The great Latin America debt crisis: a decade of asymmetric adjustment

DEVLIN, ROBERT; FFRENCH-DAVIS, RICARDO

doi:10.1590/0101-31571995-0838

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Brazilian Journal of Political Economy

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Articles • Brazil. J. Polit. Econ. 15 (3) • Jul-Sep 1995 • https://doi.org/10.1590/0101-31571995-0838 copy

The great Latin America debt crisis: a decade of asymmetric adjustment

A grande crise da dívida latino-americana: uma década de ajustes assimétricos

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

Latin America has entered a new phase of abundance of capital inflows, bearing some resemblance to the episode of 70’s. In this paper a review is made of the origins of indebtment in the 70’s, of the emergence of the crisis in the early 80’s, and of the management by creditors and debtors during that decade. Some lessons are derived about the working of international financial markets and policy implications.

KEYWORDS:
Capital flows; currency crisis; stabilization; debt crisis

	1978	1980	1981	1982	1983	1984	1985	1986	1987	1988	1989	1990	1991	1992	1993^b

Latin America and the Caribbean	155 022	231 019	287 887	331 470	356 231	372 790	383 990	400 918	427 445	419 553	422 749	439 094	456 686	468 067	486 965

Oil-exporting countries	69 138	104 126	134 101	150 772	164 395	168 593	173 054	179 262	186 217	186 095	180 749	190 465	204 978	206 220	219 290
Bolívia^c	1 778	2 340	2 653	2 803	3 176	3 208	3 294	3 536	4 162	4 066	3 492	3 779	3 628	3 774	3 900
Colombia	4 060	6 805	8 518	10 269	11 458	12 350	14 063	15 950	17 047	17 359	17 007	17 556	16 975	16 779	17 120
Ecuador	2 975	4 167	5 272	5 365	7 381	7 596	8 111	9 063	10 320	10 581	11 322	11 856	12 271	12 122	12 635
Mexico^d	33 946	50 700	74 900	87 600	93 800	96 700	97 800	100 500	102 400	100 900	95 100	101 900	114 900	114 000	125 000
Peru	9 324	9 595	9 606	11 465	12 445	13 338	13 721	14 477	15 373	16 493	18 536	19 762	20 735	21 333	21 685
Trinidad and Tobago	487	911	1 052	1 220	1 423	1 539	1 763	1 898	2 082	2 012	2 097	2 520	2 433	2 212	1 950
Venezuela^e	16 568	29 608	32 100	32 050	34 712	33 862	34 302	33 838	34 833	34 684	33 195	33 092	34 036	36 000	37 000

Non-oil exporting countries	85 884	126 893	153 786	180 698	191 836	204 197	210 936	221 656	241 228	233 458	242 000	248 629	251 708	261 847	267 675

South America	75 360	112 774	136 389	159 853	168 379	178 543	182 835	191 931	209 825	201 012	206 752	212 611	215 876	225 292	231 115
Argentina	12 496	27 162	35 671	43 634	45 069	46 191	49 326	51 422	58 324	58 473	63 314	60 973	63 700	65 000	68 000
Brazil^f	53 614	70 957	80 373	92 812	98 269	105 254	105 126	111 045	121174	113 469	115 096	122 200	123 910	130 200	131 700
Chile	7 011	11 207	15 591	17 159	18 037	19 659	20 403	20 829	20 660	18 960	17 520	18 576	17 371	18 926	19 915
Guyana	330	449	694	807	963	1 114	1 308	1 542	1 736	1 778	1 801	1 784	2 063	2 190	2 250
Paraguay	669	861	948	1 203	1 469	1 654	1 772	1 855	2 043	2 002	2 027	1 695	1 666	1 279	1 350
Uruguay	1 240	2 138	3 112	4 238	4 572	4 671	4 900	5 238	5 888	6 330	6 994	7 383	7 166	7 697	7 900

Central America and the Caribbean	10 524	14 119	17 397	20 845	23 457	25 654	28 101	29 725	31 403	32 446	35 248	36 018	35 832	36 555	36 560
Costa Rica	1 870	2 209	2 687	3 188	3 532	3 925	4 140	4 079	4 384	4 470	4 488	3 930	4 016	4 022	4 200
EI Salvador	986	1 176	1 608	1 710	1 890	1 949	1 980	1 928	1 880	1 913	2 169	2 226	2 216	2 338	2 015
Guatemala	821	1 053	1 385	1 839	2 156	2 495	2 694	2 674	2 700	2 599	2 731	2 602	2 561	2 582	2 480
Haiti^c	210	290	372	410	551	607	600	696	752	778	803	861	826	845	860
Honduras	980	1 388	1 588	1 986	2 162	2 392	3 034	3 366	3 773	3 810	3 374	3 547	3 174	3 538	3 595
Jamaica	1 200	1 734	2 212	2 690	2 920	3 207	3 355	3 575	4 014	4 002	4 038	4 152	4 456	4 450	4 500
Nicaragua^c	1 251	1 825	2 566	3 139	3 788	4 362	4 936	5 760	6 270	7 220	9 741	10 504	10 312	10 806	10 910
Panama	1 875	2 271	2 430	2 917	3 145	3 181	3 642	3 835	3 731	3 771	3 814	3 714	3 699	3 548	3 500
Dominican Republic	1 331	2 173	2 549	2 966	3 313	3 536	3 720	3 812	3 899	3 883	4 090	4 482	4 572	4 426	4 500

