ABSTRACT
Eliana Cardoso’s paper is an excellent summary of Brazil’s and Argentina’s economic and financial evolution during this century. She identifies the main differences between both countries and their uses and abuses of external debt. Combined with sound macroeconomic policies, interest recycling could break the vicious circle of debt, no growth, and deteriorating debt servicing capacity. The considerations require a new debt strategy that emphasizes the reversal of net transfers to allow adequate economic growth in indebted countries. Another key element of the strategy, the constant flow of new credits, did not materialize. Even with the sound macroeconomic strategy that it has pursued, with a 6 percent net negative resource transfer, the country cannot grow at more than 2 or 3 percent per year. To summarize, the current debt strategy has failed to accomplish a basic objective: to restore growth in Latin American countries.
