The structure of the external sector 40 years after the beginning of the Latin American debt crisis

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Abstract

In August 1982, the Mexican government announced a sovereign default due to the impossibility of servicing the public debt. In previous years, the Mexican economy grew at high rates and experienced strong and sustained foreign exchange inflows in the context of international liquidity and high oil prices. The Mexican economy benefited from oil exports due to the discovery of important oilfields in the Gulf of Mexico. Extraordinary oil revenues made it possible to maintain a level of public spending that was higher than sustainable.
Circumstances changed radically in the early 1980s. With higher interest rates, lower oil prices, and a high level of indebtedness, the Mexican government had to declare a moratorium on public debt payments and begin a deep restructuring process. The sudden stop of capital flows spread to other Latin American economies and the region entered a period of economic stagnation known as the Lost Decade (Moreno-Brid & Ros-Bosch, 2010).
During the 1980s and early 1990s, Latin American economies were involved in a profound process of economic transformation. As a central part of the process, Latin American economies increased their levels of trade and financial openness (McKinney, 2021). The international financial institutions that promoted the restructuring process argued about the advantages that international trade would bring in terms of increasing exports and economic growth within an export-led growth strategy.
In 2022, it will be 40 years since the sovereign default of the Mexican government, triggering the restructuring process of Latin American economies. In this brief article, we make a general review of the restructuring of the external sector in a select group of Latin American economies. At 40 years of distance, it is necessary to consider where we are and where we should go.
Original languageEnglish
Pages19-25
Number of pages7
Volume2
No.1
Specialist publicationDevelopment Macroeconomics Bulletin
Publication statusPublished - 2022

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