TITLE

LATIN AMERICAN DEBT: ACT TWO

AUTHOR(S)
Kuczynski, Pedro-Pablo
PUB. DATE
September 1983
SOURCE
Foreign Affairs;Fall1983, Vol. 62 Issue 1, p17
SOURCE TYPE
Periodical
DOC. TYPE
Article
ABSTRACT
This article examines the elements that make Latin American debt a far graver problem than the debt of developing countries in other areas, and explores developments leading to the conclusion that a serious gap now looms between the current account deficits of Latin American countries and the external financing sources needed to offset these deficits, as of September 1983. A clean and simple, conceptually satisfying scheme to solve the debt problem obviously has intellectual appeal, while the present muddling through is fraught with danger. For the time being, however, political realities, especially in the U.S., make it very difficult to envisage an all-encompassing scheme. There is far more political concern within the U.S. about Central America than about the debt question, although the long-term effects of the latter could turn out to be very serious. As long as nothing explodes, there will be little interest in setting up contingency mechanisms. Only a real crisis, which hopefully will not occur but is unfortunately a distinct possibility, will powerfully concentrate the minds of policymakers other than the central bankers and treasury officials who have already been involved. In the meantime, everyone would be better off if lenders, authorities in the countries of lenders and major borrowers work together in setting up a concerted program to help existing official institutions to do more and to establish contingency plans to lower the interest burden of commercial debt, in the event that the debt burden cannot be managed. Both lenders and debtors face a critical period. While there are indeed some chances that the problem will gradually be overcome by world economic recovery, the risk of major crises ahead is high. It is therefore vital to anticipate these problems in a concerted fashion, well ahead of time, rather than run the risk of facing them at the very last minute.
ACCESSION #
4853074

 

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