Debt Crisis in Latin America A Vicious Cycle
Since the 1960s, despite periods of tremendous economic growth, Latin America in general has suffered through a series of economic crises, culminating with the "dept crisis" of the 1980s. Much of the regions economic woes during this time can be traced directly to its foreign debt, which by the end of the 1980s had reached nearly $500 billion. In looking at the events and actions leading to this most recent debt crisis, it appears that Latin America has been caught in a cycle that will be difficult to break. Prior to World War I, Latin America relied heavily on imports for manufactured goods, supplying the world market with raw materials in return. This balance in trade was thrown off when the market crashed in 1929, leaving Latin America with no export markets, and as a result unable to import manufactured goods. ... Industrialization in Latin America increased quickly, bringing with it recognition in the world marketplace and sparking the interest of foreign investors. As a result of import-substituting industrialization and the subsequent direct investment by foreign-owned corporations, most of Latin America saw industrial expansion and economic growth into the 1960s. For example, by the early 1960s, Mexico and Brazils domestic industries were supplying 96 percent and 98 percent respectively of their consumer goods; and Latin America as a region saw its combined Gross Domestic Product (GDP) triple between 1950 and 1970. ... Also, most Latin American countries were exporting one primary good, often agricultural, and were at the mercy of oversupply, crop failures, and quotas.