The Latin American Debt (The Mexican Model)
Abstract
On Friday, August 13, 1982, the Mexican finance minister arrived in Washington with only one day's advance notice. His country was on the brink of bankruptcy and he needed U.S. financial assistance. Unless he could piece together a financial rescue package in Washington to avoid default on the country's $107 billion external debt, Mexico would be forced to undertake the largest suspension of payments to foreign creditors, particularly to U.S. private banks, by any government in the post-World War II period. It was widely believed that such an event could seriously disrupt the entire international financial system. The Mexican debt bomb exploded on a largely unsuspecting international financial community. The subsequent psychological shock, combined with the size of Mexico's foreign debt and the dangerous levels of U.S. commercial bank exposure in Mexico, was enough to convince most observers that Mexico's payment problem was unique. Unfortunately, as other large Latin American debtors followed Mexico into payment difficulties, the Mexican crisis was looked upon as the beginning of a serious new threat to international financial stability that quickly became known as the Third World debt crisis. Mexico ranks as the Latin American country that is most important to the United States for reasons of geography, politics, and economics. Although relations between the two nations have been strained from time to time ever since the United States annexed almost 40 percent of Mexico's territory a century earlier, strong links bind the two countries together. Mexico and the United States share a 1,760-mile border, and millions of legal and illegal immigrants flow annually into the United States. Severe economic turmoil in Mexico would only aggravate this explosive problem. This paper examines Latin American foreign debt (using Mexico as a case study), U.S. Government efforts to solve the problem, and its possible effects on U.S. national security in Latin America.
Document Details
- Document Type
- Technical Report
- Publication Date
- Feb 16, 1990
- Accession Number
- ADA437580
Entities
People
- John Collins
Organizations
- National War College