Ugarteche: Public debt crises in Latin American and Europe – a comparative analysis


The debt problems of Latin America in the 1980s were of external origin, were related
to external borrowing, exploded when international interest rates hit a historical high,
were basically international commercial bank loans in floating rate notes, and had a
negative impact on the balance of payments. The Brady Plan solved them after a
decade of falling output having undergone IFIs conditionalities, adjustment policies,
structural reforms and financing. The European crisis that started in 2007 is also of
external origin, is related to domestic borrowing, and exploded when the US sub
prime crisis hit the international financial community, is basically privately held in
bonds by European financial institutions in Euros, and has had a negative fiscal
impact. The debt solution in Latin America changed the regional process of trade and
integration begun in the late 1960s through Latin American Integration Association
(1980, previously LAFTA, 1960) as new export led policies were introduced in the late
1980s and four new sub regional schemes were subsequently created: NAFTA
(1994), SICA, MERCOSUR (1991) and CAN (1993). In this paper we are going to
inspect the economic elements of the two sets of debt problems, the international
political economy elements involved and the lessons learnt.


Available for download here.