The document summarizes the Latin American debt crisis of the 1980s. Several Latin American countries like Argentina, Brazil, and Mexico had large balance of payments deficits, high inflation, and large public sectors that led to economic distress. They took out large loans from commercial banks to manage their economies. This growing debt burden, along with high interest rates and a fall in commodity prices, resulted in a debt crisis that caused economic hardship in Latin America during the "lost decade" of the 1980s.

1. The Latin American Debt Crisis of the 1980’s
Focus on the cause and effect of the debt crisis in Latin America in the 1980’s
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Abstract
The 1980s were a period of economic distress with high levels of inflation and debt levels for the Latin
American countries. These countries’ (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico,
Peru, Uruguay, and Venezuela) dismal growth rates lead to this decade being called the "lost decade" for
them. In this paper, we will see the factors which led to the debt-crisis, the consequences and the response
mechanisms which these countries and external lending institutions adopted, how the other parts of the
world were affected with a particular emphasis on the United States. Towards the latter half of the paper,
we will examine the ongoing European debt crisis, and China's role in the global economy.
The Latin American countries at the onset of the eighties had a large Balance of Payments (BOP) deficits,
high rates of inflation and large chunks of their economies were the public sector
(Altmir, Devlin 1993). Crude oil was experiencing high rates and hence oil exporting countries like
Venezuela were able to manage the economies with the oil export income. Countries like Brazil, which
did not have much oil exports started an import substitution industrialization program to enhance its self-
reliance, and also took large loans from commercial banks (Bruno, 1988).