Table Of ContentPolitics and Economics
of External Debt Crisis
The Latin American
Experience
edited by Miguel S. Wionczek
in collaboration with
Luciano Tomassini
First published 1985 by Westview Press, Inc.
Published 2019 by Routledge
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Library of Congress Cataloging in Publication Data
Politics and economics of external debt crisis.
(Westview special studies on Latin America and the Caribbean)
Includes index.
1. Debts, Externa1--Latin America--Addresses, essays,
lectures. 2. Latin America--Economic policy--Addresses,
essays, lectures. I. Wionczek, Miguel S. II. Series.
HJ8514.5.P65 1985 336.3'435'098 84-15377
ISBN 13: 978-0-367-28363-6 (hbk)
Con�n�
List of Tables and Figures • • v
Preface, Miguel S. Wionczek ix
Introduction, Miguel Wionczek and Luciano
S.
Tomassini . • . • . . • . . • 1
Part 1
Global and Regional Issues
1 External Debt of Developing Countries in
Late 1983, Dpagoslav Avpamovio 6
2 The World Crisis and the Outlook for
Latin America, VictOF L. UFquidi 36
3 The International Scene and the Latin
American External Debt, Luciano Tomassini 53
4 External Debt Problems of Latin America,
EnFique v. Iglesias . • • . • • . • . . • 73
5 Coping with the Creeping Crisis of Debt,
AlbeFt Fishlow . • • • • 97
6 Latin American Debt: Act Two, PedFo-Pablo
Kuczynski • • • • • . . • • . . . 145
7 Capital Market Financing to Developing
Countries, AFiel Buipa • . • . . • • • 170
8 The World Monetary System, the International
Business Cycle, and the External Debt
Crisis, Jose Luis Feito • . . • . • • • • • • • 193
Part 2
Case Studies
9 Argentina's Foreign Debt: Its Origin and
Consequences, MaFcelo Diamond and
Daniel Naszewski . . . . . . • • • • . • . 2 31
iii
iv
10 Rescheduling Brazil's Foreign Debt: Recent
Developments and Prospects, Paulo Nogueira
Batista, Jr. . . . . . . . • • . . . . . . 277
11 The Mexican External Debt: The Last Decade,
Ernesto Zedillo Ponae de Le6n • . . . . • • • 2 94
12 The Renegotiation of Venezuela's Foreign
Debt During 1982 and 1983, Eduardo Mayobre 325
13 The External Debt, Financial Liberalization,
and Crisis in Chile, Riaardo Ffrenah-Davis • • 3 48
14 Peru and Its Private Bankers: Scenes from an
Unhappy Marriage, Robert Devlin and
Enrique de la Piedra . . . • • . . • 383
15 The Role of External Debt Problems in
Central America, Jorge Gonzalez del Valle 427
16 Where Do We Go from Here?, Miguel S.
Wionazek . . • . . . . . . . . 437
List of Acronyms • . . . . • • • • • 460
About the Contributors . . • • 462
Index . . . . . . . . 465
About the Book and Editor • 482
Tables and Figures
Tables
1.1 Largest debtor countries • • • 8
1.2 External debt per capita • . . • . . • 27
1.3 External debt as proportion of gross
national product • • • • • 28
1.4 Country group debt-service ratios: Total
debt service and interest as percentage
of exports . • • . • • • . • • • . . • • 29
1.5 Country debt-service ratios: Interest and
amortization as percentage of exports • • 30
1.6 Ratios of total debt service to merchandise
exports for selected developing countries
in the 1920s and the 1930s 31
4.1 Latin America: Total external debt • • • • 74
4.2 Latin America: Net financing available
after payment of profits and interest • 75
4.3 Latin America: Ratio of total interest
payments to exports of goods and services 76
5.1 Developing-country debt • • • • • • • • • 102
5.2 Consumptive behavior of debtor nations • 106
5.3 Sources of deterioration in the current
account of nonoil developing countries,
1979-1982 . . . • • • . • • • . • • • • • 108
5.4 Elasticities for developing-country export
volume and terms of trade with respect to
OECD income growth and changes in income
growth . • • • • • . • • • • • • • • • • • 116
5.5 Alternate balance-of-payments projections
for large oil-importer debtors 119
5.6 Estimating equations for export volume
elasticity in Table 5.4 • . . • • . 139
5.7 Estimating equations for terms of trade
in Table 5.4 • • • . • • • • • • • . 140
v
vi
6.1 Estimated debt burden of some major
developing countries • . . • . . 150
7.1 External debt of nonoil developing
countries 174
7.2 Multilateral debt renegotiations,
1974-1983 175
8.1 The international business cycle and nonoil
developing countries • . . • . . • • . • • 195
8.2 Aspects of the external debt cycle in
selected groups of developing countries 204
9.1 Argentina: GOP and consumption • . • • • 232
9.2 Argentina: Gross domestic product 233
9.3 Argentina: Growth of foreign debt • 236
9.4 Argentina: Balance of payments for the
1976-1981 period . . . • . 247
9.5 Argentina: Estimate of loans applied for
and received during 1983 • . . • . . • • 263
10.1 Brazil: Balance of payments (main items),
1968-1982 • . • . . . . . . . • • . . • • . 279
10.2 Brazil: Gross international reserves of
the monetary authorities (Banco Central
and Banco do Brasil), 1976-1982 · 281
10.3 Brazil: Net international reserves of
the monetary authorities, 1976-1982 282
10.4 Brazil: Net international reserves
