ABSTRACT
The current-account deficits in the region created a relentless need for inflows into the financial account. This chapter aims to illustrate how countries at Latin America’s level of economic development usually accomplish this. Financing debt by issuing bonds in Latin America has historically been done through government borrowing, as most private-sector firms were not large enough to issue bonds in the global marketplace. Capital may also flow into a country in the form of equity financing. Equity is a situation in which the lender is also an owner in the company or project being financed. Governments may borrow money for projects or to finance current-account deficits from governments or multilateral institutions such as the World Bank or the International Monetary Fund (IMF). The slow-motion collapse of the fixed exchange-rate system in the 1970s created an odd situation for the IMF. The system it was supposed to support was disappearing.
