ABSTRACT
The creditor strategy for containing Latin America’s debt crisis is breaking down. The diversity as regarding capital flight supports the creditor’s case by case approach to crisis management. Foreign debt crises are a recurring Latin American phenomenon, but the capital flight associated with the present crisis is of unprecedented volume and persistence. One is Colombia’s 1982 financial crisis, when excessive bad loans instigated a wave of financiera and bank failures so pervasive the government felt impelled to assume the bad loan portfolios on subsidized terms to halt the panic. Thus, one of the political economy consequences of the crisis has been an important alteration of property rights: the socialization of private foreign debt, most notably by the free market regimes of the Southern Cone. Compulsory asset swapping extends the precedent of socializing the foreign liabilities of the wealthy classes of the three debtor countries to include their foreign assets.
