Latin America's 1980's and Asia's 1990's Debt Crisis: A Comparison

By Carreno, Eufronio R. | MACLAS Latin American Essays, March 2001 | Go to article overview
Save to active project

Latin America's 1980's and Asia's 1990's Debt Crisis: A Comparison


Carreno, Eufronio R., MACLAS Latin American Essays


I

Latin America's Foreign Debt crisis of the 1980s has had profound repercussions that resulted in fundamental changes in the process of Economic Development and the economic structure of several Latin American countries. Asia's Foreign Debt crisis of the 1990s has resulted in comparable repercussions that changed the economic development process and economic structure of several Asian countries. This paper compares the Mexican 1980s crisis with the South Korean 1990s crisis. It focuses on the characteristics economic development strategies, international financial crisis, and the effects of the conditionality on their economic structures. Part II of the paper presents the economic development process and the strategies pursued by these two countries. Part III presents the genesis of the international liquidity crisis. Part IV presents the effects of the conditionality followed by our conclusions.

II

Mexico and Korea are amongst the few Developing countries to have attained the status of Newly Industrialized Countries (NIC's). Their drive towards industrialization had similarities during their early stages of development, however, they pursued different strategies to attain higher stages of economic development.

Mexico's drive toward industrialization became a conscious government policy with the Amendment to Article 28 of the Liberal Constitution in 1938. This Article demarcated the areas of economic activity that government and private entrepreneurs could enter. Industries such as Petroleum, Mining, Electricity and Banking were designed "strategic", hence, they were reserved for the Government. What was considered nonstrategic was left to private entrepreneurship. The government pursued an Import substitution Industrialization policy. Domestic producers who could produce domestically goods so far imported were given protection from foreign competition in the form of tariffs and embargo; also, these producers had access to subsidized funds from the Government owned NAFINSA (Development Banks).

As a result, Mexico, by the 1950s had largely completed the import substitution of consumption goods. It was perceived that the development process was stalling in the 1960s. Mexico could not export manufactured goods to the US because it could not overcome the US barriers that protected US producers. Consequently, an aggressive policy to move the import substitution of durable goods was implemented. The governments investment expanded into consumption, intermediate and durable goods industries producing goods such as sugar, steel, and trucks. Most of the output of government owned and private firms was for the domestic market.

The import substitution of consumption goods had been financed mainly with the earnings of traditional exports such as minerals; however, the production of durable goods required foreign expertise as well as funds. Thus, Mexico borrowed from abroad; in the process, it acquired a foreign debt. The discovery of vast oil reserves in the 1970s allowed Mexico to continue the import substitution of durable goods with reinvigorated impetus, which was financed in part with a large increase of the foreign debt.

Korea's economy had been linked to the Japanese economy since pre WWII. After the war, Korea in an effort to reactivate its economy, initiated a drive to industrialize via import substitution. Korea used tariff protection, multiple foreign exchange and controls. The import substitution of consumption goods had been financed mainly with the proceeds of traditional exports, such as minerals that had been developed during the Japanese occupation. When the import substitution of consumption goods was completed, it could not continue with this strategy. Korea, a natural resource poor country, could not finance it.

The U.S. officials wanted to see Korea succeed in developing its economy. Korea was a product of the Cold War. The U.S. had soldiers stationed on Korean soil since the Korean War (1950-53).

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Latin America's 1980's and Asia's 1990's Debt Crisis: A Comparison
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?