of the monetary authorities (Banco
Central and Banco do Brasil),
September 30, 1982 . . . • • . • . • . 283
10.5 Brazil: Net international reserves of the
monetary authorities (Banco Central and
Banco do Brasil), June 30, 1983 • . . . • . 287
11.1 Mexico: Some basic indicators of the
Echeverria term • . . • . . . 296
11.2 Mexico: Evolution of the foreign public
debt during the Echeverria term • 298
11.3 Mexico: Basic economic indicators during
the Lopez Portillo term . . . • . . • 303
11.4 Mexico: The evolution of the total external
debt during the Lopez Portillo term • 306
1l.5 Mexico: The flows of the external debt
during the Lopez Portillo term . 307
11. 6 Mexico: Current account during the
Lopez Portillo term . . . . . . 309
11. 7 Mexico: Public finance during the
Lopez Portillo term . . . • 311
13.1 Chile: Annual deficit on current account
and capital movements . . • . . . . . . . • 355
vii
13.2 Chile: Total external debt and debt with
private financial institutions . • . • • • 3 57
13.3 Chile: External debt, by borrowers . • • 358
13.4 Chile: Article l4--Gross annual flows
of credit, by debtors • . • • • . • • • 360
13.5 Chile: Real exchange rate and wages 364
13.6 Chile: Domestic and external real interest
rates reflecting their level with the
conversion of external transactions
into pesos • • • • • • . • • . . • . • 366
14.1 Peru: Distribution of external public debt
by source of finance . • 384
14.2 Peru: Total external debt • 390
14.3 Peru: Index of the cost of bank borrowing,
1971-1976 • • • • • • . . . . • • • . • • 391
14.4 Peru: Selected expenditure as a percentage
of GDP • . • • • . . • . • • • • 395
14.5 Peru: Growth rates of selected economic
indicat or s . • • . • • • . • • • • . 397
14.6 Peru: Net capital inflows and transfer
of financial resources • • • • . . . • 399
14.7 Peru: Savings/investment coefficients • 400
14.8 Peru: Net flows of medium- and long-term
loan capital by type of creditor . • • 401
14.9 Peru: 1978 restructuring of commercial
bank debt . • . • • . . . . • . • 404
14.10 Latin America: Provisional data on terms
of debt rescheduling: 1982-1983 • • • • 411
14.11 Peru: Distribution of commercial bank
loans according to purpose, 1971-1976 • 417
15.1 Central America: External debt outstanding • 429
15.2 Central America: Long-term external debt
to official creditors • . • • . . . 430
15.3 Central America: Apparent overall cost
of external debt . • . . . . • • • 431
15.4 Central America: Apparent external
debt burden on interest account • 432
15.5 Central America: Intraregional debt
positions, end 1983 . . . . . • • 436
Figures
4.1 Evolution of London Interbank Offer
Rate (LIBOR) , nominal and real . 80
13.1 Conventional conceptual framework of the
Liberalization of Capital Markets • • • • 3 51
14.1 Comparison of margins and maturities on
bank credits for Peru, Brazil, Mexico,
and Bolivia, 1973-1979 • . • . . • . . • • • 392
viii
14.2 The evolution of bargaining power in
the borrowing cycle • • . . • • • 414
16.1 The LDes seem headed for a resource gap 449
Preface
The immediate or1g1n of this volume can be traced
to a small informal meeting of a group of Latin
American economists and political scientists held in
Mexico City in late August 1983 under the auspices of
the Tepoztlan Club. After having discussed the most
recent information on crisis and debt in Latin America
and the external debt management experiences in Argentina,
Brazil, Chile, Mexico, Venezuela, and Central America,
the participants came to the following conclusions:
1. Although the current international economic
crisis presents many of the characteristics of a
particularly severe and prolonged recessive phase of the
economic cycle, it also contains structural factors
that distinguish it from the crisis of the 1930s.
2. The current crisis has spread to all parts of
the world, including socialist economies, via multiple
and complex channels, due to the evolution of an inter
dependent world with a highly integrated economy.
3. The causes of the acute external and internal
economic imbalances in Latin America go back to the
1960s. The actual depressive and almost desperate
economic situation in the 1980s, however, reflects a
new crisis within a crisis due in part to external
factors and in part to the inadequacies or extravagance
of most Latin American domestic economic policies. When
one looks at the policies followed in the past ten
years by individual countries, particularly in fiscal,
monetary, and trade matters, one has to recognize the
lack of coherence, forethought, and realism that pre
dominated in successive stages of policy implementation
in the region.
4. Recently and with prodding and the blessing
of international financial organizations, many Latin
American countries, facing external and domestic crises
of a magnitude never registered before, took the road
of adjustment of the external sector by means of
recessive policy, which compromises long-term productive
ix
