ABSTRACT
Since 1982, the international financial system has been strained by the unprecedented task of managing nearly one trillion dollars of Third World debt. Latin America's debt alone constitutes nearly half this total, with just the three largest Latin debtors -- Brazil, Mexico, and Argentina owing over $250 billion. For the private banks holding the Latin loans, continued debt servicing is essential. In June 1986, Latin American loans comprised nearly 100 per cent of the capital of the nine large money center banks (Fischer 1986); if Latin American nations refused to honor the previously-contracted obligations, these banks -- and, by extension, the whole U.S. financial system -- would be severely shaken. At the same time, Latin America's efforts to continue servicing the debt have brought drastic reductions in economic growth and living standards, a fact that strains the stability of the newly emerging democratic regimes in the region.