	1973	1977	1980	1981	1982
			Total
Latin America	42.8	104.2	204.3	241.5	260.7
LDCs	108.2	238.8	444.6	520.6	574.4
			Banking
Latin America	25.7	72.9	160.1	194.1	213.4
LDCs	42.5	114.8	257.1	304.2	337.6

														Averages
	1980	1981	1982	1983	1984	1985	1986	1987	1988	1989	1990	1991	1992	1980-81	1983-90	1991-92
1. GDP	101.0	99.0	95.6	91.3	92.2	92.6	94.5	95.7	94.5	93.4	91.9	93.6	94.6	100.0	93.3	94.1
2. Domestic expenditure	102.7	100.0	93.4	85.1	85.4	85.9	88.5	88.9	87.5	85.9	84.5	87.2	89.2	101.4	86.4	88.2
3. Consumption	77.8	76.3	73.8	70.1	70.3	69.9	72.5	71.9	70.8	70.4	70.4	71.7	72.2	77.0	70.8	72.0
4. Gross fixed capital formation	24.9	23.8	19.5	14.9	15.1	16.0	16.0	17.0	16.6	15.5	14.1	15.5	17.0	24.4	15.7	16.2
5. Domestic saving	23.3	22.7	21.8	21.2	21.9	22.8	22.0	23.8	23.7	23.0	21.5	21.9	22.3	23.0	22.5	22.1
6. National saving	20.7	18.4	14.5	14.1	15.0	15.6	13.8	15.8	15.4	14.8	13.4	13.6	13.8	19.5	14.7	13.7
7. Non-financial current account	(1.7)	(1.0)	2.2	6.2	6.8	6.8	6.0	6.8	7.0	7.6	7.4	6.4	5.3	(1.4)	6.8	5.9
a) Goods
Exports	12.1	12.9	12.8	13.7	14.6	14.2	13.8	14.7	15.7	16.0	16.7	17.4	18.6	12.5	14.9	18.0
lmports	(12.3)	(12.3)	(9.8)	(7.5)	(7.9)	(7.8)	(8.3)	(8.6)	(9.2)	(9.2)	(10.0)	(11.3)	(13.4)	(12.3)	(8.6)	(12.4)
b) Services
Exports	2.1	1.9	2.1	2.0	2.0	2.1	2.3	2.4	2.4	2.7	2.6	2.5	2.3	2.0	2.3	2.4
lmports	(3.6)	(3.6)	(2.9)	(2.0)	(1.9)	(1.7)	(1.8)	(1.8)	(1.9)	(2.0)	(1.9)	(2.1)	(2.3)	(3.6)	(1.9)	(2.2)
8. Terms of trade effects	O.O	(0.8)	(2.4)	(2.7)	(2.3)	(2.9)	(4.3)	(4.6)	(4.7)	(4.7)	(5.2)	(5.8)	(6.5)	(0.4)	(3.9)	(6.2)
9. Net transfers of funds	1.7	1.8	0.2	(3.6)	(4.5)	(3.8)	(1.8)	(2.2)	(2.3)	(2.8)	(2.3)	(0.5)	1.3	1.7	(2.9)	0.4
a) Capital movements	4.5	5.1	2.5	0.4	1.5	0.6	1.5	2.1	0.8	1.4	2.4	4.3	6.3	4.8	1.3	5.3
b) Net payment of profits and interest	(2.6)	(3.7)	(4.9)	(4.5)	(4.8)	(4.5)	(4.2)	(3.7)	(3.8)	(3.9)	(3.4)	(3.0)	(2.7)	(3.2)	(4.1)	(2.9)
c) Subtotal	1.8	1.4	(2.4)	(4.2)	(3.3)	(3.9)	(2.7)	(1.7)	(2.9)	(2.5)	(0.9)	1.3	3.6	1.6	(2.8)	2.4
d) Change in international reserves	0.2	(0.3)	(2.6)	(0.6)	1.2	(0.1)	(0.9)	0.5	(0.6)	0.3	1.4	1.8	2.3	(0.1)	0.1	2.0

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E-mail: cecilia.heise@bjpe.org.br

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[TFN1] Source: ECLAC, on the basis of official figures.

[TFN2] ^a Includes debt to the International Monetary Fund.

[TFN3] ^b Preliminary figures.

[TFN4] ^c Public-sector debt.

[TFN5] ^d Since 1991 figures for the private debt have been adjusted to take account of the privatization process and the elimination of the exchange-control system.

[TFN6] ^e Total debt according to figures supplied by official source and international financial institutions.

[TFN7] ^f Until 1984, corresponds to figures provided by the World Bank.