ABSTRACT
The crisis of external indebtedness in Latin America has disrupted much of international business in the region for the past six years. As public-and private-sector borrowers in Latin America have encountered persistent difficulties in meeting foreign-debt obligations, it has become more and more clear that some substantial shift in the manner of dealing with the crisis is needed. This chapter reviews the major issue involved in the crisis, namely the 'transfer problem' that requires a shift of real resources from the debtor countries to their foreign creditors. An attempt to estimate future ability of the major debtor countries to repay their foreign debts shows the unlikelihood of meeting the existing obligations under current conditions. The failure of banks and governments to deal adequately with this crisis sets the stage for new major problems in the near future.
