ABSTRACT
Growth in the debtor countries demands savings and foreign exchange, and the simulation scenarios developed by David Felix and John P. Caskey demonstrate the enormous capital requirements for growth of the major Latin American debtor countries. The “inward oriented” scenario of Felix and Caskey incorporates an allowance for idle capacity but produces discouragingly high capital requirements. Felix and Caskey seek to reinforce their analysis of the intractability of the resource transfer problem by referring to deteriorating terms of trade as an important contributing factor to rising debt-export ratios for the major debtor countries during the 1980–86 period. Since 1986 external debt as a percentage of the value of exports has declined for all of Latin America and for the major debtor countries treated by Felix and Caskey. Direct foreign investment has not rushed in to fill the gap left by the absence of new foreign loan capital in Latin America.
