Question

Why did most countries of Latin America fall into a debt crisis in the early 1980s? Discuss the general problem of a “debt trap” and national dollar capital inflows and outflows. Then discuss 2 general trends of the 1970s and 2 specific trigger events of the 1980s which caused the crisis.

Answer 1

1) During 1980s, definately a period of lost decade ,how where all countries ,rich and poor have external debt but that time situation ia going worst day by day ,even they couldn't repay their foreign debt, situation Came with number of problems .the time was definitely with some unintended consequences.

As GDP fell from 112% to 98% of the world average.it happened because of following given below:

A) loan window of the private banks closed because of recession .

B) Debtors nations faced with a daunting foreign exchange crises.

C) when access of new loans they were faces with the difficult situation.

D) lower the standard of living.

E) they declared monotorium.

2) Debt trap itself says it's meaning ,a debt trap is the relations between countries with a negative intent.latin Americans heavily criticised amid allegations of debt trap diplomacy mostly they had been denied access of funds ,As the situation already created ok in which a debt is difficult or impossible to repay.

And about national dollar capital inflows and outflows.the total inflow and total outflow from developing countries , recovering from 1980s debt crises period ,both inflow and outflow form important component of the capital available to developing countries.

Capital inflow means capital flowing out of a particular economy.

Capital outflow means restrictions can find it difficult to attract capital inflows.

3) the two general trends of 1970s crises is given below

-Caused by localised shortages

-wars,tax hikes.

- manipulation etc.

The trigger events is when countries borrowed heavily during the 1980s to fund industrialization.

The problems caused occurred when oil prices shot up over and over most Latin American were net importers of oil so faced higher import cost.