A Historical Analysis of the Nature, Causes and Impact of the Foreign Debt Crisis in Latin America, 1970- 1980

Abstract

This study examined the nature, causes and impact of the huge foreign debt crisis in Latin America between the 1970s and 1980s referred to generally as the ‘lost decade'. As a survey research, it employed the historical method of research and analysis. It gathered its data extensively through library search and adopted the qualitative technique of content analysis of historical documents. The paper noted that the debt crisis in Latin America came to a head in August 1982 when Mexico publicly declared its insolvency. It identified a number of factors that brought about this endemic burden of foreign debt in Latin America. These included: the over-preponderancy of foreign loans granted to Latin American states, particularly Argentina, Brazil, Mexico and Venezuela, in the 1970s and the attendant inflation and increasing floating interest rates. These had combined to serve as great challenges to the economic development and survival of the Latin American countries during the period of study. The various attempts at debt rescheduling and cancellation between 1980 and 1989 were equally well documented. It concluded that Latin American countries should avoid excessive external debts to avoid disaggregation in their economic development in the nearest future.