The 1980s Latin American Financial Crisis Analytical Essay by Erick

Looks at the financial crisis of the 1980s and what was done to avoid the collapse of the Latin American economies.
# 150056 | 2,145 words | 9 sources | APA | 2011 | PH


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Description:

This paper explains that, in the 1980s financial crisis, the Latin American countries especially Mexico could no longer repay their foreign debts, which was caused by excessive and continuous borrowings even at a negative interest rates and the rising cost of commodities and a global recession that was aggravated by the Organization of Petroleum Exporting Countries (OPEC) oil crisis. Next, the author examines the measures instituted to arrest the collapse, such as the Baker plan, the Brady plan and the International Monetary Fund (IMF) and World Bank (WB). The paper relates how the recent financial crisis is linked to this 1980 financial crisis.

Table of Contents:
Introduction: The 1980's Crisis
Background
The Oil Crisis
The Effect of the Oil Crisis
The Debt Burden
The Financial Crisis
The Role of the Fed in the Crisis
August 1982
The Foreign Commerical Banks
The IMF-WB Conditions
The Baker Plan
The Brady Plan
Conclusion

From the Paper:

"Latin American countries particularly Mexico are already feeling the brunt of these combined economic setbacks. The global economic slowdown diminished the demand of their exports thus decreasing their capacity to pay their loans. More importantly, the interest payments on their loans rose dramatically due to the increased interest rate imposed by the Fed to arrest the inflation. This measure took a toll on the economies of Latin American countries because of their heavy dependence on external loans.
"In August of 1982, Mexico, through its Finance Minister, Jesus Lava Hertzog declared that it cannot bear the crisis anymore and declared that it cannot pay its debt and asked for a 90 days moratorium. When he made this announcement, Mexico's debt already exceeded $80 billion and "almost 30 percent of this debt was due within one yea. He also requested a new loan to repay its existing loans and renegotiated for the due dates of their loans. This declaration of default on loans by Mexico precipitated a global financial crisis as other countries which has the same balance of payments problem like Mexico also declared its inability to pay its loan. Instead of a moratorium, Mexico's loans became immediately due."

Sample of Sources Used:

  • Anon., (1977). Annual Report 1976. Washington; Inter-American DevelopmentBank.
  • Anon., (2008) Latin America: Just how resilient. Business Latin America, 43(37): 1-2.
  • Buerkle, Tom (2007). When the World Fell Off the Wall. Institutional Investor, 41(5):164-167.
  • Feldstein, Martin (1984). From Crisis to Renewed Growth. Challenge. 27(3): 27-31.
  • Hawkins, Clark A.; Maese, Judy E (1986). An Examination of the Latin American Debt Crisis.. Columbia Journal of World Business, 21(3): 61-67.

Cite this Analytical Essay:

APA Format

The 1980s Latin American Financial Crisis (2012, January 24) Retrieved August 22, 2019, from https://www.academon.com/analytical-essay/the-1980s-latin-american-financial-crisis-150056/

MLA Format

"The 1980s Latin American Financial Crisis" 24 January 2012. Web. 22 August. 2019. <https://www.academon.com/analytical-essay/the-1980s-latin-american-financial-crisis-150056/>

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