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#159 Debt, Diversification, and Dependency: Latin America's Changing International Political Relations

By Laurence Whitehead

From the Introduction

The debt crisis that spread throughout Latin America in 1982 revealed an unanticipated degree of economic--and therefore political--vulnerability in the region. Contrary to universal expectations, this vulnerability has proved almost uniform. Who now remembers the "political risk" evaluations used to rank Latin American sovereign borrowers according to creditworthiness? Highest ranked in 1980 by both Euromoney and Institutional Investor was Mexico, the nation that precipitated the debt crisis. Third in both rankings was Argentina, an earlier casualty because of the South Atlantic war. Second came Venezuela, currently also in extreme difficulties. Nearly all the countries in these rankings are at present behind on some portion of their external debt payments, although ironically two of the least well-regarded in 1980 (Peru and Jamaica) are among the best behaved in 1983. In general, the debt crisis has struck like a plague, affecting Latin American nations large and small, military and civilian, oil-exporters and oil-importers alike, whether the economy was run by Friedmanites, Cepalistas, or central planners. The impartiality has been remarkable.

Prior to the onset of the crisis it was generally accepted among observers from many schools of thought that Latin America was achieving at least a partial emancipation from earlier conditions that can loosely be characterized as "external dependency." In particular, many Latin American government were thought to be achieving a greater degree of autonomy and self-assertion in their relations with the United States. The events of 1982 and early 1983 cast real doubt' on all stich assumptions. At least for the present, all the major nations of Latin America find themselves in the most urgent need of external economic assistance and support. They also find, as this chapter is mainly concerned to show, that their alternatives to dependence on Washington have withered on the vine. In the short run, their autonomy is diminished and their assertiveness curbed to an extent that few observers would have imagined possible as recently as two years ago. Moreover, in such matters the "short run" is prone to stretch out over a considerable period, during which lasting shifts in the international balance of forces can be expected. The debt crisis has suddenly renewed Latin America's "dependence" on the United States, giving Washington both opportunities and responsibilities that were not expected either by the Carter or by the Reagan strategists. The texture of United States-Latin American relations for many years to come will be determined by the quality of the United States response to this crisis.

 

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