The Latin American Debt Crisis Essay

2642 words - 11 pages

The sub-region of the Americas which nations speak Romance languages is a region considered Latin America. The region is very diverse when it comes to people but also the geography and natural resources of its nations. The people and resources of the region combined to an approximated gross domestic product of over US$ 5 trillion today after its discovery in the late 1400s. However, Latin America’s history as a whole was not all pleasant. There were many times in the region’s history filled with adversity, while aspects of the positive cultures that discovered the region permeated into the region some it is negative ideals went in as well. The lack of sound economic ideals and stability of many nations in Latin America can be seen as the reason for many of the issues that plague the region today. One of the most influential events that occurred in the region originated in the late 1970s and early 1980s, the Latin American debt Crisis. This crisis was a financial crisis in which many Latin American nations had their foreign debt exceed their earnings and became unable to pay back the debt leading to a lost decade in the region. However, after the crisis began there were many ways for which a nation dealt with the crisis, while some nations to this day have not fully recovered others have recovered and then started breaking into the world stage as major competitors. Brazil is one of those nations, after the crisis, their ideals helped them become one of the top seven economies in the world.
The Latin American Debt crisis did not occur overnight, the crisis was many years in the making and signs of its arrival were prominent in Latin American society. The reasons for its occurrence are also expansive; some fault can also be placed in countries outside of Latin America. The growth rate in the real domestic product of many Latin American countries grew at a constant high rate in the decade prior to the crisis in the 1980s, this growth led to an increase in foreign investment, corporate investment, and the world began supporting these developing nations (Ocampo). The foreign investments in Latin America created a new international financial system that gave the foreign banks access the funds to give massive loans to the developing nations. However, the origin of the debt crisis can be partially traced to the expansion of the banking system in the United States in the 1950s along with the quick growth of the world economy. The growth in the world economy generated new investments in new markets, in particular in the markets of developing nations. The investments and this new international financial system created the Eurodollar market giving the United States banks more access to wealth, which they could lend to Latin America at a greater rate (Ocampo). Shortly after the new order in international finance there was an incredible increase in crude oil prices in 1973 and continued to rise for about a decade. This increase in oil prices generated...

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