest share accounted for by any region) * 32% of all US FDI ...

Words: 6085 - Pages: 25

What Are the Determinants of Financial Access in Latin America

...What are the Determinants of Financial Access in Latin America? Financial systems that are well-functioning help improve the problems created by information and transaction costs and help allocate resources across space and time. According to the author, financial development affects capital accumulation and technological innovation through at least five channels: by facilitating risk management, by reducing the costs of acquiring information about new investment opportunities, by simplifying corporate control over managers, by mobilizing savings, and by facilitating exchanges and thus promoting specialization and innovation. The author discusses that another financial indicator that suggests the region has a significant progress to make is the interest rate spread which is the margin between rates paid on liabilities and those received on assets. This chapter provides new evidence on the extent of firms’ access to financial services in the Latin America and Caribbean region and the relationships between access and selected policy-relevant variables. Moreover, the chapter explores the determinants of access by firms in the Enterprise Surveys sample. Also, the chapter studies the relationship between quality of courts and access to financial services. According to the Enterprise Surveys, the analysis of access focuses on the following six principal measures: First, Checking, which is an indicator variable that equals 1 if the enterprise has a checking account. Second,......

Words: 3707 - Pages: 15

Latin America Monitor

...moderation in economic growth will put the macroeconomic imbalances that both of these economies have accumulated over the years under significant stress. An implosion of these imbalances would be the first major economic crisis in the region since Argentina's default in 2002, and could well cause investors to question many of the economic improvements Latin American sovereigns have achieved over the past decade. A Slowdown Of Economic Growth We believe the era of record gains from commodity exports and expansionary policy is now over for Vencontinued on page 2... Peru: Mining Sector Looking Promising In 2012 BMI View: While Peruvian mineral output declined in 2011, we expect huge investments into mining projects especially for copper to spur growth in 2012. A report by Peru’s Ministry of Energy and Mines shows January through November 2011 mineral production fell across all base and precious metals. That said, we anticipate strong growth in copper production in 2012 as major producers bring expansion projects online. page 6 Ecuador: Correa Tightens His Grip BMI View: President Rafael Correa’s chances of winning next year’s presidential ballot should he stand for re-election have been boosted by recent developments, which have seen the executive increase its control over the country’s political institutions. We view this as negative for Ecuador’s long-term democratic credentials. page 7 Venezuela: Strong Banking Sector Growth Belies The......

Words: 8831 - Pages: 36

1x08 Mob Psycho 100 | Snowy Road (Movie) | EL TRIUNFO DEL ESPIRITU PELICULA CRISTIANA