Latin American Financial Markets

Masters
Essay
Miscellaneous
Pages 11 (2761 words)
Download 0
The beginning of the foreign debt crisis for many developing countries started early in the 1980s when the price of oil and other prime materials dropped sharply. This resulted in a reduction in export-related income for the producer countries at a time when they had to cover the servicing of growing foreign debt…

Introduction

This situation reached a crisis in August 1982 when the government of Mexico announced a moratorium on the payment of capital totaling approximately $20 billion dollars scheduled for 1982 and 1983. This resulted in a complete suspension of new loans to indebted nations, placing a heavy burden on those countries in Latin America where almost 50 percent of worldwide debt was concentrated. The closure of international financing sources obliged the debtor nations, including Venezuela, to adopt adjustment policies that had a severe recessionary impact. Against this background, the Venezuelan government and the central bank agreed, in February 1983, on the establishment of a foreign exchange control system based on differential exchange rates. This allowed the granting of foreign exchange for basic imports and debt servicing at a preferential exchange rate, while the other transactions were directed toward the free market where the exchange rate was progressively devalued. The goal of these measures was to protect international reserves and to decrease aggregate demand, reduce consumption and investment expenses, while generating exchange savings that would permit servicing the foreign debt. ...
Download paper
Not exactly what you need?

Related papers

Latin American Politics
There is no such ideal situation defining the real state of democracy, in fact there may be a narrowed down democracy in certain countries or there may be a broaden concept of democracy prevailing in the others. The narrowed democracy is a situation where certain aspects of democracy are existent while the others are entirely invisible, for instance in Peru. In such cases the governments are…
Latin American Financial Markets
This situation reached a crisis in August 1982 when the government of Mexico announced a moratorium on the payment of capital totaling approximately $20 billion dollars scheduled for 1982 and 1983. This resulted in a complete suspension of new loans to indebted nations, placing a heavy burden on those countries in Latin America where almost 50 percent of worldwide debt was concentrated. The…
Latin American Civilizations
The population of Latin America is an …
Latin American Region
Latin American countries share a common preference for family over community needs. This is a stereotype that Latin Americans are particularly proud of because it shows their tight knit family and positive family values.…
Take home question Financial Markets of Latin American
However, they -as well as other emerging markets as China or Eastern Europe- appear to be overcoming this crisis much better than more mature markets as USA or the European Union. Some analysts explain that this fact is due to these countries costume and tradition of facing continuous tensions and crisis, situation that have led them to develop "overcoming mechanisms"2. According to Manuel Romera,…
1980s Latin America Debt Crisis
Brazil implemented a program of industrial expansion. Argentina and Chile established an overvalued exchange rate policy as an integral part of anti-inflationary strategy. Diverse government policies led these Latin American countries to defective exchange rate policies and excessive dependence on external capital flows.Another factor for the persistent debt problem was the fact that state…
Latin American Politics Essay
Trade unions developed under government control in Mexico or Brazil, were managed at the price of ntially increased labour costs which had led employers to adopt capital-intensive, production methods. (Ward, 2006).…